Skip to content

Reaching Retirement — Now What?

July 20, 2011

Reaching Retirement–Now What?
April 01, 2011
Page 1 of 2, see disclaimer on final page
You’ve worked hard your whole life anticipating the
day you could finally retire. Well, that day has arrived!
But with it comes the realization that you’ll need to
carefully manage your assets so that your retirement
savings will last.
Review your portfolio regularly
Traditional wisdom holds that retirees should value
the safety of their principal above all else. For this
reason, some people shift their investment portfolio to
fixed-income investments, such as bonds and money
market accounts, as they approach retirement. The
problem with this approach is that you’ll effectively
lose purchasing power if the return on your
investments doesn’t keep up with inflation.
While generally it makes sense for your portfolio to
become progressively more conservative as you grow
older, it may be wise to consider maintaining at least
a portion of your portfolio in growth investments.
Spend wisely
Don’t assume that you’ll be able to live on the
earnings generated by your investment portfolio and
retirement accounts for the rest of your life. At some
point, you’ll probably have to start drawing on the
principal. But you’ll want to be careful not to spend too
much too soon. This can be a great temptation,
particularly early in retirement.
A good guideline is to make sure your annual
withdrawal rate isn’t greater than 4% to 6% of your
portfolio. (The appropriate percentage for you will
depend on a number of factors, including the length of
your payout period and your portfolio’s asset
allocation.) Remember that if you whittle away your
principal too quickly, you may not be able to earn
enough on the remaining principal to carry you
through the later years.
Understand your retirement plan
distribution options
Most pension plans pay benefits in the form of an
annuity. If you’re married you generally must choose
between a higher retirement benefit paid over your
lifetime, or a smaller benefit that continues to your
spouse after your death. A financial professional can
help you with this difficult, but important, decision.
Other employer retirement plans like 401(k)s typically
don’t pay benefits as annuities; the distribution (and
investment) options available to you may be limited.
This may be important because if you’re trying to
stretch your savings, you’ll want to withdraw money
from your retirement accounts as slowly as possible.
Doing so will conserve the principal balance, and will
also give those funds the chance to continue growing
tax deferred during your retirement years.
Consider whether it makes sense to roll your
employer retirement account into a traditional IRA.
IRAs usually offer greater withdrawal flexibility than
employer plans. A rollover to an IRA also allows you
to consolidate your retirement assets.
Plan for required distributions
Keep in mind that you must generally begin taking
minimum distributions from employer retirement plans
and traditional IRAs when you reach age 70½,
whether you need them or not. Plan to spend these
dollars first in retirement.
If you own a Roth IRA, you aren’t required to take any
distributions during your lifetime. Your funds can
continue to grow tax deferred, and qualified
distributions will be tax free. Because of these unique
tax benefits, it generally makes sense to withdraw
funds from a Roth IRA last.
Know your Social Security options
You’ll need to decide when to start receiving your
Social Security retirement benefits. At normal
retirement age (which varies from 65 to 67,
depending on the year you were born), you can
receive your full Social Security retirement benefit.
You can elect to receive your Social Security
retirement benefit as early as age 62, but if you begin
receiving your benefit before your normal retirement
age, your benefit will be reduced. Conversely, if you
Page 2 of 2
Prepared by Forefield Inc. Copyright 2011
delay retirement, you can increase your Social
Security retirement benefit.
Consider phasing
For many workers, the sudden change from
employee to retiree can be a difficult one. Some
employers, especially those in the public sector, have
begun offering “phased retirement” plans to address
this problem. Phased retirement generally allows you
to continue working on a part-time basis–you benefit
by having a smoother transition from full-time
employment to retirement, and your employer
benefits by retaining the services of a talented
employee. Some phased retirement plans even allow
you to access all or part of your pension benefit while
you work part time.
Of course, to the extent you are able to support
yourself with a salary, the less you’ll need to dip into
your retirement savings. Another advantage of
delaying full retirement is that you can continue to
build tax-deferred funds in your IRA or
employer-sponsored retirement plan. Keep in mind,
though, that you may be required to start taking
minimum distributions from your qualified retirement
plan or traditional IRA once you reach age 70½, if you
want to avoid harsh penalties.
If you do continue to work, make sure you understand
the consequences. Some pension plans base your
retirement benefit on your final average pay. If you
work part time, your pension benefit may be reduced
because your pay has gone down. Remember, too,
that income from a job may affect the amount of
Social Security retirement benefit you receive if you
are under normal retirement age. But once you reach
normal retirement age, you can earn as much as you
want without affecting your Social Security retirement
Facing a shortfall
What if you’re nearing retirement and you determine
that your retirement income may not be adequate to
meet your retirement expenses? If retirement is just
around the corner, you may need to drastically
change your spending and saving habits. Saving
even a little money can really add up if you do it
consistently and earn a reasonable rate of return. And
by making permanent changes to your spending
habits, you’ll find that your savings will last even
longer. Start by preparing a budget to see where your
money is going. Here are some suggested ways to
stretch your retirement dollars:
• Refinance your home mortgage if interest rates
have dropped since you obtained your loan, or
reduce your housing expenses by moving to a less
expensive home or apartment.
• Access the equity in your home. Use the proceeds
from a second mortgage or home equity line of
credit to pay off higher-interest-rate debts, or
consider a reverse mortgage.
• Sell one of your cars if you have two. When your
remaining car needs to be replaced, consider
buying a used one.
• Transfer credit card balances from higher-interest
cards to a low- or no-interest card, and then cancel
the old accounts.
• Ask about insurance discounts and review your
insurance needs (e.g., your need for life insurance
may have lessened).
• Reduce discretionary expenses such as lunches
and dinners out.
By planning carefully, investing wisely, and spending
thoughtfully, you can increase the likelihood that your
retirement will be a financially secure one.
Phased retirement
According to a recent survey by the AARP, 61% of
respondents named the need for money as the
primary reason for working beyond retirement age.
Over 50% named the need for health care.
Other reasons given were the desire to stay
mentally and physically active, and the desire to
remain productive and useful.
AARP, “Attitudes of Individuals 50 and Older
Toward Phased Retirement,” 2005.
Rule of thumb
Many investment
professionals recommend
you follow this simple rule
of thumb when allocating
your retirement assets:
The percentage of stocks or
mutual funds in your
portfolio should equal
approximately 100% minus
your age. (Obviously you
should adjust this rule
according to your risk
tolerance and other
personal factors.)

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Philip Catalan, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by,,,,, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Representative with FSC Securities and may be reached at


Comments are closed.

%d bloggers like this: