Our CFS Advisors can assist you with developing a strategy for withdrawing the money you’ll need. Social Security and pensions may provide a fixed amount every month, but you'll still need a plan for using your other assets. The timing of withdrawals can significantly impact the taxes you pay.
Generally speaking, you'll need three elements in your retirement income plan:
- A cash account for day-to-day expenses
- Short-term reserves for emergencies and to generate consistent income
- Long-term assets for potential growth
A cash account can include checking, savings or money market accounts. Assets in this category are liquid, so you can use them any time without incurring penalties or losses.
Short-term Cash Reserve
Short-term assets provide cash reserves and create consistent and predictable income. Investments in this category generally have guaranteed principal, such as:
- Share certificates
- Treasury bills
- Mid-term assets such as bonds
You may want to move money into your cash account as these assets mature. That helps the investments in your short-term cash reserve provide a reliable source of income for many years, no matter how your long-term investments are performing.
The main goal for your long-term assets is to provide growth to help meet your financial needs throughout retirement, and possibly build assets to pass on to your heirs. You may use your long-term assets to create income, transferring them as necessary to short-term reserves or your cash account.
Examples of long-term investments are:
- Stocks and bonds held individually or in mutual funds
- Fixed and variable annuities
- Real estate and real estate investment trusts (REITs)
- Hedge funds and commodity investments
- Life insurance cash value
Your Advisor can help you determine whether it might be a good strategy to invest some of your assets in bonds or other fixed-income investments as protection against inflation and market volatility. There are ways to diversify your portfolio that may help you get the most from your retirement savings.