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It's time to retire and live off your hard-earned retirement funds. You're not on easy street yet; you still have lots of financial decisions to make.

At long last, you have reached the stage of life you've been working for. It's time to withdraw your retirement savings. But how and when? How much should you leave in savings or investments? First, estimate how long your retirement nest egg will last. Then, create a realistic spending plan. You've been working all your life to get here; maintaining a sensible financial plan has never been more important than it is right now.

Living Off Your Retirement Income

Generally, you have several options to evaluate, such as a pension, 401(k) plan, profit-sharing, private savings, and social security. Regardless of the type of retirement income you have, you must decide how to best access your money.

In order to decide which money to use first, you'll want to carefully weigh your options against several factors unique to your situation, including your needs, your sources of retirement income, your age, and general state of health. One of the more important elements in the decision process is to determine what the tax implications are when accessing your retirement income. Your employer may have a benefits administrator who can assist you in evaluating your alternatives or you may want to seek the advice of a financial professional to choose how to effectively use your individual sources of retirement money.

Accepting large, lump-sum distributions of your retirement funds might be unwise. It can place an immediate, undue tax burden on you, so you should carefully evaluate taking more of a distribution than you need right away. Remember, all of the money that has been invested for you or by you in tax-deferred plans becomes taxable as soon as you take custody of the money. The tax rules vary widely, depending upon your age and the type of investment you are considering accessing, so you probably want to do a lot of research or consult with a financial professional to get the best advice. You can also contact the IRS at www.irs.gov to study your options and tax liabilities. Now, if you are a savvy investor, you may be able to offset the taxes with income earned on investments. As a general rule, you'll want to access your retirement funds at a rate that maximizes return and minimizes tax liability.

Making Sure Your Retirement Income Lasts

Regardless of how large your retirement fund is, it is of paramount importance that you make sure it will last you throughout your retirement. Also, as you get older, it may become more difficult to find suitable work to supplement your retirement with wages. Let's assume you have a retirement nest egg. How long will it last? The table below illustrates:


Rate of Return on Retirement Fund

Percentage Withdrawn Annually







14 Years

15 Years

17 Years

20 Years

26 Years


16 Years

18 Years

22 Years

28 Years



20 Years

23 years

30 Years




25 Years

33 Years





36 Years





If you can create a financial plan so you only have to use 6% of your retirement reserves each year, and are earning a conservative 5% on your funds, your money will last for 36 years. As an example, let's say you have $200,000 in your retirement account. If you want to limit your use to 6%, this means you can use $12,000 annually, or $1,000 per month. Assuming you continue to earn 6% on your investment, you'll be able to count on this $1,000 every month for the next 36 years. Keep in mind that this illustration doesn't factor in inflation, so over time that $1,000 each month will continue to buy you less and less. You must also factor in taxes that will be assessed on the use of tax-deferred money. If you are in a 28% tax bracket, your $1,000 only buys you $720 of purchasing power.

Spending Plans

Your retirement money is finite so establishing a realistic spending plan is critical in your retirement. What could be worse than running out of money? If you've gone through the budgeting process before, throw it away because your retirement income and expenses will look completely different from what you may have experienced pre-retirement. You may not be spending your money on mortgage payments or business suits, but you may want to travel and may need to pay for some type of health insurance. Use the CareOne Credit budget planner to help you assess your finances.

Comprehensive Financial Plan

Just because you're retired doesn't mean you don't need a comprehensive financial plan. In addition to creating a spending plan, you still need an investment plan, an estate plan, and an insurance plan. Just about the only element of a comprehensive financial plan you don't need to worry about is saving!

Take time to make careful financial decisions. You'll want to take into account tax implications, inflation, your age and average life expectancy, and your goals and objectives so your golden years are worry free and enjoyable.

There are many related articles in the CareOne Credit Knowledge Center Library that may help you further investigate your options.

Take control of your finances with out debt help tools. Use our calculators and budget planner to help you manage your money.


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