Retirement income strategies help you plan for and maximize the potential returns from your assets in retirement. A financial professional can assist with finding a plan tailored specifically to your needs.
Market-responsive withdrawal plans utilize Social Security, pensions, and annuities to create a minimum guaranteed income stream that helps mitigate sequence of return risk and longevity risk.
Life expectancy-based drawdown strategy
Life expectancy-based drawdown strategies provide a flexible method for producing retirement income that uses your savings to provide income throughout your lifetime. Their flexibility enables you to maintain purchasing power while protecting assets against inflation, as well as avoid forced depletion of savings accounts.
Dynamic withdrawal strategies allow you to adjust the amount you withdraw based on the performance of your investment portfolio, so as to decrease spending during years when the market loses money and increase it when profits accrue.
Research fellows at TIAA Institute recently conducted an impressive study that demonstrated how increased longevity literacy — defined as understanding objective life expectancies — makes people nine times more likely to include annuities as part of their retirement income strategies. This is significant, as one major source of annuity nonpurchase is subjective survival pessimism.
Tax-free accounts
Tax-free accounts are investment vehicles with special tax advantages that allow investors to save for retirement, educational expenses and healthcare costs with special tax advantages. Such accounts include Roth individual retirement arrangements (IRAs), which can be funded with after-tax income; 403(b) plans offered to public school employees and government workers; as well as health savings accounts compatible with high deductible health plans.
Tax-free investing strategies can help you build wealth over the long term while simultaneously reducing taxes. But remember, tax-free investments shouldn’t replace saving and planning for retirement; their costs may be higher than traditional savings accounts and require an immediate commitment from you as there may only be short reviews periods before commitment is required for their lifetime income streams – something some individuals might find unsuitable.
Income streams
An income stream is essential to retirement success. Determining how much to spend and which assets are the most suitable can be challenging for clients, so financial professionals are available to help clients understand their options and create a personalized retirement strategy.
One popular retirement savings strategy is the “bucket strategy”, which organizes retirement savings into different buckets according to their intended withdrawals. Short-term buckets contain cash accounts like checking and savings, CDs; while longer term buckets comprise investments with longer time horizons. Clients withdraw funds from short-term buckets while long-term buckets replenish them at regular intervals or balance thresholds.
An effective retirement income strategy can provide additional sources of income beyond Social Security, pensions and savings accounts; it can also help manage risks like sequence of returns risk, inflation risk and longevity risk.
Legacy planning
There are various strategies that can help ensure that your retirement savings last. Working with a financial professional, they can explain your available options and assist in selecting one that fits best with your retirement goals, while at the same time helping reduce taxes on withdrawals.
Tax-efficient withdrawals may not be your only strategy for protecting against outliving your assets. Other approaches may help, including bond and CD ladders and systematic withdrawals that help create a steady income stream that’s protected against market fluctuations.
Successful legacy planning requires open and honest conversations among family members and advisors, along with creating a plan tailored specifically to your values and objectives. While this may seem difficult on its own, enlisting help from a dependable financial advisor can assist with gathering a team of specialists such as estate attorneys and accountants – plus help navigate local/state laws regarding probate, taxation and more.
