Living Off Your Savings: How Do I Cover My Spending in Retirement? Ep # 130

Now you know what your spending in retirement will be, but how do you know where and when to withdraw money? Welcome back to the second episode in the Living Off Your Savings series. Last week we established how much you needed to retire and you learned how to create a retirement budget. Today we’ll figure out how you will obtain that monthly cash flow. In this episode, we’ll discuss Social Security, filling the gap between spending and your Social Security, and which accounts to withdraw from first. Listen in to discover how to turn your savings into income in retirement.

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Outline of This Episode

[1:22] Should you burn through your IRA while waiting until age 70 or take Social Security on time
[4:02] What if you retire early?
[7:02] How we fill the gap between Social Security and our spending needs
[10:00] Which accounts should we draw from first in retirement?
[14:22] Find out what we’ll learn next week on Retirement Starts Today

Should I take Social Security now or live off my IRA for 6 years?

Since most of us have the guaranteed income from Social Security to look forward to in retirement, that is a natural place to start. Actually, Social Security claiming strategies are one of the most common topics that I receive questions about, so it’s no surprise that I have 2 similar questions regarding Social Security today.

Mark is curious whether he should burn through his IRA between the ages of 64-70 and delay taking Social Security until age 70 or if he should claim his Social Security payments as soon as he can. There are many factors at play when deciding when to take your Social Security benefit, but it is important to remember that Social Security is the payment that keeps on giving. It will pay on forever regardless of who earned it or who passes away first. So it’s important to protect it as much as you can. Listen in to hear my thoughts on when to claim Social Security.

Social Security claiming strategies are one of the most common topics that I receive questions about. Click To Tweet

If retiring at age 62, should you claim Social Security or withdraw from your 401K?

Although you can use a retirement calculator to compare the difference between claiming Social Security at different ages, consider delving a bit deeper and thinking about this perspective. By deferring Social Security you will receive a guaranteed 8% increase per year. Although your investments may compound at 8%, that isn’t guaranteed. In addition, you probably don’t have a portfolio that consists of 100% stocks. Your bond portion of the portfolio isn’t earning at the same rate. And that will be the part of the portfolio that you will be withdrawing from during those years. So the guaranteed 8% from deferring your Social Security is a much safer bet.

How to fill the gap between Social Security and spending in retirement

In retirement, there is usually a gap between the amount that Social Security provides and our spending. To fill that gap we look to our retirement assets. But how do we know which assets we should draw from and in what order? Every family has different circumstances and different goals so the answers vary greatly. There are different variables to consider. You might need to increase or decrease your taxable income in certain years. Listen to the different reasons that you might need to increase or decrease your taxable income.

Discover which accounts to draw from and in which order by listening to this episode of Retirement Starts Today Radio. Click To Tweet

Which retirement accounts should I draw from first?

Elise has a question about which accounts to draw from first in retirement. When answering this question I always want to think about what potential landmines there are to avoid. I want to ensure to avoid any taxes and penalties if I can. So, it is important to look down the road to age 72 when required minimum distributions (RMD’s) start. Note whether your projected withdrawals will fall under the mandatory distributions. If it looks like your income will spike then making some Roth conversions is a good step to take. Discover which accounts to draw from and in which order by listening to this episode of Retirement Starts Today Radio.