How to get the most out of your retirement money

Once you hit the retirement age, you will really want to kick back and try to enjoy your savings. But you are likely to enjoy them even more once you learn how to manage each of your withdrawals in a smart way. In order to provide yourself with a better chance of outliving all your savings, you will have to withdraw no more than 5% or 6% of your total savings every year. Minimizing your tax bite is another important thing you should consider in order to get the most out of your current retirement savings. For instance, the more your savings grow, the faster the tax will grow as well. The key element here is to do your best in order to pay the lowest tax rates on each of your withdrawals.

Experts suggest that you should draw some of your savings from the taxable accounts in your early years of retirement. The rest of your retirement income should be redrawn from the tax-deferred accounts. This is the right mix for you. If you are interested to make major portfolio adjustments in your retirement, you should try and do so in the tax-deferred accounts because, this way, you will pay no taxes or transaction costs. In turn, your taxable accounts can be used in order to harvest all the tax losses. In this process, you will be selling a retirement investment on which you have already lost money and you will apply this loss against all your future capital gains. This will reduce your tax bill as well.

If you notice that your savings are not large enough in order to have all your needs met, you will have to do something in order to stretch all the retirement assets that you have already accumulated. For instance, you might try and take a job in your retirement. Just imagine taking an interesting part-time job in order to reduce all your withdrawals from the IRA. Actually, you can save up to $10,000 on your savings by taking a part-time job.

You might also try and get extra money from your home. You might try and convert the home equity into a tax-free income for your retirement. You can do this by taking the so-called reverse mortgage. Another thing you might try and do is to move to an area that isn’t so expensive. By doing this, you could stretch your savings and income by 20% or even more.  Reducing or even eliminating the high interest-rate debts is paramount when trying to get the best out of your retirement income. For instance, the credit cards must be reduced or even eliminated in order for you to live well in your retirement.

Keep in mind that you must not rely solely on the Social Security or your company pension plan. Instead, you should depend on yourself and on how skillfully you manage to plan and invest your retirement savings. You will also have to make a good use of the existing 401k(s) and IRAs in order to increase your retirement income. However, you will have to start by estimating how much money you will need in retirement. Keep in mind that you will need almost 75% of your pre-retirement income in order to live comfortably. This amount of money should be enough if you have managed to pay off your mortgage and you are in a perfect health the moment when you kiss your office goodbye. But if you plan to build a new house or trot around the whole planet, you will need 100% of your pre-retirement income.  

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