Finances & Money

How to Structure Your Assets for Retirement

Assets for Retirement

Many consumers spend their entire working lives saving for retirement. Everyone knows the importance of contributing to their 401k, investing in real estate, and stashing some money away in securities. But how do you use these assets when you retire?

There are many ways to tap into your assets, but you need to be careful how you go about it. Cashing out your 401k too quickly may trigger a large tax burden. Accessing your home equity without using a reverse mortgage could lead to unnecessarily high interest expenses. Fortunately, there are simple solutions to all of these problems. By following these simple techniques, you’ll be able to access your investments without incurring any unnecessary expenses.

How to Access Your 401K
As long as you retire at 60, cashing out your 401k is pretty straightforward. The withdrawal process depends a lot on which company you use. Most of the time, you are able to take regular distributions in the form of an annuity – set monthly payments. Other companies may allow you to take a large, lump-sum payment. Which option is right for you? If you’re planning to move or travel, it may be better to take the lump sum. You will miss out on potential investment income, but the lump sum will allow you to purchase real estate or cover the expenses of setting up in a new area.

How to Access Your Home Equity
This one can be tricky. Obviously, selling your home is the quickest way to access this investment, but can incur large expenses. You could also take out a line of credit, but this requires you to make monthly payments on to the debt. For most people, the best way to access their home equity after retirement is through a reverse mortgage. This type of financing allows you to receive regular payments that come directly from your home equity. You’ve already been paying for your home your entire life, and for once you can finally have your home pay you. There is interest associated with this type of financing, but generally it is the lowest in the industry. You can find out what it would cost you with a reverse mortgage calculator.

How to Access Your Investments
Investments such as GICs, Stocks, Bonds, and Funds are generally the easiest to access. However, timing is very important when you are cashing these out. Because the markets go up and down all the time, you want to make withdrawals at a time when the market is up to maximize your return on investment. Unless you’ve invested in specific funds, talk to your bank and see if you can arrange an annuity. This type of withdrawal can provide you with monthly or bi-weekly payments. Your banks financial advisor will carefully select which stocks and bonds should be sold depending on how the market is doing. Because you are transitioning from a position of long term investment, your financial advisor should be able to sell off some of your more volatile investments and exchange them for stable investments.

No matter how you choose to spend your time during retirement, make sure that you take the time to speak to a financial advisor. These scenarios can be complicated, and it’s best to use the advice of professionals before you make any important decisions on your own.

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James

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