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What you should know about drawing income in retirement Thumbnail

What you should know about drawing income in retirement

Drawing income in retirement is critical to ensuring financial security during your golden years. Here are some key things you should know about drawing income in retirement:

1. Create a retirement budget: It's essential to create a budget that outlines your expected expenses in retirement. This budget will help determine how much income you must draw from your retirement savings each year.

2. Determine your retirement income sources: You may have multiple sources of retirement income, such as Social Security, a pension, or investment accounts. Determine how much income you can expect from each source.

3. Consider your withdrawal strategy: Different strategies exist for withdrawing money from retirement savings. Some retirees opt for a fixed percentage withdrawal rate, while others use a bucket strategy or rely on more secure income sources such as annuities.

4. Consider taxes: Your retirement income may be subject to taxes. Consider the tax implications of your withdrawal strategy and ensure you take advantage of any tax-deferred retirement accounts available.

5. Plan for risks: Many factors can undermine financial security and diminish the standard of living in retirement, including inflation, market volatility, longevity, healthcare, and spending shocks. Take note of these factors and devise a plan to mitigate them.

6. Maximize efficiencies: Integrating various strategies into the retirement income plan can increase spending potential, preserve assets, and improve the standard of living. 

7. Be flexible: Your retirement income needs may change over time. Be prepared to adjust your withdrawal strategy as needed to accommodate changes in your budget or unexpected expenses.

8. Work with a financial advisor: A financial advisor can help you create a retirement income plan that considers all of these factors and helps ensure you have enough income to support your lifestyle throughout retirement in a manner that suits you.