Frequently Asked Retirement Income Questions

November 26, 2019
HQa7d3de-4cc4-4265-bdf0-7a4ef06dbb71

Whether you are near retirement or not, it is always good to plan ahead. Following is a scannable list of frequently asked questions about retirement income planning with plain-English answers:

When should I begin thinking about tapping my retirement assets and how should I go about doing so?

The answer to this question depends on when you expect to retire. Assuming you expect to retire between the ages of 62 and 67, you may want to begin the planning process in your mid-to-late 50s. A series of meetings with a financial professional may help you make important decisions such as how your portfolio should be invested, when you can afford to retire, and how much you will be able to withdraw annually for living expenses. If you anticipate retiring earlier, or enjoying a longer working life, you may need to alter your planning threshold accordingly.

How much annual income am I likely to need?

Financial professionals typically suggest that many people are likely to need between 60% and 80% of their final working year’s income to maintain their lifestyle after retiring. But low-income and wealthy retirees may need closer to 90%. Because of the declining availability of traditional pensions and increasing financial stresses on Social Security, future retirees may have to rely more on income generated by personal investments than today’s retirees.

How much can I afford to withdraw from my assets or investments for annual living expenses?

As you age, your financial affairs won’t remain static: Changes in inflation, investment returns, your desired lifestyle, and your life expectancy are important contributing factors. You may want to err on the side of caution and choose an annual withdrawal rate somewhat below 5%; of course, this depends on how much you have in your overall portfolio and how much you will need on a regular basis. The best way to target a withdrawal rate is to meet one-on-one with a qualified financial professional and review your personal situation.

When planning portfolio withdrawals, is there a preferred strategy for which accounts are tapped first?

You may want to consider tapping taxable accounts first to maintain the tax benefits of your tax-deferred retirement accounts. If your expected dividends and interest payments from taxable accounts are not enough to meet your cash flow needs, you may want to consider liquidating certain assets. Selling investments that are not generating profits in taxable accounts may allow you to offset current or future earnings for tax purposes. In addition, it is important that you frequently consider rebalancing your account so that it is aligned with your goals. Another potential strategy may be to consider withdrawing assets from tax-deferred accounts to which nondeductible contributions have been made, such as after-tax contributions to a 401(k) plan.

When crafting a retirement portfolio, you need to make sure it is positioned to generate enough growth to prevent running out of money during your later years. You may want to maintain an investment mix with the goal of earning returns that exceed the rate of inflation. Dividing your portfolio among stocks, bonds, and cash investments may provide adequate exposure to some growth potential while trying to manage possible market setbacks.

To manage your account online, you may visit popular.com/401k

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

 

 

The content of this material is provided for informational and educational purposes only and may not be applicable to all situations. Its contents should not be considered as an advice of any kind or as a suggestion to effect (or inhibit) any particular action. The information and general descriptions included are designed to help you understand some of the factors that you should generally consider when evaluating the relevance of any financial strategy. It does not include or take into account all the factors that may be relevant to your individual financial needs. By providing this information, we presume that you are able to evaluate this information an exercise your independent judgment. Brokerage products and services are provided by Popular Securities, LLC, a registered broker/dealer, member FINRA SIPC. Popular Securities, LLC is a subsidiary of Popular, Inc. and an affiliate of Banco Popular de Puerto Rico. Popular Inc. and Banco Popular de Puerto Rico are not registered broker/dealers. Banco Popular de Puerto Rico, its subsidiaries and affiliates, are not engaged in rendering legal, accounting or tax advice. Should legal, accounting or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, are not deposits or obligations of, nor are guaranteed by, Banco Popular de Puerto Rico, its affiliates and/or subsidiaries; they involve risk and may lose value.

ˆ