Early retirement sounds like a dream, right? There are a few key steps that you can put into place now to make sure that goal is attainable. Those who work hard and plan for early retirement want to enjoy their golden years without having to worry about running out of money. Since they will need to draw on their savings for a longer period of time, their investment withdrawal strategies need to be very purposefully planned. So, when should you start that planning? NOW!
1. Plan your monthly withdrawals.
One of the popular strategies used for determining investment withdrawal strategies is the 4% safe withdrawal rule. The basic idea is that retirees can pull out 4% of their investments per year and enjoy a long retirement, even if markets have some poor years. However, this rule doesn’t consider other sources of income like Social Security or situations like medical emergencies and other expenses. This is where working with a financial advisor can be beneficial to help you truly determine the best monthly withdrawl schedule for you.
2. Investing while you grow.
This is where risk management and asset allocation strategies come into play. With the help of a Mooney Lyons financial advisor, early retirees can obtain interest gains in their investments to make their funds last as long as possible and avoid serious risks.
3. Budget for Spending
First, plan out your goal. How much money do you need to match your current or new lifestyle? Map out a realistic timeline of what that would look like. Let’s not forget about the taxes! As you draw on investments and potentially begin collecting pension income, be sure that you are aware of the tax implications and prepare to pay your annual tax bill.
4. Separate cash into 3 buckets.
The first bucket is cash on hand. This is money that can be spent immediately and should cover a few years of expenses. The second bucket is fixed income investments such as bonds. The interest from this bucket can be poured into the first cash bucket to help supplement income in retirement. The third bucket is focused on the longer-term and is usually invested into stocks or equities. This bucket offers some growth to help slow down the rate of savings reduction as you begin to draw on your retirement savings.
5. Connect with a Retirement Planning Expert.
At Mooney Lyons Financial Advisors, we help take the guesswork out of early retirement planning. With our personalized approach, we help set you up for retirement success!
Contact us today by calling 847-382-2600 and start planning your retirement, investment withdrawal strategies, and asset allocation. Retirement doesn’t have to be filled with stress. Plan now to enjoy the fruits of your hard work later!