This Week's Must Read

Are you getting close to retirement and itching to take your Social Security benefits? You may want to wait. The bottom line is: waiting longer to start drawing your benefits pays.

And it seems more people are clued into this fact. According to a new study by Fidelity, only 3 in 10 retirees plan on taking their benefits when they turn 62, the earliest you’re eligible to apply for Social Security. Compare that to 2008, when almost half of retirees planned to start taking benefits at 62, according to Fidelity.

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Planning for retirement can be stressful, but breaking it down to these five elements can help. If you want your nest egg to be robust when you’re ready to retire, you have to take care of it now. That means careful investing and saving. You can’t just go out there and wing it.

Here are five things to consider as you build and manage your wealth.

1. Reduce your risk.
If you lose 10% of your savings when you’re young — say, $1,000 of your $10,000 — it’s a blow. If you lose 10% of the $1 million you have saved for retirement at 65, it will feel like a knockout punch. Know your time horizon and how much risk you can tolerate. Your portfolio will thank you.

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Fanny Handel, a retiree in Queens, N.Y., was stunned to receive a notice in 2015 telling her she owed $92,000 in taxes on her traditional individual retirement account. Like many Americans, she thought the account was tax-free.

But she was wrong. It is entirely possible to owe annual tax on a tax-deferred traditional IRA or tax-free Roth IRA, even on an allowed investment..

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These days, investors can track at any moment how the market’s daily ups and downs are affecting their wealth.  Even investors with multiple investment accounts spread across different firms can calculate changes in their net worth in real time, thanks to websites and apps that do all of the work for them. One might think that having all of this information would make people more financially savvy, especially when it comes to saving for retirement. New research, however, suggests that for many people, it may be the opposite.

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If you are one of the millions of Americans with a retirement-savings account, three of the most important letters in your financial life might be these: RMD.  They stand for required minimum distribution, which is something that the nation’s baby boomers now need to grapple with for the first time. It refers to an annual payout that savers must take from their retirement kitty at a certain point, as required by law.

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Required minimum distributions first. Taxable accounts next, followed by traditional IRAs and 401(k)s. Roth IRAs and 401(k)s last.  That’s the standard sequence for tax-efficient portfolio draw down during retirement. The overarching thesis is to be sure to tap those accounts where you’ll face a tax penalty for not doing so (RMDs) while hanging on to the benefits of tax-sheltered vehicles for as long as possible. Because Roth assets enjoy the biggest tax benefits–tax-free compounding and withdrawals–and are also the most advantageous for heirs to receive upon your death, they generally go last in the withdrawal-sequencing queue.

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Have questions?  We can help!  Contact us at 407-869-9800 or click here to send us your request.