As you approach retirement, you’re likely wondering what the best strategy is for withdrawing money from your investments. There are a few things to consider when making this decision.  How much money do you have in savings? What is the value of your investments? When are you going to start taking withdrawals? Do you have Income streams that are guaranteed for life (i.e. Social Security, Pensions, and/or Annuities with Lifetime Withdrawal Benefits), and when will they start? What are your monthly/yearly expenses? What accounts should I start taking withdrawals from first (Tax-Deferred or Tax-Free)? In this blog post, we’ll dive into the different withdrawal strategies and help you determine which is right.

 Key Points

  1. Knowing what your monthly/yearly expenses are.
  2. Knowing your guaranteed for-life income streams and when they will start.
  3. How much money do you have in Savings?
  4. What is the value of your investments?
  5. When are you going to start taking withdrawals?
  6. What accounts should you start taking withdrawals from first (Tax-deferred or Tax-free).

1.   Monthly/Yearly Expenses

The first step is knowing what your monthly expenses are. That includes not just your needs (Electric, Fuel, Food, Heat, Car Payments, Mortgages, etc.) but your wants as well (Travel, Dining Out, Entertainment, Charity Contributions, etc.).

Once you know how much income you need each month, you can then determine how much you will need to withdraw from your investments each month.

If you need help creating a budget, you can schedule a one-on-one 30-minute introductory meeting by clicking here.

2.  Guaranteed Lifetime Income Streams

Your next step is to determine how much money you will have going in each month and when it starts from Social Security, Pensions, and or Annuities with an Income Rider. Not everyone will have all of those, but you always want to take stock of money that you cannot outlive.

Having guaranteed income will reduce the amount of money you will need to take from your investments each month. This will allow your investments to continue to grow.

If you would like to find out more about having guaranteed lifetime income, you can schedule a one-on-one 30-minute introductory meeting by clicking here.

3.  How Much Cash is in Your Savings Account

Having emergency money in a liquid savings account is extremely important in retirement. Not only for unexpected financial events but also in case the market is in a downward trend at the beginning of your retirement.

Starting to withdraw funds from your investment account at the beginning of your retirement can significantly impact how long your money will last due to the sequence of returns. Having negative returns just as your start retirement will have a much greater impact than if the market experiences a downward trend later in your retirement.

Having between one & two years of cash in your emergency fund will allow you to hold off on withdrawals for the time being and will give you the flexibility to start when market conditions are better.

If you want more information on the sequence of returns and how they can significantly impact your retirement, click here to schedule a one-on-one 30-minute introductory meeting.

4.  The Value of Your Investments at the Start of Your Retirement

It is very important to know the balances of ALL your investment accounts as you go into retirement. By knowing your balances, how much you have in savings, and your guaranteed income streams, you will have a general idea of how long your money will last based on your project expenses.

In addition, to your expenses, the other important factor will be what type of return from your investments you hope to generate during retirement. This will depend on several factors, including your risk tolerance and life expectancy.

5.  When are You Going to Start Withdrawing Money

Timing is everything. Are you going to start taking withdrawals before your guaranteed income starts? Is the market in a downward trend? Are you willing to work part-time at the beginning of your retirement to help your principal balance grow further? Will you be willing to hold off investment withdrawals for a year and live off your savings?

It is very important to choose the best strategy for you based on your individual goals, needs, objectives, risk tolerance, and projected time horizon. Making the wrong selection can mean the difference between a financially secure retirement and one with financial struggles.

6. Which accounts do you start withdrawing from, Tax-deferred or Tax-free?

Money can be withdrawn from tax-deferred and tax-free accounts without incurring a 10% penalty after age 59 ½ (If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties). There are certain exemptions prior to age 59 ½ where money can be withdrawn without penalties.

Tax-deferred retirement accounts require you, in most cases, to begin taking mandatory withdrawals beginning at age 72 (70 1/2 if before January 1, 2020). This will require you to take at least the required minimum withdrawal each year, whether you want to or not. The IRS formula determines how much you must withdraw each year.

Tax-free retirement accounts have no required minimum withdrawals at any age. That means if you do not need the money, you do not have to take it out. The reason is that you already paid the tax on the contributions.

Using a combination of withdrawals from tax-deferred and tax-free retirement accounts can help minimize your taxes.  Each person’s situation is unique. Which strategy or strategies will work best for each person will depend on their own goals, objectives, and circumstance.


As you can see, there are a lot of factors that go into whether or not you’re on track to have a successful retirement. If you’re feeling lost, don’t worry – we can help.

Our team of financial professionals will sit down with you and figure out where you stand and what steps you need to take to get on track for the retirement lifestyle you want. Schedule an appointment with us today so we can start helping you plan for your bright future.

To find out what retirement withdrawal strategy or strategies might be best for you, or if you are not sure your retirement is on track, schedule an introductory 30-minute retirement strategy call by clicking here.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.

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