Which Money to Spend First: Retirement Withdrawal Strategy
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- เผยแพร่เมื่อ 5 ก.ค. 2024
- Which retirement account should you withdraw from first when you need funds? You might have assets in pre-tax accounts, Roth accounts, or plain-old joint and individual accounts.
The choices you make can have a dramatic impact on your taxes and other costs, so it’s worth making a strategy.
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In general, the idea is to manage your pre-tax accounts. For instance, you may have traditional IRAs, pre-tax 401(k) or 403(b) accounts, or other workplace plans. You’ll have to pay taxes on those funds someday, but the temptation is to avoid taxation for as long as possible.
Ultimately, you pay taxes on those accounts sooner or later. So, when should you spend that money in retirement?
It might make sense to draw from pre-tax accounts-even when you don’t need to-when you can do so in relatively low tax brackets.
While you can form a strategy, you can’t really know in advance how it will play out. So go ahead and try to quantify the impact, but recognize that there’s no way to predict the future accurately.
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Read the article: www.approachfp.com/which-mone...
Consider Roth conversions as well. If you don’t need to spend money from pre-tax accounts, it could make sense to convert a portion of your account to Roth. If you are able to meet all IRS requirements, it might be possible to get funds out of the Roth tax-free later in life.
Ultimately, these strategies might not pay off. There’s no guarantee that you’ll come out ahead, and any action you take could potentially turn out to be a mistake in hindsight. So, evaluate your situation, make some educated guesses with the information available today, and then do what you think is best.
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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.
CHAPTERS:
00:00 Important Question
00:54 Example: Why it Matters
09:34 Which Account Should You Spend First?
11:44 Pro-Rata Withdrawal Strategy
13:51 Sample Scenarios and Tips
IMPORTANT:
You can run out of money with any strategy. Verify tax rules and details with a tax expert before making any decisions. This video may show information from companies that are not associated with Approach Financial, Inc. It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
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Outstanding job, Justin! A most essential financial topic, indeed!!
Thank you for saying so. Spending 101!
Thanks for your content.
Wow lots to consider there!
When you use the speech to text tool, the text box blocks off important things that you are trying to show.
Thank you, that is a good point. I try to include a lot of information in the video portion, and I see what you're saying. This video, in particular, has a lot in the lower portion of the screen (as you noticed). The captions can, of course, be turned off when not needed-but that doesn't do any good for those who want or need to view captions. So, I'll have to keep this in mind for future videos. Thanks again for bringing it up.
my idea is to spend out of brokerage first and keep it under $40,000. this would mean very little tax, since I am not taking SS early, i ll wait until 70. The brokerage would last me until 62, at which point I would take out of 401k for 10 years before reducing it to zero and then taking SS and then ROTH . What do you think?
It sounds like you've been doing some planning. I can't really opine on a retirement plan in TH-cam comments for multiple reasons, but I truly appreciate you watching the videos. I'd just run some numbers on what it looks like to pull from pre-tax accounts sooner than later, although of course I don't know any of your details. It might or might not make sense to tap the pre-tax money-I just don't know.
@@ApproachFinancial Thank you sir. Love your videos
What do you charge to do a retirement strategy for a couple?
Thanks for your interest. There are several topics I avoid in TH-cam comments to steer clear of regulatory problems and advertising issues. This is one of those topics, but you're encouraged to visit my website-and the Pricing page, in particular-to see what's currently available.