As you transition into retirement, your financial focus will likely shift from building your savings to managing your spending. A tax-efficient withdrawal strategy can help you maximize your assets and enjoy a fulfilling retirement.
Understanding Common Retirement Income Sources
Your retirement income will likely come from various accounts and investment vehicles. Some common retirement income sources include:
- Required withdrawals: At age 73, you’ll need to start taking Required Minimum Distributions (RMDs) from certain accounts like traditional IRAs and 401(k)s. These withdrawals are mandatory and taxed as ordinary income.
- Automatic income: Sources like Social Security, pensions, and annuities provide regular, predictable payments. Be aware that healthcare costs can affect these streams.
- Optional income: Sources like traditional and Roth 401(k)s and IRAs, along with taxable investment accounts, generally offer more flexibility in when and how much you withdraw (outside of any applicable RMDs).
Navigating Your New Tax Situation
Many people find that their tax landscape changes in retirement. Here are a few key considerations to keep in mind for your retirement withdrawal strategy:
- Account-specific tax implications: Different accounts are taxed in different ways. Some accounts may be taxed as ordinary income, while others may offer tax-free withdrawals.
- Shifting tax brackets: While your income may be lower in retirement, large withdrawals or RMDs could push you into a higher tax bracket.
- State and local taxes: Some states provide more favorable tax treatment for retirees by exempting certain retirement income or applying reduced tax rates.
Work With a Financial Professional for your Retirement Withdrawal Strategy
Managing your finances and optimizing your retirement withdrawal strategy can be complex, but a financial professional can help. Let’s work together to create a personalized, tax-efficient plan that aligns with your goals and helps you enjoy the retirement you’ve envisioned. Contact the office today to start the conversation.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera nor any of its representatives may give legal or tax advice.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.