Stocks climbed slightly Friday. The S&P reached a new record, and the NASDAQ posted its fourth
winning week in a row as investors shook off a report showing the Consumer Price Index jumped 5
percent in May from a year earlier. For the week, the Dow fell 0.78 percent to close at 34,479.60. The
S&P rose 0.43 percent to finish at 4,247.44, and the NASDAQ climbed 1.85 percent to end at
|Dow Jones Industrials (TR)||-0.78||13.65||39.98||13.38||16.74|
|NASDAQ Composite (TR)||1.85||9.50||49.29||23.64||24.78|
|S&P 500 (TR)||0.43||13.84||43.73||17.31||17.41|
|Barclays US Agg Bond (TR)||0.47||-1.71||-0.20||5.50||3.17|
|MSCI EAFE (TR)||0.34||11.60||35.24||8.04||10.41|
invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays
US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return
to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE
returns stated in U.S. dollars.
— 59 percent of the world’s foreign exchange reserves, i.e., cash holdings of central
banks around the world, were held in U.S. dollars as of the end of calendar year 2020, its lowest level in
25 years but still making the dollar the most popular currency in the world. The Euro, representing 21
percent of global foreign exchange reserves, is the second most widely held currency (source:
International Monetary Fund, BTN Research).
— When America recorded 4.32 million births in 2007, it broke the nation’s all-time high of 4.31
million births from 1957. Since 2007, the number of U.S. births has fallen in 12 of 13 years to 3.61
million births in 2020, the same number of U.S. births that took place in 1980 (source: Centers for
Disease Control and Prevention, BTN Research).
— Americans filed 4.33 million new business applications in
2020, up 24 percent from 3.49 million filed in 2019, and up 75 percent from 2.48 million filed in 2010
(source: Census Bureau, BTN Research).
So, you’ve developed a financial plan for your future. You know how you’re going to accumulate the
savings and investments needed to provide a comfortable retirement. But do you have a plan for
withdrawing savings during retirement? If you don’t create a well-thought out plan for accessing funds
from your accounts, you could lose savings to taxes or even run out of money.
Here are some things to keep in mind when developing your budget and withdrawal plan.
Your budget is a good place to begin determining your monthly
retirement withdrawals. Will you continue your current financial lifestyle? Adopt a more conservative
approach? Or do you have goals, which will require a higher budget? In addition to living expenses,
include travel, entertainment, and the possibility of life-changing events like marriage or health issues.
Having assets in accounts, which vary in terms of their tax
treatment, could be wise. Your assets likely fall into tax-deferred, taxable, or tax-free categories.
Knowing how your savings will be taxed is important when developing your withdrawal plan. For
example, depending upon your circumstances and goals, it might be best to use the profits from taxable
investment accounts first and later look to your tax-deferred accounts, such as a traditional IRA or
401(k). Most experts agree Roth IRAs should be the last account to tap, giving them as much time as
possible to grow tax-free.
When you reach 72 (70½ if you reached 70½
before January 1, 2020), certain types of accounts require you begin withdrawing savings. If you don’t,
the tax penalty could be as high as 50 percent of the required distribution. The rules for RMDs can be
confusing. Your financial professional can help you understand them and avoid fees.
Just as it’s never too early to start saving for retirement, it’s never too soon to think about how you’ll
withdraw from those savings in retirement. There are many approaches to withdrawal plans, but the
best plan is based on your future goals and the kind of investment accounts you have. Call our office
today. We can help you create a well-thought-out withdrawal plan designed to increase confidence,
preserve your retirement assets, and reduce your tax burden.
*We do not provide tax advice; please consult an accountant for more information.