We all know that we need to start saving for retirement as early as possible. But what happens when we reach retirement age and need to start withdrawing that money? How do we turn our retirement savings into income that will last throughout our retirement years?
There are a few different ways to do this, and the best option for you will depend on your individual circumstances. But there are a few things to keep in mind no matter what route you take.
When Should You Start Converting Retirement Savings Into Income?
Retirement planning is a process that includes figuring out how much money you will need to live on in retirement and how to generate the income you will need to cover your expenses. One important question that arises during this process is when you should start converting your retirement savings into income.
The answer to this question depends on a number of factors, including your age, your health, your retirement lifestyle, and your overall financial situation.
If you are nearing retirement age (typically between 55 and 65), you may want to start thinking about how you will convert your retirement savings into income. You may also want to start taking withdrawals from your retirement accounts if you have not already done so.
There are a few different ways to generate income in retirement, such as:
- Taking withdrawals from retirement accounts, such as your superannuation fund
- Selling investments such as stocks or mutual funds
- Taking out a reverse mortgage
- Renting out a property
- Working part-time or starting a business
Each of these options has its own set of pros and cons, so it is important to weigh your options carefully before making a decision.
How Much Should You Convert to Income?
The question of how much of your retirement savings should convert into income is difficult to answer. There are a number of factors to consider, including your age, health, lifestyle, and overall financial picture.
Here are a few things to keep in mind as you make this decision:
1. Your Age
The older you are, the less time you have to rebuild your savings if you make a mistake. If you’re close to retirement, you may want to be conservative in how much you convert to income.
2. Your Health
If you’re in good health, you may be able to take more risks with your income. If you’re in poor health, you’ll want to be more conservative.
3. Your Lifestyle
If you have a simple lifestyle, you may be able to get by on less income than someone with a more lavish lifestyle.
4. Your Overall Financial Picture
If you have other sources of income, such as a pension or Social Security, you may be able to afford to take more risks with your retirement savings.
Ultimately, there’s no right or wrong answer to the question of how much you should convert to income. It’s a decision that depends on your individual circumstances.
Conclusion
It’s clear that retirement savings are essential, but it’s also crucial to know when and how to turn those savings into retirement income. There are a number of ways to do this, and the best way will vary depending on each individual’s situation. No matter which method you choose, it is essential to remember that retirement income is not static. Inflation and other factors can impact the purchasing power of your retirement income, so it is important to review your options on a regular basis and make adjustments as needed. Better yet, hire a financial advisor to help you build a better retirement plan.
At New Wave Financial Planning, we understand that planning for retirement is never an easy thing to approach. You need to consider a lot of factors that could overwhelm you. This is where a Gold Coast retirement financial planner could be of great help to you. As your new wave of financial advisors, we’ll help you build a better future for you and your family. Contact us today to get started.
