Which Retirement Income Should You Spend First?

People who are inclined to daydream about being rich often envision a future where they can live off the interest of their savings. Most of them will never do it; you must be extraordinarily wealthy to achieve this. It is how university endowments work; the endowment is the principal balance of the university’s savings account, and the money it can spend in a year is the income that the principal generates in interest. Realistically, you cannot expect that you can live for decades after you retire without spending any of the principal of your retirement savings. It is a worthy goal, however, to spend as little of it as possible, so that at the end, there will be some money left for your heirs to inherit. The best way to do this is to delay spending the most sustainable parts of your retirement income for as long as you can. The simplest way to do this is to stay in the workforce well past your 65^th birthday. Even after you retire, though, when you no longer have employment income, you can still let some of your income streams continue to accumulate before you settle into the fixed income that must sustain you for the rest of your life. For help strategizing about making the most of your retirement income, contact a Tampa estate planning lawyer.

Spend Your Investments First, and Let Your Social Security and Your 401(k) Pile Up

The good news is that your Social Security income will not run out unless the entire Social Security program runs out of money, in which case everyone else’s Social Security income will run out, too. Social Security issues you a check every month for the rest of your life, the same amount each month. The amount of your monthly payment varies according to how old you are when you start drawing Social Security payments. The maximum age at which you can start drawing Social Security is 70, so if possible, wait until then. Do this by staying in the workforce, or by withdrawing money from investment accounts and personal savings, if you have them.

Likewise, you should postpone withdrawals from your 401(k) for as long as possible. This way, the money in your 401(k) can keep generating interest longer. You are not required to take money out of your 401(k) until you turn 73. In other words, if you are healthy enough, then you can ensure a prosperous retirement by retiring at 70, at which point you start drawing Social Security. Once you retire, you should coast for three years on your Social Security income and personal savings and then start taking required minimum distributions (RMDs) from your 401(k) account.

Contact David Toback About Maximizing Your Retirement Income

A Central Florida estate planning lawyer can help you make wise decisions about how long to stay in the workforce and which of your savings you can afford to spend when, to ensure sustainable retirement income.  Contact David Toback in Tampa, Florida to set up a consultation.

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