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STOP saving START spending Thumbnail

STOP saving START spending

You’ve done the hard part, saving diligently over your working life. Now, the fun begins.

How do you spend it? How do you draw down your assets in the most tax-efficient way possible?

Coffeehouse Investors typically have a mix of the following asset types and income streams that are taxed at various levels: 
  • Roth IRA:
    • These after-tax contributions can be withdrawn tax-free after age 59 ½ and a five-year holding period.
  • 401k, 403B, Traditional/Rollover, SEP, or Simple IRAs:
    • These pre-tax contributions grow tax-deferred, and withdrawals are taxed at an investor’s ordinary income tax rates. Mandatory distributions are required by age 72 (70.5 if you were age 70.5 by January 1, 2020).
  • Social Security:
    • Payments are available at age 62, at full retirement age (generally age 67), or delayed at age 70. Each year you delay taking Social Security beyond your full retirement age, your benefit increases by 8%.
  • Pensions:
    • Payments generally begin at retirement, and typically allow the employee to select a beneficiary benefit option, anywhere from 100%, 75%, 50%, or no benefit at all.
  • Taxable accounts:
    • Income generated on these investments is taxed annually. Capital gains realized on sales of long-term assets (held for more than a year) are taxed at 0%, 15%, or 20%, depending on your marginal tax bracket.
Six questions for you as you stop saving and start spending:
  1. Which account should you start drawing from first? 
  2. Does it make sense to initiate a Roth conversion?
  3. Does it make sense to initiate withdrawals from your traditional IRA prior to age 72?
  4. When should you start taking Social Security? 
  5. Should you take a lump sum from your pension, or take the annuity? 
  6. What beneficiary election should you choose from the pension annuity?
Need help with your withdrawal strategy? Let's connect.