For Optimal Retirement Income, Withdraw Money From Your Investment Accounts First
While you are still in your prime working years, decisions related to maximizing your retirement income relate to increasing your earnings and living below your means, so that you can put as much of your income as possible toward retirement accounts and investments on which you can draw after you retire. From this perspective, economist Laurence Kotlikoff is correct when he says that you should plan for retirement based on how much money you have instead of how much money you want to withdraw each month. Regardless of whether you retire tomorrow or when you are 80, the amount of money in all your accounts will be X. Once you get closer to retirement, your decisions center on where to withdraw the money, so that you can maximize interest and minimize taxes. A Tampa estate planning lawyer can help you with these financial plans.
Delaying Payouts from Social Security and Retirement Accounts Doesn’t Have to Mean Delaying Retirement
There is plenty of discussion in the field of estate planning about the ideal time to retire. Of course, there is no one-size-fits-all answer. The decision depends on many factors, including your health, your line of work, and your financial obligations to people other than yourself or your spouse, such as whether you are financially supporting your elderly parents or have borrowed Parent PLUS loans for your children’s college education.
Whether you retire at age 70, age 65, or even earlier than 65, it pays to delay drawing Social Security for as long as you can. If you start drawing Social Security at age 70, which is the latest possible start time, your return on investment (the investment being all those years that your employer withheld Social Security from your paychecks) is considerably higher than if you start at age 62, the earliest possible start time. A similar principle applies to IRAs and 401(k) retirement accounts; the way to get the most money out of them, relative to how much you have put in, is to delay taking money out until you are 72, which is the age at which you must start taking required minimum distributions (RMDs). In other words, you should let as much compound interest as possible accumulate before you start taking money out.
Of course, it is only possible to do this if you also have other investments on which you can draw. This is where brokerage accounts, stocks and bonds, and ETFs come in. These should be your main source of income during your first years of retirement, until maximum social security income and retirement account RMDs kick in. Achieving this requires some long-term planning, but if you have steady employment now, it is feasible.
Contact an Attorney for Help Today
An estate planning lawyer can help you make realistic decisions about how to maximize your retirement income, based on your current employment income. Contact David Toback for help with your case.