Systematic Withdrawal Strategies
Sep 2, 2022
Some retirees wish they could simplify money management.Estimating investment income, annual retirement plan distributions, and quarterly taxes can be a chore.
This is why some retirees choose to make systematic withdrawals. Just as they contributed a set amount per month to their retirement accounts while working, they now withdraw a set amount from their accounts each month, quarter, or year.
The simplicity of this may appeal to you. The potential drawback is that a systematic withdrawal strategy can risk oversimplifying the complex matter of retirement income distribution.
How Do These Strategies Work?
A specific monthly, quarterly, or annual withdrawal amount is established, and then assets are sold or liquidated to generate the cash. As people commonly have multiple retirement or investment accounts, a comprehensive systematic withdrawal strategy arranges proportionate withdrawals from most or all of them. Sometimes, federal or state taxes can be withheld from the withdrawals.
Remember, investments will fluctuate in value and when sold, they may be worth more or less that their original cost. This article is not intended as tax or legal advice, and may not be used for the purpose of avoiding any state or federal tax penalties. Please consult a professional with legal or tax experience regarding your situation.
These Withdrawals Often Take Time To Arrange.
Most investment custodians will permit them, but paperwork is necessary. In some cases, they are only allowed when the account balance is above a certain level.
In the big picture, tax issues must also be considered. Withdrawals from retirement accounts may be characterized as taxable income.
There Are Times When Systematic Withdrawal Strategies May Not Work Well.
For example, say some of your investments have lost value, but your withdrawal amount stays the same. This means that a greater percentage of your investments may have to be sold to generate that income you have set up.
So during this period, you are selling a greater percentage of your invested assets – assets that have the potential to grow in the future.
Also, note that required minimum distributions (RMDs) may apply to certain accounts after you reach age 72. That implies an end to systematic withdrawals, as your RMDs will almost certainly vary per year.
There Are Pros and Cons to Adopting a Systematic Withdrawal Strategy.
For more insights and resources, be sure to sign up for our Weekly Market Commentary. Follow our YouTube channel where we regularly post our Epic Market Minute videos. Follow us on LinkedIn, or like us on Facebook. And as always, please don’t hesitate to reach out to a dedicated service professional at Epic Capital.
Tags: charlotte NC, retirement, Retirement Planning
More Insights
Jul 26, 2024
Key Takeaways Volatility came back with a vengeance this week as selling pressure in the mega cap space dragged down the broader market. Counterbalancing weakness in these heavyweight names poses a challenge for the rest of the market. Overbought conditions can also be blamed for the recent weakness. The S&P 500 reached a 14.9% premium … Continue reading “Market Update – Assessing the Technical Damange”
Jul 24, 2024
Life insurance can be an excellent tool for charitable giving. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but you may also benefit from tax rules that apply to gifts of life insurance.
Jul 22, 2024
When you think of Social Security, you probably think of retirement. However, Social Security can also provide much-needed income to your family members when you die, making their financial lives easier. Your family members may be eligible to receive survivor benefits if you worked, paid Social Security taxes, and earned enough work credits. The number … Continue reading “Social Security Survivor Benefits”
Jul 19, 2024
Information vs. instinct. When it comes to investment choices, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware … Continue reading “Making Investment Choices”
Jul 17, 2024
As a business owner, you should carefully consider the advantages of establishing an employer-sponsored retirement plan. Generally, you’re allowed certain tax benefits for establishing an employer-sponsored retirement plan, including a tax credit for establishing the plan and a deduction for contributions you make. In return, however, you’re required to include certain employees in the plan, … Continue reading “Retirement Plans for Small Businesses”
Top of Page
Services
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >
Find us on:
Copyright © 2024 Epic Capital Wealth Management. All Rights Reserved.
Securities offered through LPL Financial. Member FINRA/SIPC.
The LPL Financial representative associated with this website may discuss and/or transact securities business only with residents of the following states: CA, CO, DC, DE, FL, GA, IN, LA, MD, MO, MS, NC, NJ, NY, PA, SC, TN, TX, VA, VT, WA.