5. Adopt a total return strategy
This strategy definitely requires the help of a professional group like my company, 1st Capital Wealth Management Group and calls for looking at each asset, such as a stock or bond, based on its percentage change in value or "total return" over a specific time period. This total return includes income the asset generates, such as dividends and interest, and increases in value, such as a rising stock price.
Essentially, you'd choose investments that could create cash flow from interest and dividends or capital gains (profits from selling them). Your payouts could come from any of these sources. If you don't feel comfortable selling assets, though, you may feel safer using a strategy focused on interest and dividend income instead.
6. Tap your savings by bucket
With this strategy, you divide your retirement investments into three buckets:
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The idea is to withdraw your income from the first bucket, which is continually replenished with earnings from the others. Withdrawing your funds this way can provide peace of mind and financial lifestyle security since it reduces the chance that you’ll run out of money. It can also prevent you from needing to sell investments during a market downturn for cash. Over-or underestimating how much to put in each bucket, though, can make this strategy less effective.
7. Effective use of required minimum distributions
Many retirees rely on required minimum distributions (RMDs) to signal when they should withdraw money from their retirement accounts. RMDs are minimum amounts that an individual must take out of their tax-deferred retirement accounts annually once they reach age 73 if they turned 72 after 2022. That age bumps up to 75 for those who turn 74 after 2032.
To calculate your RMDs, divide the amount of money you had in an account at the end of the past year by the IRS’s "life expectancy factor" that corresponds to your age. To find your factor, consult the life expectancy tables in IRS Publication 590-B. Repeat the process for all your retirement accounts, because you’ll need the RMD for each one. Again, in this case I strongly recommend working with a professional advisor or group like 1st Capital Wealth Management Group to get all the “boxes correctly checked”!
To summarize…it’s not just about the large, accumulated portfolio, but also properly accessing your funds over the lifetime of your retirement. Contact us to discuss your decumulation strategy. [email protected] * www.1stcig.com * 312-952-8040/Cell * 312-836-3800/Office.