Retirement Withdrawal Strategy Matters More Than You Think
Most people spend decades building retirement savings, but once retirement begins, the focus shifts to creating reliable income. One of the most important decisions retirees face is not just how much to withdraw each year, but which accounts those withdrawals should come. The order of withdrawals can significantly affect taxes, portfolio longevity and overall retirement success.
Many retirees follow a traditional approach of spending taxable accounts first, then drawing from tax-deferred accounts such as IRAs and 401(k)s, while preserving Roth accounts as long as possible. Although this strategy can work in some cases, applying the same sequence to every situation may lead to unnecessary taxes and missed planning opportunities.
A more effective strategy Involves coordinating withdrawals from multiple account types each year. By combining taxable, tax-deferred and Roth withdrawals, retirees can better manage their tax brackets, potentially create opportunities for Roth conversions and take advantage of lower-income years. This type of tax-efficient planning, called tax arbitrage, can help reduce lifetime taxes and preserve more wealth for future spending needs.
Withdrawal decisions also affect more than income taxes. They can influence Medicare premiums, the taxation of Social Security benefits and the assets ultimately passed on to heirs. Because tax laws, account balances and income sources change throughout retirement, withdrawal planning should be reviewed regularly and treated as an essential part of a comprehensive retirement income strategy rather than a one-time decision.
Want to learn more about how retirement withdrawal strategies can allow you to keep more of your savings? Our comprehensive retirement planning webinar provides valuable insights into the tools and strategies available to help create an optimized retirement strategy that’s built for your specific financial situation. This no-cost, no-obligation, on-demand financial educational webinar addresses how to create a sustainable income strategy.
In retirement, it's not just what you withdraw, it's how you withdraw. Let us help ensure your retirement assets support the life you've worked so hard to create. Plan well. Live well. Retire well.
Will Riggs, NSSA
Financial Advisor
For informational and educational purposes only. This material should not be construed as individualized investment, legal, tax or insurance advice or as a recommendation to buy or sell any security or insurance product. Investing involves risk, including possible loss of principal. Past performance is not indicative of future results. Consult your financial, tax, and legal professionals before making financial decisions. Strategic Wealth Partners is an SEC-registered investment adviser; registration does not imply a certain level of skill or training. Any guarantees discussed are backed solely by the issuing insurance company. For more information, including our Form ADV, please visit adviserinfo.sec.gov.
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