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3rd Quarter 2017

Balancing Retirement Income With Withdrawal Strategies

Balancing Retirement Income With Withdrawal Strategies As you get closer to retirement, it's a great time to refine your plans: calculate how much you'll receive in retirement income, estimate your expenses in retirement, and figure out how to fill in any gaps. You need to make the most of extra savings opportunities and start preparing for special expenses such as a long vacation or several short trips.

Estimate how much you'll receive in retirement income. If your employer offers a pension, find out how much you're on track to receive at different ages. Depending on the amount and your comfort level, you may want to stay on the job a bit longer to continue saving. Factor in any amount you'll get from previous jobs, too. Also set up a My Social Security account (www.ssa.gov/myaccount) to see estimates of how much you can count on from Social Security.

Add up the regular expenses you expect to have in retirement. Start by considering costs such as housing, transportation, insurance, taxes, utilities, and health care costs (you can get help with calculating health care expenses in retirement at www.icmarc.org/health). Also see ICMA-RC's 10 Question Retiree Guide at www.icmarc.org/10Questions for more about expected expenses.

Figure out how to fill any gaps. If your guaranteed retirement income is less than your expenses, how will you make up the difference? If you plan to rely on withdrawals from a 457 plan, IRA, and/or other retirement-savings vehicle, use the calculator at www.icmarc.org/ontrack to figure out if you're likely to have enough.

Make the most of catch-up opportunities. As you get closer to retirement, you can also save more in tax-advantaged retirement accounts. Starting in the year you turn 50, you can save an extra $1,000 in your IRA and an extra $6,000 in your 457 plan. Or you may be able to double your 457 contributions for the three years before the normal retirement age specified by your plan, if you haven’t maxed out your contributions in the past. This is called the "pre-retirement catch-up." For more information, see www.icmarc.org/contributionlimits.

Look for other ways to save. If you’re falling short of your needs, see if you can benefit from working extra hours, taking on some freelance or consulting work, or working longer before you retire. Also pay down high-interest-rate debt as quickly as possible so you can pad your retirement savings rather than a creditor’s bottom line.

Set goals for special expenses. If you’d like to take a long vacation or regular trips, or build up some extra money for entertainment or gifts to your kids or grandkids, now is the time to set a goal and time frame. Procrastination won’t get you there. Start saving a little extra for those expenses now.

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