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3 Big Retirement Withdrawal Mistakes - YouTube
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everyone bill let's been here for money
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evolution calm in today's video I'm
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gonna be talking about three big
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retirement plan withdrawal mistakes so
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if you're planning for retirement you're
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gonna be looking at how you can make a
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transition from what we call the
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retirement accumulation phase when
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you've been saving and investing money
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for your retirement into the retirement
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withdrawal phase now you're gonna take
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some of that money that you saved and
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you're gonna start distributing that
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money back to you start taking some
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withdrawals
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so there's actually three big mistakes
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that we see all the time here and
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hopefully this video will help you avoid
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some of these mistakes so mistake number
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one is probably the most common one that
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we see all the time and it's waiting too
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long to begin taking withdrawals and
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this mistake can actually compound into
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a couple of other little mistakes that
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actually can cost you a lot of money so
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one of the things for example that we
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see all the time is people will
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oftentimes begin taking their Social
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Security benefits as early as they can
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at age 62 and not only does this prevent
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them from getting a bigger Social
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Security check and kind of maximizing
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that but it also oftentimes means that
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they're delaying taking their retirement
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plan withdrawals and what that does is
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it compounds itself down the road
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because as many of you probably know at
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7 and 1/2 the IRS is going to mandate
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that you're going to start taking some
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withdrawals from those retirement
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accounts it's called the required
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minimum distribution rules and what that
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might do is it might push you up into a
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higher tax bracket at that time and on
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top of that as I think most of you
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probably know not only would you pay
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more taxes there but it can also affect
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your Medicare premiums as well because
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your Medicare premiums are also tied to
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the level of income that you make so the
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more money you make the more you pay for
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Medicare one of the things that we look
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for though as a way to kind of get
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around this mistake is we want to really
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map out some of those cash flows and one
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of the things that we identify is that
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sometimes maybe taking some retirement
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plan withdrawals early on in retirement
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can take advantage of what we call low
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tax years so if you're waiting to take
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Social Security for example or maybe
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your pension doesn't kick in right away
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you might have a couple years maybe
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several years early on in retirement
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where you're in a very low tax bracket
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so by taking some of those retirement
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plan withdrawals early can take
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advantage of those low tax years
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and also at the same time help you get
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maybe a bigger social security check
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down the road and also take some
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pressure off of some of those required
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minimum distributions maybe some of
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those won't be so high and pushing you
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up into those higher tax brackets we can
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also look at maybe doing some Roth
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conversions too as a way to again take
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advantage of some of those low tax years
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number two is going to be taking your
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distributions at too high of a rate so
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what I mean by this is there's some
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schools of thought out there probably
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the most prominent of this is something
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called the 4% rule and this was a rule
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that was that came up by a financial
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planner William Ben Gunn back in the 90s
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and he did a lot of math study some
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probability and statistics and said that
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if you limit your retirement plan
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withdrawals to no more than four percent
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of your entire portfolio each year you
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should have a pretty good chance of
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probability that that money is going to
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last you throughout the rest of your
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lifetime so if we think about 4% as kind
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of our our withdrawal rate that we
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should be targeting think about that if
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we're at five or six percent it may not
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seem like a big difference but looking
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at the math and the numbers your
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probability of running out of money goes
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up pretty high once you start getting up
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to five and especially once you get up
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to six percent or more so making sure
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that you're not taking out too high of a
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distribution rate and again one of the
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things to figure that out is to have
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that long term cash flow projection so
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you know what those expenses are know
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where your withdrawal rate comes in and
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then number three is not understanding
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your cash flow needs so one of the
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things that we want to understand is we
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want to understand some of the very
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abilities that you might be experiencing
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with your income and your expenses in
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retirement and again we talked about the
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sequencing of returns that's what
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William Bennigan's did when he did his
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research on the 4% rule but even if
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we're earning let's say a six or seven
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or eight percent average return over
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time because of the sequencing of
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returns and we could end up with a bad
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string of years where we have multiple
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years where we're not earning that
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average or we have down markets what is
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the impact of that on our long term
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ability to sustain our retirement
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withdrawals well one of the ways we'd
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get around that is we we use a bucket
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strategy for our clients what that means
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is we like to
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keep one to two years worth of liquid
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cash reserves in an account that's very
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safe very accessible so that as you need
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money to supplement your retirement
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we're not having to take it out of some
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of the riskier investments that might be
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in the stock or the bond market we also
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want to have a kind of intermediary
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bucket where we have another three to
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five years worth of cash flow needs and
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stuff that maybe it's paying some
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dividends or paying some interest to
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kind of replenish that first bucket and
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then finally the third bucket is a long
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term bucket that's meant for your long
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term growth to keep up with inflation
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and and have you know some wealth
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creation there so understanding those
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cash flow needs is really one of the
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most critical pieces to mapping all that
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out and knowing how much money goes into
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each one of those three buckets so there
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you have it I hope this has been helpful
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helped you now know three of the big
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mistakes hopefully you'll avoid those
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mistakes if you want to learn a little
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bit more about some of the financial
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planning that we do here we have what we
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call a wealth vision comprehensive
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financial plan I'll put a link right
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below the notes here right below the
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video and if you like you can set up a
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free no obligation introductory to call
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with me we can learn a little bit about
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your situation and find out if wealth
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vision is right for you so until then I
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will see you in the next video have a
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great day
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you
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