Thank you for joining us for episode 51 of our Money Wisdom Question Series. Today’s question is, “How Do I Retire?”
Making the Transition into Retirement
We spend all these years working and saving for retirement and accumulating income. Hopefully you grow more money as time passes. Every year you get closer to your ideal retirement date, whatever it is you’ve planned for. Of course, different people want different things. Eventually, the question becomes, “How do I take all this money that I’ve saved and turn it into income?” Sometimes people think that’s a silly question, but it’s really not.
Let’s Talk About Taxes
How many of you think taxes are going down? No one, I’m guessing. We have to anticipate that taxes are going to continue to increase. Are you doing things in the early years of retirement in regards to where you’re drawing money from that you might regret later on? Some things to consider:
- Should you do a Roth conversion?
- When should you draw your Social Security?
As of right now, the Required Minimum Distribution is at age 72. So, if you’ve got this chunk of money in your IRA and your 401(k) that’s growing, that’s great. You certainly want to grow your money. But is that the best way for your money to be growing? Keep in mind, every dollar you make in your IRA increases your future tax liability. Maybe that’s the money you should be spending sooner. Or maybe you should consider a ROTH conversion.
Retirement Planning is Income Planning
We start the conversation of retirement with, “What have you saved? What do you need that money to do? What is your income going to be?” Your retirement planning is income planning and for a lot of folks, assuming you’re fully retired, that’s Social Security. Maybe you have a pension. For a lot of people, the biggest source of income is what can you draw off of your investments. We encourage you to sit down with a professional and start to talk about these things:
- How much are we going to spend and what do we want retirement to be?
- Do we want to travel?
- Would we want to stay home?
- Should we give money to our kids?
- Or do we want to spend it all?
These are the important conversations that you have to be having before retirement so that when you get to retirement. You can live how you want to live, because you certainly didn’t save this money all these years as a result of being frugal and making good financial decisions to make it to retirement and be afraid of spending your money.
Thanks for joining me and I hope you found this information helpful!
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