We spend decades working and accumulating money for our retirement. After retiring, we start spending the funds. How should this be done?
Spoiler alert: There is no "right" answer.
Here's what may be available:
- Employer retirement plans. For a few, profit sharing accounts contributed by the employer. For some, private company pensions. For many others, retirement accounts such as 401K, 403B and 457. These are now available for withdrawal or to rollover. There may also be an option to convert retirement funds to an annuity or to convert a pension to a lump sum. Which option to do?
- Tax advantaged savings plans. IRAs (both Traditional and Roth), annuities and whole life insurance. Should these be used before or after taxable savings?
- Taxable savings accounts. Investment accounts that hold stocks, bonds, mutual funds and ETFs. Should these be used before or after tax advantaged savings?
- Social Security and/or Public Sector Pensions. These are monthly payments to retirees. While private pensions are usually fixed, Social Security and public sector pensions have annual COLA adjustments. The big question is when to start?
- Health insurance. Some may have employer sponsored retiree health insurance. Medicare is available to retirees 65 and older. Otherwise, ACA insurance. All require premiums be paid by the retiree. Should one take original Medicare and supplement or sign up for Medicare advantage?
If it looks complicated to navigate, it's because it is. There is no straight forward answer. The decisions should be based on each person's own situation. The only recommendation I have is to talk to different knowledgeable people, who do not gain financially from a decision you make, and weigh the different options.
This is not financial, saving, nor retirement decision advice. Please consult a professional advisor.
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