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  • 4-Minute Article
  • |
  • Jun 15, 2017

4 Retirement Questions to Ask Now

A look at common questions when preparing for retirement.

Questions this article can help you answer:
  • What questions should I ask my financial professional about retirement?
  • What’s a savings withdrawal strategy?
  • How do I make sure I don’t outlive my savings?

Retirement can be an exciting new chapter of your life, but as it’s approaching, you may have questions about what this transition means for your financial plan and how to secure your desired retirement lifestyle. Here are some common questions you may have as you enter retirement

Q: Should I make major changes to my investments?

Answer: If you’ve been shifting your savings into more stable investments leading up to retirement, your portfolio shouldn’t need a big shake-up. In fact, it’s important to consider keeping at least some assets in equities or other investments with good growth potential to protect against risks like inflation and outliving savings.

Of course, stocks have the potential to rise and fall with the market. If you’re worried about that uncertainty, consider adding a source of income to your savings mix that will not fluctuate regardless of what happens in the market, like some annuities.

Q: Which sources of income should I tap first?

Answer: If you haven’t, now’s the time to get the advice of a financial professional to develop a savings withdrawal strategy. The plan can include options to help make the most of your savings, such as:

  • You can start receiving Social Security benefits as early as age 62 or as late as age 70. Each year you delay your claim, you increase the size of your lifetime Social Security benefit by approximately 8% depending on your year of birth. If you’re younger than age 70, however, you will receive a reduced benefit.1

  • You need to begin taking required minimum distributions (RMDs) from your retirement accounts by April 1 of the year after you turn 72.2 Until that age, however, you can let the savings continue growing for the future. For example, if you retire at age 65 and can postpone withdrawing from an IRA with $100,000 in it, you could see an additional $40,710 in growth from that account by the time you reach age 72 and must begin taking RMDs (assuming 5% annual account growth). In the meantime, you can consider using withdrawals from taxable savings accounts or guaranteed income sources such as annuities to cover your expenses.

  • About 80% of workers think they’ll continue working past the traditional retirement age. If you’re considering this path as a way to earn retirement income, speak with your financial professional about what impact that money could have. It’s also important to note that expectations don’t always match reality: more than 4 in 10 retirees retire earlier than expected, and just 28% of retirees actually do earn income by working in retirement.3

 

Q: How will my taxes change?

Answer: The taxes you owe during retirement depend on a number of factors. But whatever your circumstances, you can take steps to manage your tax bill.

For example, if you find yourself in a lower tax bracket entering retirement because you’ve stopped earning a regular salary, it might make sense to withdraw money from retirement accounts like traditional IRAs and 401(k)s first. That’s because withdrawals from those accounts are taxed as regular income, so you’d generally pay your new, lower income tax rate on those withdrawals.

If you remain in a high tax bracket, such as 35% or 37%, however, you might instead start by tapping other sources of income, such as savings in brokerage accounts. Withdrawals from these accounts may be taxed at the more favorable long-term capital gains rate, which is 15% or 20%, depending on your income. It’s important to speak with a tax professional about your specific situation.

Q: I feel confident about my income now, but what about when I’m 85?

Answer: One way to help ensure you won’t outlive savings is to put some savings into a guaranteed income source, such as an income annuity. An income annuity can provide a guaranteed stream of income payments that can last for your lifetime, or the lifetime of you and your spouse.

In fact, a deferred income annuity even lets you postpone the start of your stream of guaranteed lifetime income payments (and any associated taxes) until later in retirement, no matter what happens with the rest of your savings during the coming years.


Working with a financial professional can help answer these and other questions about your retirement financial strategy in a way that best suits your individual needs and helps secure the future you’ve always envisioned.