3 Things every retiree should check off before withdrawing retirement funds
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There are moments in life when milestones arrive quietly yet carry enormous weight, shaping the future in ways that are not always immediately visible.
Stepping into retirement often feels like a celebration, but it also introduces new responsibilities that demand foresight and patience.
Each decision has the power to ripple across years, influencing comfort, stability, and peace of mind. It is in these first careful steps that the path to financial security is either strengthened or put at risk.
Plan Ahead
The first step toward a smooth withdrawal is building a clear picture of income needs, tax brackets, and required minimum distributions (RMDs).
Tyler Meyer, CFP and founder of Retire to Abundance, emphasized the importance of consolidating accounts and setting aside enough cash to handle expenses during difficult markets.
“Streamlining finances by rolling over old 401(k)s into IRAs can make managing withdrawals easier,” Meyer said.
“Maintain 12 to 24 months of living expenses in cash or a cash equivalent to avoid selling investments during a market downturn.”
Also read: Smart ways to make the most of RMDs you don’t currently need
Create a Withdrawal Strategy
Financial experts often point to the 4% rule as a practical starting point, allowing retirees to withdraw 4% of their savings in the first year and adjust annually for inflation.
Meyer warned, however, that one-size-fits-all approaches may not reflect the realities of longevity, spending needs, or portfolio risks.
“Estimate life expectancy and adjust withdrawal rates accordingly, keeping in mind that many people underestimate how long they’ll live,” he said.
He also recommended using income guardrails and stress testing strategies so retirees can adapt to market swings without running the risk of running out of money.
Also read: Social Security after retirement: 6 Smart moves to make
Consider Tax Implications
Taxes remain one of the most critical factors when making the first withdrawal, as the type of account and age of the retiree dictate what is owed.
“Many people are seeking ways to help reduce the taxes that they will pay over the course of their retirement,” said Andrew Bachman, director of financial solutions at Fidelity Investments.
Meyer also pointed out that order matters, noting that retirees should begin with taxable accounts, then move to tax-deferred accounts, while saving Roth IRAs for last to maximize tax-free growth.
“Save Roth IRAs for last to allow tax-free growth,” he said, cautioning that withdrawals can affect Medicare premiums and Social Security taxation if not carefully planned.
Read next: Getting ready for retirement: Tips to handle this major life shift
What strategies are you considering for your first retirement withdrawal, and how do you plan to balance income with taxes and long-term security? Share your approach and thoughts in the comments below.
Stepping into retirement often feels like a celebration, but it also introduces new responsibilities that demand foresight and patience.
Each decision has the power to ripple across years, influencing comfort, stability, and peace of mind. It is in these first careful steps that the path to financial security is either strengthened or put at risk.
Plan Ahead
The first step toward a smooth withdrawal is building a clear picture of income needs, tax brackets, and required minimum distributions (RMDs).
Tyler Meyer, CFP and founder of Retire to Abundance, emphasized the importance of consolidating accounts and setting aside enough cash to handle expenses during difficult markets.
3 Things every retiree should check off before withdrawing retirement funds. Image source: Vitaly Gariev / Unsplash
“Streamlining finances by rolling over old 401(k)s into IRAs can make managing withdrawals easier,” Meyer said.
“Maintain 12 to 24 months of living expenses in cash or a cash equivalent to avoid selling investments during a market downturn.”
Also read: Smart ways to make the most of RMDs you don’t currently need
Create a Withdrawal Strategy
Financial experts often point to the 4% rule as a practical starting point, allowing retirees to withdraw 4% of their savings in the first year and adjust annually for inflation.
Meyer warned, however, that one-size-fits-all approaches may not reflect the realities of longevity, spending needs, or portfolio risks.
“Estimate life expectancy and adjust withdrawal rates accordingly, keeping in mind that many people underestimate how long they’ll live,” he said.
He also recommended using income guardrails and stress testing strategies so retirees can adapt to market swings without running the risk of running out of money.
Also read: Social Security after retirement: 6 Smart moves to make
Consider Tax Implications
Taxes remain one of the most critical factors when making the first withdrawal, as the type of account and age of the retiree dictate what is owed.
“Many people are seeking ways to help reduce the taxes that they will pay over the course of their retirement,” said Andrew Bachman, director of financial solutions at Fidelity Investments.
Meyer also pointed out that order matters, noting that retirees should begin with taxable accounts, then move to tax-deferred accounts, while saving Roth IRAs for last to maximize tax-free growth.
“Save Roth IRAs for last to allow tax-free growth,” he said, cautioning that withdrawals can affect Medicare premiums and Social Security taxation if not carefully planned.
Read next: Getting ready for retirement: Tips to handle this major life shift
