Transitioning from Saving to Spending - Trust Point

If you’re approaching retirement, it may seem like your hard work is almost done. You’re probably getting ready to relax and enjoy yourself. However, there are still a few more things you should do to complete your retirement planning. Doing them now, before you retire, can help you transition from saving to spending your savings. Here are a few ways to get the ball rolling.

Review Your Investments

First, look at your investment portfolio’s asset allocation. Your ability to recover from market downturns is generally reduced when retirement is getting closer. You may decide to shift a larger portion of your portfolio out of stocks. But keep in mind that inflation can reduce the buying power of your retirement assets. Consider keeping some stock investments in your portfolio since they have the potential to generate returns that outpace inflation.

Consider Your Distribution Options

Next, take some time to learn about your plan distribution options. If you cash out your account balance, you’ll owe income taxes in the year you receive the distribution, leaving you with less money to spend or reinvest.* Instead, you may have the option of keeping the funds tax deferred in your plan account and taking periodic payments. Or, you can arrange for the distribution to be transferred directly into a tax-deferred individual retirement account (IRA). With either option, you can spread out your tax liability by withdrawing the money over time.

Keep Contributing

Finally, continue contributing to your plan. Even if retirement is only a short time away, continuing to save can make a difference in your account value at retirement. If you’re age 50 or over, your employer’s plan may allow you to make “catch-up” contributions. If possible, take advantage of this opportunity so you can accumulate even more money for your retirement.

This is a hypothetical example used for illustrative purposes only and does not represent any specific investment product. Annual compounding is assumed. Your investment performance will be different.

Source: SS&C Retirement Solutions, LLC

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We’re committed to helping our clients navigate the often complicated financial implications that retirement brings. Whether you’re looking at your investment portfolio asset allocation or considering distribution options, contact us to see how we can support your retirement goals.

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*Qualified distributions from a Roth account are not subject to federal income taxes.

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