Today, women have far more financial options and tools available to them in retirement. Using these tools can be the difference between realizing your dreams and running out of money during your retirement. Try these tips to help ensure that your savings last for the long haul.
Keep a close eye on the rate at which you withdraw from your accounts during your early retirement years. In fact, the safe withdrawal rate may be less than you think. For example, if you’re facing a 20-/25-year retirement, your initial rate might be in the 4%/5% per year range, but if you’re looking to spend more than 30 years in retirement, you’ll likely have to cut back to 3%/4%. And if your assets take a nose dive, you may want to consider cutting back even more.
Investing conservatively can result in lower returns and running out of money during retirement. That’s why your asset allocation – the way you divide your portfolio among stocks, bonds and cash – still matters after you retire. It must match both your tolerance for risk and how much you need to continue living in retirement. Each investment type comes with different risk and growth characteristics. For example, if you have a large amount invested in stocks, you may have greater potential return – but also greater exposure to risk. Remember, however, that there is no guarantee that asset allocation reduces risk or increases returns.
Because of inflation, prices – and your expenses – don’t stay the same over the years. Even a low inflation rate can severely impact a retirement budget if it’s not accounted for. To accurately estimate what your expenses will be throughout your retirement, you’ll need to predict how inflation will impact your current retirement account.
There are two primary types of IRAs- Traditional IRAs and Roth IRAs.
|Traditional IRA||Roth IRA|
|Types of contributions||Pretax contributions||After-tax contributions|
|Tax advantages for distributions||Federal taxes owed on your investment earnings and on your pretax contributions when you withdraw your money||Federal taxes not owed on your investment earning or your withdrawals|
|Distributions (withdrawals)||You must take withdrawals by April 1 following the year you reach the age of 70 ½||You may take withdrawals at any time tax free and are not subject to mandatory distributions|
So, should you convert your Traditional IRA to a Roth IRA to save on taxes? It depends on your tax bracket in retirement and when you’ll need to start receiving funds. If you think you’ll be in a lower tax bracket, it might make sense to keep a Traditional IRA. But if you want to start drawing on them early and save on taxes, the Roth might be a good choice. Be sure to discuss your options with your tax advisor prior to taking any action.
An annuity is an insurance product that supplies retirement income and can be a key piece in your retirement strategy as it creates a stream of income in retirement.
When you make an investment in an annuity, you will receive payments on a future date or a series of dates. The income can be received monthly, quarterly, annually or all at once.
With annuities, you can opt to receive payments the rest of your life, or for a set amount of years. The amount you receive depends on whether you choose a guaranteed payout (fixed annuity) or a payout stream based on the performance of your annuity’s investments (variable annuities).
It’s important to work with an advisor who understands your needs and priorities. Take your time evaluating the planners available to you. And remember: If you share finances with another person, such as a spouse or partner, be sure he or she is involved in the process of choosing and then working with an advisor.
Now is the time to take pleasure in what life has to offer, and to take a breather. With a little financial savvy – and a vigilant eye on your retirement accounts – you can enjoy the fruits of your labor.
Annuities are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts [and mutual funds] are not guaranteed and may rise or fall based on investment performance. All annuity guarantees are subject to the claims-paying ability of the issuing insurance company.
Withdrawals of earnings from an annuity are subject to ordinary income tax, plus a possible federal 10% penalty if you make a withdrawal before age 59 ½.
The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Neither TIAA-CREF not its affiliates offer tax advice. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
TIAA-CREF Individual & Institutional Services, LLC, member FINRA distribute securities products.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
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