Retirement Planning: Prioritizing Your Withdrawals in the Right Order
For retirees, knowing which sources to pull money from first can significantly impact their financial well-being. Here's the standard order all retired Americans should consider when it comes to withdrawals.
Retirement planning involves careful consideration of how to efficiently utilize various income sources during the post-work years. When it comes to withdrawing funds, many retirees wonder where to begin. An established order can help retirees make informed decisions about their withdrawals in order to make the most of their savings. Here's a breakdown of the standard order all retired Americans should consider for pulling money in retirement:
- Social Security Benefits: Start by tapping into your Social Security benefits, as they provide a steady stream of income that can cover essential expenses.
- Traditional IRA and 401(k) Distributions: Next, consider withdrawing from tax-deferred accounts like traditional IRAs and 401(k)s. Keep in mind that withdrawals from these accounts are subject to income tax.
- Roth IRA Distributions: After exhausting taxable accounts, look into withdrawing from Roth IRAs, which offer tax-free growth and withdrawals.
- Brokerage Accounts: Finally, consider using funds from brokerage accounts and other taxable investments. These accounts typically have favorable tax treatment for long-term capital gains.
By following this standard order of withdrawals, retirees can maximize their savings and potentially reduce their overall tax burden. Consult with a financial advisor to create a personalized retirement income strategy that aligns with your specific financial goals and circumstances.