Six tips for turning your assets into income
The closer you get you to retirement, the more you’ll picture the lifestyle you want – and what it may cost. By creating a strong retirement income strategy, you can feel more confident about the future. We’ve put together six of our top tips to help you get started.
1. Think beyond a lump sum goal
When most of us save for retirement, we imagine the final dollar amount we want to reach. But it’s important to consider how much of that amount you’ll need each month or year. This will help shift your thinking from focusing on a specific amount to developing an income stream.
2. Include all your income sources
The more accurate your estimated retirement income is, the stronger your income strategy will be. When calculating how much income you’ll have in retirement, remember to include pensions, Social Security payments and any other savings or investments. To see how much you’ll receive from Social Security, visit ssa.gov.
3. Understand how taxes can have an impact
One of the benefits of most traditional retirement plans is that your contributions are added to your account pre-tax. This can be helpful during your working years (when your taxable income is likely higher than it will be in retirement), but it’s important to remember that you’ll pay taxes on your contributions and earnings when you start taking withdrawals. If you’re contributing to a Roth account, however, your withdrawals will be tax-free because you already paid taxes on those contributions.
4. Pick a withdrawal approach
When it comes to withdrawing money from a retirement account, you can choose from a few different approaches:
- Fixed dollar amount - You withdraw the same amount each month, quarter or year.
- Fixed percentage - You withdraw the same percentage of your portfolio each year, so your income will vary based on how much you have in your account.
- Investment earnings only - You withdraw only what your account has earned in the last month, quarter or year. This leaves your principal untouched and your income will vary based on market performance.
5. Understand your withdrawal options
Most retirement plans won’t let you take withdrawals before age 59 ½ without paying a penalty, but require you start taking income by age 72. Your financial professional can help you determine the ideal time to start taking income, so you can make the most of your money and meet your needs in retirement.
6. Determine the best time to start withdrawing income
If you’re an Equitable client, you can use our retirement calculator to determine your exact retirement income based on your current contributions. You can also explore how some changes, like increasing your contributions, can make an impact. If you’re not a client, you can still use our retirement calculator and fill out what you know. With an estimate of how much income you’ll have, you can finetune your retirement income strategy and feel more confident about your future.
If you need any help creating or updating your retirement income strategy, please contact your financial professional.
Important Note: At Equitable, we believe that education is a key step toward reaching your financial goals, and we’ve designed this material to serve simply as an informational and educational resource. Accordingly, this article does not offer or constitute investment advice and makes no direct or indirect recommendation of any particular product or of the appropriateness of any particular investment-related option. Investing involves risk, including loss of principal invested. Your needs, goals and circumstances are unique, and they require the individualized attention of your financial professional. But for now, take some time just to learn more.
This article is provided for your informational purposes only. Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.
Equitable Financial Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through Equitable Advisors, LLC, member FINRA, SIPC. Equitable Financial Life Insurance Company and Equitable Advisors are affiliated and do not provide tax or legal advice.
