How you distribute income from your savings will vary based on your goals and your financial needs in retirement.
“It requires a case-by-case and year-by-year approach,” said Jeff Fosselman, a CPA and senior wealth advisor for Relative Value Partners in Northbrook, Illinois.
Get together with your financial advisor and your accountant and hash out the following.
• Start with Social Security and any pension: Find out how these two sources of retirement income will affect your marginal tax rate. How much room do you have for additional income before your rate rises?
“That’s the amount of money that you can take out of your 401(k) and IRA and still remain in the same bracket,” said Keckler at Ameriprise.
• Know when to tap the other buckets: “If your MAGI is approaching the threshold for higher Medicare premiums, having accounts that generate little tax are a great alternative,” said Fosselman of Relative Value Partners.
• Remember your goals: There’s no rule of thumb for drawing down in retirement. If you’re planning to keep your Roth IRA intact for your heirs, your strategy will be different. “If the client wants the Roth to be part of a legacy, we may be more aggressive investing it,” said Morrissey at Financial Strategy Associates.
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