Already Retired Managing Your Money

Your retirement plans may include traveling the world, spending time with family or mastering a new sport. To achieve all of that, you need to have a clear financial plan in place that includes your strategy for withdrawing and conserving funds.

Consider tax consequences of withdrawals.* Investments held over a year in taxable accounts are taxed at the long-term capital gains rate. Withdrawals from Traditional retirement accounts and Individual Retirement Accounts (IRAs) are taxed as ordinary income. Roth IRA withdrawals are tax-free when requirements are met.

Avoid withdrawal penalties. While it's best to leave tax-advantaged accounts as full as possible, that doesn't mean you can ignore required minimum distributions (RMDs). Owners of Traditional IRAs and Simplified Employee Pension (SEP) plans are required to take RMDs starting at age 70½. Those with 401(k)s are also required to take RMDs upon retirement or age 70½. Failing to take RMDs can significantly eat into savings with a 50 percent excise tax on the amounts not withdrawn. However, what you choose to do with withdrawals is up to you.

Reinvest unneeded withdrawals. If you don't need the full amount of your RMDs to pay for your living expenses, you can reinvest that money into a variety of investment vehicles. Savings certificates are a great option, as are bonds, annuities, exchange-traded funds and dividend-paying stocks.

Consider your expected portfolio return. Your portfolio in retirement should be neither too conservative nor too aggressive. Most retirees know that retirement is not a time for a high-risk investment strategy. However, an overly conservative portfolio is also dangerous, as it may be unable to provide enough growth to sustain a lengthy retirement.

Diversify—but not too much.** Having a variety of investment vehicles guards your retirement savings against being devastated by fluctuations that happen to one type of investment. Be mindful, though—diversifying too much may mean paying fees for many different investments.

Allow for variable withdrawals. While a general withdrawal strategy is important, there will be times you'll need to finance big-ticket items—such as a child's wedding or special anniversary trip. When deciding on a base withdrawal level, build in some flexibility to allow for these.

Avoid overspending. Occasional fluctuations for big events are a normal part of life in retirement, but they should never become the rule. Constant overspending will quickly eat into retirement savings and jeopardize any withdrawal strategy.

*Consult your tax advisor for information specific to your situation.
**Diversification cannot guarantee a profit or protect against loss in a declining market.

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Investors should carefully consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. This and other information about municipal fund securities is available in the issuer's official statement which can be obtained directly from the issuer, or if distributed through a broker dealer, may be obtained from a financial adviser, and should be read carefully before investing.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

If a municipal fund security describes one or more of their investment options as having the characteristics of a money market fund, it is important to know that an investment in the security is not insured or guaranteed by the FDIC or any other government agency (unless such guarantee is specifically provided by or on behalf of such issuer) and, if the security is held out as maintaining a stable net asset value, that although the issuer seeks to preserve the value of the investment at $1.00 per share or such other applicable fixed share price, it is possible to lose money by investing in the security.