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 800.786.8787.