Saving for retirement is only the first step in enjoying your post-working years. Once you stop working, you’ll begin receiving a different kind of “salary” as you draw from your retirement funds. Distribution planning can help you determine how to best utilize your savings to continue enjoying the lifestyle you want throughout your retirement.
Interest-Only Withdrawals
Once you reach retirement age, you’ll need to determine how large a salary you want to withdraw from your savings. In an ideal world, you will have enough in terms of retirement finances to live comfortably on the annual interest your account accrues. This distribution plan works well if you have excess savings when you choose to retire; however, if you do not have a significant excess in savings, annual inflation could diminish the benefits of this plan.
Systematic Withdrawal
Unlike an interest-only plan, a systematic withdrawal plan periodically removes money from retirement investments based on the performance of these investments. Thus, the “salary” associated with such a plan will vary; during some months, there may be excess income, while during others, no income will be withdrawn. A systematic withdrawal plan requires additional financial planning to accommodate such situations, while still allowing retirees to maintain quality of life.
Spend Down/Grow Back Withdrawal
A spend down/grow back plan splits your retirement savings into two accounts—a spending account and a growth account. Over a predetermined period of time, you will spend money only from the first account, while investing the money in the second to replace the amount you’ve spent. You can bolster the effects of such a plan by investing a portion of the spending account as well to accrue additional returns.
An experienced retirement planner can help you determine how to distribute your assets for the highest quality of life after retirement. At Financial Directions, LLC of Tucson, we can assist you with development and growth of your retirement savings at any age. Please visit us online or call (520) 408-7777 to find out more about how we can set you on the path to an enjoyable retirement.
