Project Your Steady Income
With a robust sense of your typical and exceptional outlays, you can finally make some choices about your income, from deciding when to start taking Social Security benefits to setting up the right withdrawal strategy from retirement savings.
Check Out And Decide On Withdrawal Strategies
Which account should you withdraw from first—a 401(k), an IRA, or a regular taxable brokerage account?
Deciding on withdrawals by account type is often a matter of income taxes. Withdrawals from 401(k)s and traditional IRAs trigger income taxes, while qualified withdrawals from Roth IRAs are income-tax-free. Withdrawals from a non-retirement brokerage account are free of income tax, but can trigger capital gains taxes if you sell investments.
One savvy method is to withdraw from your various accounts according to their percentages of your total savings. If your 401(k) represents 50% of your total retirement savings, plan to take 50% of needed income from there each year.2 This method can spread income tax bills over time, potentially keeping you in lower tax brackets.