“When I retire, I should take withdrawals from my non-tax deferred investments first.”
September 18, 2011 by tfroberts
The typical rule of thumb is "spend your taxable investments and let your tax deferred investments grow". While this may result in a higher overall tax adjusted value for many people, it may not always be the optimum withdrawal strategy. It does make sense to withdraw from your Roth IRA, and HSA, accounts last because there is no tax due on the growth or withdrawals.
If you have a large balance in your Traditional or Rollover IRA and you delay withdrawals, you may be forced to take larger Required Minimum Distributions (RMDs) after age 70 1/2 than you desire. Depending on the tax rates when you make the withdrawals, you may pay more tax than if you managed your withdrawals over a longer period, in a lower tax bracket.
To determine the optimum strategy for your situation, gather up your expected expenses, account balances, Social Security and other guaranteed income. Run scenarios taking income from different sources over your lifetime and compare. This will help you decide which withdrawal strategy is best for you.
Careful planning needed to meet retirement health care needsHealth care is expensive. With the efforts to balance government budgets, the trend of shifting more costs to the consumer is likely to continue. Whether we are retired or planning for retirement, the numbers can be daunting. |