Creating a Retirement Income Plan & Withdrawal Strategy
By Christopher L. Hudson, Financial Advisor, CIMA
As you approach retirement, your focus begins to shift from “investing for growth” to “investing for income growth” and building a portfolio that generates a stable, predictable stream of growing income year-after-year.
Another critical step in developing an “income strategy” is to determine a reasonable withdrawal rate. How much money are you going to be able to take as a distribution each year and where is that money going to come from?
After building a large nest-egg, you do not want to put that nest-egg at risk because of the withdrawals you are taking in retirement.
These four common sense tips are a starting point for developing a prudent withdrawal strategy:
- Know how much you can spend each year without jeopardizing your savings by running a detailed, year-by-year, cash flow analysis as part of a comprehensive retirement financial plan.
- Determine the order in which you will tap into various retirement accounts both taxable as well as tax deferred.
- Decide when to claim Social Security benefits as a supplement to your withdrawals.
- Institute a dynamic withdrawal strategy where you are adjusting your distribution rate based on inflation to help preserve your purchasing power over time.
Having a responsible income plan and withdrawal strategy in place is critical to your success as you transition from the “accumulation” phase of retirement planning to the “distribution” phase.
Any opinions are those of Christopher Hudson and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
