elderly, caregiver,

How you manage your resources can make a big difference in how financially secure you are
during your retirement years. This includes choosing how and when you withdraw funds from
your retirement accounts. The following are some of the things you should not do.

Failing to make a strategic plan

If you do not think through how you want to use your resources, over time, you will be
diminishing the returns of your invested capital which could result in a lower quality of life during
retirement. There are some sources of capital that you should draw from first which can allow
you to preserve as much retirement capital as possible for the long term.
Withdrawing and cashing out on certain types of assets will result in larger tax bills at certain
times. For example, if you withdraw from some types of retirement accounts you will incur an
income tax liability. Therefore, it may be best to try to wait until your income tax bracket is lower
in your later years of retirement before taking some of that money.
A professional financial advisor can help you sort out the best timing for withdrawing capital
from your retirement accounts and other types of investments.

Claiming Social Security benefits too early

You are required to wait until you reach the full retirement age of 62 years before you are
allowed to claim benefits from Social Security. However, just because you are allowed to do so
at this age does not mean it is the best time to do so. Just like with other retirement accounts,
the longer you keep your capital in the fund the more your capital will accumulate, giving you
more resources during your golden years.
Therefore, you may want to plan on waiting to claim your Social Security benefits until you reach
the age of 70 which is when the maximum amount of benefits is reached. Of course, the ability
to wait until this age will depend on your individual circumstances.

Withdrawing too early from your 401(k) and IRA

If you withdraw funds from your 401(k) or IRA too early you will be charged a penalty by the
IRS. However, once you reach the age of 59 ½ you can withdraw funds from these types of
accounts without penalty. Therefore, you should do whatever you can to wait until you reach this
On the other hand, just because you are allowed to withdraw at this age does not mean it is the
best thing to do. Legally, you are not required to take distributions from these accounts until the
age of 72. Leaving your capital invested will allow your money to continue to accumulate.

Taking money out of your Roth IRA too soon

Just like with other types of retirement accounts, money left in your Roth IRA for a longer period
of time allows your capital to appreciate more, maximizing your retirement resources. Roth IRAs
do not have a Required Minimum Distribution age like a traditional IRA or 401(k) does.
Therefore, you can let your capital appreciate without withdrawal beyond the age of 72.
Also, you should also consider that funds deposited in a Roth IRA have already been taxed.
This means withdrawing will not incur additional income taxes.
Your financial advisor can help you understand what this means for your retirement strategy and
how to develop an overall strategy that is customized for your individual needs and goals.


Any opinions are those of the author and not necessarily Raymond James. Any information provided is for informational purposes only and does not constitute a recommendation.