Is it a viable plan to use a 401(k) for 8 years from retirement date (62 years old) to Social Security maximum payable age (70 years old)? I have about $750,000 and pay monthly Expect to pay about $1,700. I already have a pension of about $1500 a month.
–Rin
waiting for application social security Taking advantage of delayed credits is a good strategy for those who want to make the most of their benefits. If you quit your job before you can start claiming benefits, you’ll need a source of income. fill the gap The period from when your salary is paid until your social security benefits begin.
If you have a sufficient balance, it is a perfectly viable option to consider withdrawing from your savings. However, it may not necessarily be the best choice for you. There is often more than one way to achieve a goal, so you should consider your own preferences and concerns. (Need more help with important financial decisions in retirement? Consider working with a financial advisor. )
About social security delayed credits
As you probably know, your Social Security check gets larger the longer you wait until age 70 to claim it. On the other hand, if you claim before the full amount is reached, the value will be lower. full retirement age (France).
If you were born after 1960, you can receive your full benefit at age 67. If she files for Social Security before reaching FRA, her benefits will be reduced by a fixed percentage each month until she reaches age 67, up to a maximum. Once you reach age 62, your benefits will be reduced by 30%. However, for each month he waits, his final benefit amount increases by up to 24% at age 70.
To illustrate the difference, assume your benefit amount at age 67 is $2,000 per month. If you choose to claim benefits at age 62, you will only receive $1,400 per month (30% less). On the other hand, if you wait until age 70, your payments will increase to $2,480 per month. That’s a big difference, and it’s often worth the wait. (Need more help planning your Social Security? Consider matching with a financial advisor. )
Close the gap with 401(k) withdrawals
Of course, if you retire at age 62 and wait another eight years to collect Social Security, you’ll need a way to cover your expenses until age 70. 401(k) Retirement income is a natural place to focus because that’s what it’s all about. But if he withdraws more from his 401(k) before retirement, he increases the risk of: run out of money. You should evaluate the risks to see if you are comfortable with this potential trade-off.
You can do it by considering your Withdrawal rate. Simply divide the total amount he plans to withdraw from his 401(k) in a year by his account balance. In your case, he would divide $20,400 (1,700 * 12) by $750,000.
This is 2.72%, which I think is an incredibly low withdrawal rate. Assuming consistent inflation-adjusted returns and investments within reasonable limits, asset allocation If you stay within this range, the chances of you running out of money are pretty low.
If you plan to reduce your 401(k) withdrawals once Social Security payments begin, your risk decreases even more. In fact, you may become unnecessarily conservative and consider further withdrawal. However, you may be perfectly content with preserving your assets. I’m a strong believer in spending your money in the way that makes the most sense for you. (A financial advisor It helps you assess your retirement risks and create an asset allocation designed to meet your needs. )
next step
Without knowing more about your situation, I can’t say for sure that this is a good plan for you. social security delay In many cases, this is a wise choice, and a 2.72% withdrawal rate may work just fine for most retirees.
I would also like to point out that my answer above says nothing about whether this plan will provide enough income to cover your retirement expenses. They said it was $1,500. pension If you want to make payments, you’ve probably determined that $1,700 each month from your 401(k) is enough to cover your expenses. If not, you may want to look at your expected retirement expenses and evaluate whether $3,200 is enough to meet your spending needs.
Tips for finding a financial advisor
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Finding a financial advisor doesn’t have to be difficult. SmartAsset Free Tools , we match you with up to three vetted financial advisors serving your area. You can also have a free introductory call with an advisor to decide which advisor you feel is a good fit for you. Are you ready to find an advisor to help you reach your financial goals? gIt started now.
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Consider several advisors before deciding on one. It’s important to find someone you trust to manage your money. As you consider your options, you may consider the following: Questions to ask your advisor To ensure you make the right choice.
Brandon Renfro, CFP®, is a SmartAsset Financial Planning columnist and answers readers’ questions about personal finance and taxes. Have a question you’d like answered? Email AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Brandon is not a participant in the SmartAdvisor Match platform and receives compensation for this article.
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post Ask an Advisor: Should I delay Social Security and rely on my 401(k) for 8 years? I have $750,000 in savings and a pension It first appeared SmartRead with SmartAsset.