Budgeting in retirement | blog.firstffcu.com

Do you have a spending plan in place for when you retire? Many retirees worry about outliving their money. It’s important to have a strategy for withdrawing and using your retirement assets.

First, you’ll need to determine a practical, yearly withdrawal amount. Some households adopt the 4% rule, which entails removing 4% from their savings annually. That rule, however, has its critics, many of whom feel it can backfire in a volatile market. Some retirees try to withdraw a set dollar amount annually. Others withdraw a fixed percentage of their portfolio or aim to live off its interest rather than its principal. There is also the “bucket” approach, in which a retiree withdraws cash to live on from an account that would be “refilled” with investment earnings from other accounts.

Second, keep in mind the order in which you withdraw from your accounts. It may be preferable to withdraw income from your taxable investment accounts first. That way, you can give your tax-deferred accounts a chance to grow and compound further. Generally, withdrawals from tax-deferred retirement accounts are required at age 72. Because the taxable income resulting from these mandatory withdrawals may put you in a higher tax bracket, one option is to start allowing withdrawals from these accounts earlier (after age 59 1/2) – the smaller the account balance, the smaller the mandatory withdrawal becomes.

As your retirement progresses, you’ll want to review your strategy. Life events, investment returns, inflation and other factors may call for adjustments. The key is to have a plan in place that you can then modify as needed.

Questions about this topic? Contact First Financial’s Investment & Retirement Center by calling 732.312.1534. You can also email mary.laferriere@lpl.com or maureen.mcgreevy@lpl.com

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial, LLC

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Very few people can retire without the stress of worrying about money. If you’re like most people, you’ll face a critical task when you reach retirement to make sure that your assets are able to support you through your lifetime.

Cash flow is king here. Quite simply, you must have enough income to pay for your living expenses. This is no easy task, especially as people are living longer today than ever before.

To help keep you on track and get you to a positive cash flow, there are a few key steps to keep in mind.

First, make a plan. You want to get a clear picture of your financial situation, which includes your projected income and expenses. Start by creating a detailed net worth statement, which will give you a comprehensive overview of your assets, debt, and cash on hand.

Next, assemble an accurate budget that itemizes your income and expenses. If you anticipate any major lifestyle changes after retirement, make these notations. Include your anticipated income during retirement, such as Social Security, pension, and other income streams. Include all of your expenses, prorating them on a monthly basis. When you finish creating your statement, look for any cash flow issues that might arise, and then find areas that will help you improve your income/expense balance.

Revisit your planning tool regularly and readjust the figures if your actual income and expenses change. As you monitor your finances, there are several items that could impact your cash flow in profound ways, including interest rates, tax rates, healthcare costs, and life events. Continually assess and revise your plan as necessary to account for their impact.

By developing and monitoring a budget during retirement, you minimize the possibility of cash flow issues that could otherwise constrain your lifestyle expectations.

For help in planning carefully, look to your financial professional for assistance.

Contact First Financial’s Investment & Retirement Center by calling 732.312.1534 to speak with professionals who can help steer your finances in the right direction. You can also email mary.laferriere@lpl.com or maureen.mcgreevy@lpl.com

Securities and insurance offered through LPL or its affiliates are:This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial, LLC

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