For retirees today, you are faced with many challenging decisions:
- When and how should I file for Social Security benefits?
- How should I take my pension payment?
- What should I do with my 401k or retirement plan through my employer?
- Do I have enough money to retire and where do I invest today?
- Will the rising cost of healthcare deplete my lifetime of savings?
Historically, the best places for creating wealth in this country have
been ownership of: real estate, stocks or a small business. On the other
hand, if you are retired, your objective may be more than just having
an asset you are hoping to sell for a higher price than what you paid for it.
In my experience there are a few basic things you want to consider for
your investments if you need retirement income:
Liquidity: If you invest your money today and decide you want your money back tomorrow,
what will you get back?
Taxation: While non-retirement account income is usually taxed at the more favorable
capital gains rate, retirement account income is typically taxed as ordinary income.
Fees & Expenses: What is the total cost of owning your investments and potential penalties
for early withdrawal?
Here are a few important ages to remember with regard to retirement:
50: Age you can contribute a higher amount to your retirement plans, also
known as "catch-up" contributions.
55: Age you can take a penalty-free withdrawal from an employer-sponsored
qualified plan, if separated from service.
59½: Age you can take a penalty-free withdrawal from your Individual Retirement
Accounts. (This is exactly 59 years and 6 months.)
62: First year you can file for your Social Security benefits.
70½: First year you have to take a required minimum distribution (RMD) from
your retirement account(s). If your birthday is on or before June 30
th in the year you turn 70, you are considered 70½ by the IRS, that
year. If your birthday is on or after July 1
st, you are considered 70½ the following year. At age 70½,
your first distribution is approximately 3.6% of your account value. (Example:
If the prior year-end value of your IRA account was $100,000, the distribution
would be approximately $3600 the first year.)
Lastly, here are a few things to consider for your retirement investment
- With the increase in the US markets, there may be better opportunities
found in international rather than domestic equities.
- Longer duration and higher quality bonds have a tendency to be more sensitive
to interest rates. In a rising interest rate environment, shorter duration,
credit-oriented and non-U.S. bonds might possibly fare better.
- Cash and short-term instruments are still generating minimal to no interest.
You may still consider using this only for your short- to near-term liquidity
needs, until we see a rise in interest rates.
Wishing you all the best for a healthy and prosperous 2015!
For additional financial health information, please attend Torrance Memorial's
Financial Health Seminars.
Mark Tsujimoto is a Financial Planner with Cetera Advisor Networks. Mark's
family has operated a financial planning business in Torrance since 1968.
Cetera Advisor Networks LLC, 25500 Hawthorne Blvd., Suite 1140, Torrance,
CA 90505 (CA Insurance License #0B99371). Securities and advisory services
offered through Cetera Advisor Networks LLC (doing insurance business
in CA as CFGAN Insurance Agency), member FINRA/ SIPC.
The opinions in this blog are those of Mark K. Tsujimoto of Cetera Advisor
Networks (310) 373-7351 x304. They are general comments that might not
be appropriate for every individual. All information is believed to be
from reliable sources, however we make no representation as to its completeness
or accuracy. All economic and performance information is historical and
not indicative of future results. Information with legal or tax issues
should be relied upon only after consulting your legal or tax advisor.