The Withdrawals from Savings chart shows the years in which you will need to withdraw money from savings (or sell investments ) to cover your expenses. It also shows years in which you plan to exercise stock options. To view a forecast chart, see the related topics below.
The Lifetime Planner calculates withdrawals automatically. Typically, such withdrawals occur after retirement, unless you need money earlier for big purchases and unusual expenses. For example, you may need to dip into your savings to buy a house or pay for college tuition. At some point, you may choose to borrow money from your own retirement plan. It's a good idea to avoid withdrawals from savings unless it's absolutely necessary.
When savings withdrawals are necessary, the Lifetime Planner figures out how much money you'll need to withdraw to cover the cash shortfall as well as the capital gains taxes from selling an investment. The Lifetime Planner withdraws money from taxable investments first. Once that money is depleted, it withdraws from stock options. If still more money is needed, withdrawals come from your tax-free retirement accounts . This withdrawal technique is designed to minimize taxes and maximize your investment growth.
Legal regulations may also require you to make withdrawals. For example, after age 70 and one half, IRS guidelines require you to withdraw money from certain retirement accounts. These withdrawals are known as minimum required distributions. You must make these withdrawals, even if you plan to work to age 100 and don't need the money. The Lifetime Planner uses the money that's withdrawn to cover your expenses, and any surplus is automatically reinvested in non-retirement accounts. In addition, when stock options expire, the Lifetime Planner automatically projects a sale and reinvests the proceeds.
Before age 59 and one half, avoid withdrawals from retirement accounts as this typically results in a tax penalty.