1. Waiting Too Long
As odd as it sounds, waiting too long to start drawing from those accounts. Many people who are early in their retirement are hesitant to start withdrawing from their retirement savings. It is important to remember that you saved this money so that you could use it.
One of the consequences of waiting too long is increasing your required minimum distribution (RMD.) This means that when you finally do decide to withdraw, you're going to have to take more out at once, which can sometimes result in a higher tax bill, or also it can impact things like your Medicare costs based on what you're planning for that year.
2. No Plan
The second biggest mistake we see is if you're going to draw income from a portfolio without a specific plan. Without considering from where you are withdrawing your money, you could be drawing from risk assets that can fluctuate and go up and down at a time not opportune. This essentially means that you could be losing money by withdrawing from the wrong account at the wrong time.
3. Not Considering the Tax
Not considering the tax ramifications goes hand in hand with not having a plan. Even if you're not taking too much, or if you are not concerned with running out- where you draw income from inside of your portfolio can make a big difference. This is because of the taxation of either the specific investment or the account, whether it's a traditional or Roth account, the tax-deferred account, etc. You have a big impact on what you're paying as far as taxes.
Overall, your goal is to use the money you worked so hard to save wisely. You want to be as efficient as possible so that you do not run out of savings.
Do You Have a Retirement Plan?
No matter where you are in your financial planning, our team is here to help answer your questions and get you running in the right direction. If you have any questions about your plan, contact us today!