Newly Retired? Fresh Ideas for Managing Your Retirement Income

As a new retiree, you may be wondering how to manage your retirement income.  Last month, president of Charles Schwab, Carrie Schwab-Pomerantz, published an article titled “Newly Retired?  Fresh Ideas for Managing Your Retirement Income”.  This article hits key points of 1) Which accounts and investments you could draw from first, 2) Options for rebalancing your portfolio once you start to withdraw, and 3) Considering taking your required minimum distributions to avoid penalties (if 70 ½ or older).  Click here to read the entire article, or continue reading for a summary below.
 
Before jumping into the discussion of possibile ways to manage your retirement income, keep in mind the following essentials:
 

• At the point of retirement, you may want give very careful thought to your asset allocation.  Mainly, you may not want to take on as much risk in your investments as you did when you were younger and still working.
• Aside from your Social Security, a pension, real estate investments, or other sources of income, you may want to figure out how much money you could need to withdraw from your retirement accounts.
• Your most tax-efficient investments may need to be kept in taxable accounts, and your least tax-efficient investments may need to be be kept in tax-deferred accounts.
• Maintaining well-diversified portfolios of many types of investments including stocks and bonds could possibly help protect against inflation over your many years of retirement.

Listed below are the strategies outlined in the article “Newly Retired? Fresh Ideas for Managing Your Retirement Income”, in order of which you could consider first.  Please read the full article for more complete descriptions of each strategy:

1. Draw Down Principal from Maturing Bonds and CDs:  The first strategy you could use would be to create a short-term ladder of bonds or CDs, and then you could tap the principal of each bond as it matures.
2. Take Your RMDs if You’re 70 ½ or Older:  Once you reach 70 ½, the IRS requires you to take a yearly distribution from many retirement accounts, known as a Required Minimum Distribution (RMD).
3. Sell Overweighted and Lower-Rated Investments from Your Taxable Accounts:  Since withdrawals from taxable accounts are taxed as capital gains rather than ordinary income, these could be the next accounts from which to draw retirement funds.
4. Sell Overweighted and Lower-Rated Investments from Your Tax-Deferred Accounts:  Generally, your tax-deferred accounts could be the last place to look for retirement income.

Please note:  This post is for informational purposes only and is not intended as advice.  Since everyone's situation is different, please consult a professional before changing your portfolio.

Conversations with Chuck: Charles Schwab on Volatility

Check out this video interview with Charles Schwab on market volatility and portfolio diversification.

Schwab Makes Fortune's "Most Admired" List‏

We get excited to share good news about the firms and people serving our clients. Charles Schwab was recently recognized by FORTUNE magazine as the #1 securities company on its list of "World's Most Admired Companies." Click here to view the full list.


"We're proud of the recognition our peers and other business leaders provided in this year's listing. We know how important the elements of the list are, and ranking number one for our industry on five of the nine categories, including innovation, use of corporate assets, social responsibility, financial soundness and quality of products was rewarding. Our success as a business depends on our clients' trust and confidence, and these factors are crucial in today's environment to building and maintaining that trust."

- Walt Bettinger, Schwab President and CEO

Family Investment Center has no financial relationship with Schwab, but they've been helping many of our clients since 1998. In fact, our clients hold nearly $70 million there. (We recently shot a brief video on client insurance and safety which discusses Schwab's $100,000,000 per account insurance coverage. Watch it here.) One key service we provide is helping clients choose top providers for their investment needs. This type of recognition just confirms our selection processes.

The advisors at Family Investment Center specialize in managing large portfolios ($100,000 or more) of traditional investments. They do, however, advise investors on a broad range of wealth management services. Family Investment Center is a commission-free investment advisory firm registered with the SEC. More about this unique firm can be found at http://www.familyinvestmentcenter.com/, on the firm's blog at http://www.familyinvestmentcenter.blogspot.com/, or on Twitter at www.twitter.com/family_finances. Visit them at 3805 Beck Road, St. Joseph, MO 64506 or call (816) 233-4100.