Whether you’re approaching or you’re planning long term for retirement, it’s important to consider how your retirement plan savings will replace your employment income. By evaluating your savings, potential sources of other income, and possible expenses, you’ll get a clearer picture of how to withdraw plan funds for retirement income.
Take a retirement test drive. Use our interactive scale calculator to plan and strategize an outcome that keeps you in the driver’s seat with your money then read on.
Step One. What’s my planned income for retirement?
The money you’ve saved for retirement is designed to replace, or at least supplement, the income you earned while working. Doing this will help you maintain your standard of living so you can enjoy retirement. To plan for income replacement, you’ll want to evaluate your different sources of retirement income starting with your retirement savings accounts then consider sources of income you may receive such as:
- Social Security
- Pension Plan
- Part-time Income
Take time to understand how each of these will contribute to your monthly income stream to cover your expenses. Plug your numbers into to the Retirement calculator.
Step Two. What expenses should I plan for in retirement?
To estimate your cost of living in retirement, start by calculating your expenses today. Then, ask yourself a series of questions to help you estimate future expenses.
- What expenses are taken from your paycheck today? Consider health insurance—you may pay this out of your own pocket once you retire.
- Do you have expenses that are likely to increase once you retire, like medical expenses and prescriptions?
- Do you have expenses that might decrease once you retire, like housing, clothing or transportation?
- Have you budgeted for extras like travel and entertainment?
- Have you consulted a tax specialist to estimate your taxes during retirement?
- Have you budgeted for unexpected expenses, like home repairs, new appliances or automobiles?
Step Three. How should I withdraw my retirement plan savings?
Once you understand expected income and expenses, you can make a plan for how you’ll withdraw money from your retirement plan savings. Due to the tax implications of retirement plan withdrawals, it’s important to consult with a tax professional and/or financial advisor to review your personal situation.
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