Retirement Planning

The retirement-planning process sets retirement income goals and builds out the steps required to get there. These include determining income sources and expected expenses, creating a savings plan utilizing the best retirement account choices for you, and choosing investments. Prepare to adjust your plan to fit changing circumstances.

This rule recommends that, in order to ensure a safe, steady steam of income,  retirees withdraw no more than 4% of their savings every year. Based on historical data, this rule is designed to ensure that savings last throughout retirement. Some experts think the rule could rise to 5% and others that 3% is more prudent with current interest rates.

Proponents of this movement, based on a best-seller originally published in 1992, save aggressively in order to retire well before age 65. This can involve stashing up to 70% of income until savings reach around 30 times expenses. Then the saver can retire, continuing to live on a very tight budget but without the constrictions of daily work. 

SEPP is a way to receive funds from an IRA or other qualified retirement plan before age 59½. It lets the recipient avoid incurring IRS withdrawal penalties of 10% of the distributed amount. The process involves specified annual distributions for a period of five years or until the account-holder turns 59½, whichever comes later. Income tax is still due on withdrawals.

This is an additional contribution that people aged 50 or older can make to tax-advantaged retirement accounts, including traditional and Roth IRAs, traditional and Roth 401(k)s, 403(b)s, most 457 plans, the federal government’s Thrift Savings Plan (TSP), SIMPLE IRAs and Simplified Employee Pensions (SEPs).

People who withdraw from tax-advantaged retirement plans before age 59½ are usually subject to withdrawal penalties. However, emergency withdrawals in response to “an immediate and heavy financial need,” as the IRS terms it, may be allowed under certain circumstances. For 401(k)s, the employer’s rules determine which situations are permitted.