retirement income, 401k plan, Enjoying Retirement, Converting your Retirement Savings into Cash

Enjoying Retirement

You’ve spent the past several decades saving. Now that you’re retired, however, you face an entirely different conundrum: What’s the best way to turn that savings into a retirement income?

This is an important question because life expectancies are rising. Longer life expectancies mean longer retirements. A 65-year-old American male in good health has a 50 percent chance of living to 85 and a 25 percent chance of living to 92. A 65-year-old female has a 50 percent chance that she will live to 88 and a 25 percent chance of living to 94. Based on these findings, you’ll need a reliable income for a longer period of time than previous generations—for almost as many years as you spent working. A successful retirement income plan can help you feel confident that your assets will last through your extended lifetime.

It takes some smart planning to make sure you use your savings in the most efficient way possible, while still ensuring that you’ll have enough income to last a lifetime. A SunTrust Investment Services advisor can help you take a comprehensive look at all sources of retirement income, such as your savings, investments, employer-sponsored 401(k) plans, Social Security, pension, annuities and insurance. Then your retirement advisor can help you devise a tax-efficient strategy for converting these savings into retirement income.

You can begin withdrawing income from your qualified retirement accounts after age 59½ without penalty, through periodic distributions, lump-sum distributions or required minimum distributions.

Periodic distributions: The rate at which you withdraw income from your qualified assets is a key to determining how long your savings will last. Factors that affect your distribution rate include your age, health, spending habits, lifestyle, gifting goals and the potential impact of inflation. As a reference point, most retirees typically liquidate no more than five percent of their principal each year.

Lump-sum distributions: You have the option of withdrawing income from a qualified retirement plan in one lump sum. There are tax advantages to this method, but there can be many caveats as well. A SunTrust Investment Services advisor can help you determine whether you qualify for such a distribution and under what circumstances it makes sense.

Required minimum distributions: For Traditional IRAs, you must generally begin taking required minimum distributions (RMDs) no later than April 1st following the year you turn 70½. RMDs are determined by the IRS and based on your age and a percentage of your account balance. The same generally holds for 401(k) plans and other qualified retirement plans, with some exceptions. It’s worth noting that Roth IRAs have no such minimum distributions.

To speak with a SunTrust retirement expert call 866.732.1687.

Surprising facts about retirement saving habits

How do your plans compare with others?

  • Half of all Baby Boomers say they plan to launch a new career or job in retirement.
  • More than half of U.S. workers have saved less than $25,000 for retirement.
  • Social Security accounts for less than 40 percent of an average wage earner's income after retiring.
  • Only 36 percent of Baby Boomers think they will have enough to live comfortably in retirement.

What you need to know about taxable withdrawals

When withdrawing from taxable accounts, consider this:

  • To benefit from the lower rate on long-term capital gains, sell assets with long-term gains and hold onto assets with short-term gains.
  • Sell assets to restore the balance of your portfolio.
  • If you have a taxable investment that’s worth less now than when you bought it, selling at a loss may result in a tax deduction that you can use to offset investment gains.

Get details about healthcare costs in retirement

Many retirees underestimate their healthcare costs, so remember:

  • Most Americans are not eligible for Medicare until age 65.
  • Medicare can assist with benefits and health insurance.
  • Basic Medicare doesn’t cover prescription drugs and many other medical costs.
  • Supplementary insurance plans can help cover healthcare costs.

Protect yourself no matter where the market goes

Retirees are particularly vulnerable to market downturns because of their dependence on portfolio income and their limited investment horizon. You can’t guard against losses, but you can ease the ups and downs in the market by following these suggestions:

  • Keep withdrawal assumptions conservative
  • Maintain a sensible asset allocation
  • Review and rebalance your portfolio
  • Work with a financial professional
Disclaimers

SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively, “SunTrust”) are not permitted to give legal or tax advice. While SunTrust can assist clients in the areas of estate and financial planning, only an attorney can draft legal documents, provide legal services and give legal advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any financial transaction or estate plan. Because it cannot provide legal services or give legal advice, SunTrust’s services or advice relating to “estate planning” are limited to (i) financial planning, multi-generational wealth planning, investment strategy, (ii) management of trust assets, investment management and trust administration, and (iii) working with the client’s legal and tax advisors in the implementation of an estate plan.

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