This is John Graves. I'm the author of "The Seven Percent Solution" and the editor of the website, Theretirementjournal.com. Today I'd like to talk to you about setting up retirement withdrawals. Before you can answer the question setting up retirement withdrawals, we must ask three primary questions. The first is can you afford to retire and that question is predicated upon two further ones. What are your expenses during retirement and what will your income sources be during retirement? So if you can afford to retire you can afford to meet your expenses with your income sources. Your expenses will be your mortgage, your interest, you insurance, property taxes, utilities, personal bills, food, entertainment, prescriptions, etc. If you don't have a budget now, it may be a good idea to start one to keep track of what your expenses actually are. Your income sources will be for example from Social Security. When will you take that Social Security, at 62? Will you take it at 65 or 67 or will you wait to 70? When you receive Social Security you will be paying a Medicare premium against that, what will that premium amount be? Will you be paying supplemental insurance to cover what Medicare does not cover? Another source of income could be your pension. If you are a public or a private employee, you may have a pension. If you're a fireman, a teacher, a lawyer, you may have income from the county, from State or from the federal government. That pension may be integrated with Social Security. If it is, that means that both will be balanced against one another, you will not get the sum total of each, you will get an integrated amount from both. Another source of income may be from your portfolio, from your IRA, your 401K, you may have income from a rental property or from an inheritance. You must take all of these things into consideration when discovering how to take retirement income withdrawals. So once you've identified what your expenses are, and have secondarily identified what your income is going to be, you can more effectively answer the question, can you afford to retire. The last question becomes then when do you take withdrawals? For example, if you have a mortgage and that mortgage is paid off in ten years, that expense will go down and therefore your income will increase by the same amount. So in ten years you would effectively need somewhat less income than you do today. Also, during the first couple of years of retirement, you tend to spend money and time traveling, visiting the kids or the grandkids, discovering new hobbies, giving back to the community and those things tend to take money and effort. As you settle into your retirement lifestyle, you're going to discover that you're spending less than you thought you may have planned for and as the years pass you are going to settle more and more comfortably into this lifestyle, you're going to find that you're doing less, having more fun doing less but also spending less. So in your 70s, you'll probably spend less than you do in your 60s, and in your 80s, you'll spend less than you did in your 70s. So you manage your retirement withdrawals according to you needs, you manage those needs according to time and you reference the withdrawals that you take from your needs point of view and also from a tax point of view. Ideally you want to minimize the taxes on any withdrawals you take from your portfolio or from your IRA. Thanks very much, this has been John Graves.
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