Consider these smart strategies for living on a fixed income:
1. Start by determining potential sources of retirement income
You have several ways to generate income during your retirement, including:
- Investments, like stock dividends, variable annuity payments, securities proceeds, and interest from bonds
- Tax-deferred retirement accounts, such as 401(k) plans and Traditional IRAs
- Tax-free accounts, such as a Roth IRA or Roth 401(k)
- Taxable products, like bank CDs and mutual funds.
2. Next, consider when to withdraw
Did you know that you can withdraw different amounts every year?
Maybe you’ll want to withdraw more early in your retirement, when you’re more active and want to travel or play more tennis. Later on, when feel like relaxing, you may need less income to support your lifestyle.
Or you can do the opposite—take it easy on withdrawals in the early years, perhaps even supplement your income with a part-time job or second career. Then, as you feel more secure financially, you can gradually ramp up your withdrawals. Whatever your approach, keep in mind that there are required minimums that must be taken.
Here’s a not-so-shocking but necessary stat to consider: Retirees spend 27% more on healthcare than people ages 45 to 64.* Medical expenses tend to increase with age, so withdrawing less money early in retirement and more money later is a smart approach for many people.
3. Get your retirement ducks in a row
If you’re not concerned about leaving money to heirs, many financial professionals recommend spending your accounts in this order:
- Tax-free accounts
- Taxable products
- Tax-deferred accounts
This approach can help you postpone paying income taxes, may keep more of your money growing tax deferred, and may even reduce the total retirement income that you pay toward income taxes.
You’ll feel better knowing you have a game plan.
Ask a financial professional to help you come up with a retirement withdrawal strategy that meets your individual needs. Sorting out the details now means not having to worry about them later.
*Source: US Bureau of Labor Statistics, Consumer Expenditure Study, by Age.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.
The tax information herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
Neither Voya nor its affiliated companies provide tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.