Go to school. Go to more school. Stay in school. Get a job. Start your career. Work. Save. Work some more. Get a promotion. Save. Save. Save. Ok stop....spend??
As soon as we start our careers, we are trained to accumulate. Traditionally, we are coached to save to our 401ks, our IRAs - for retirement age. And if we're lucky, we get to that age and we're healthy. But when should that day come? Is there a "number"? And how do I spend?
First, the transition from work to retirement is not easy. Don't expect it to be. For many, they go from having a clear purpose and to do list each day to the honeymoon first first months of retirement to, ok now what is my purpose? Practice makes perfect. Try practicing retirement before you pull the trigger. What will your passions be? Will you work? Volunteer? Read books? Travel?
Next, push the idea of a static "number" out of your head. Successful retirement may require investments that will fluctuate in the short term. Plan for this to occur. What if you retire at your "number", then the stock market goes down 10% within that year (happens every year, on average...)? That should be expected and considered when planning for cash flow.
Finally, don't withdraw your assets in the wrong order. Each account you have has an opportunity cost for use. Consider the alphabet soup of retirement accounts - IRA, SEP IRA, 401k, 403b, and so on. Those are "qualified" accounts, meaning there is some tax benefit provided by the IRS. For all listed above, you may get deductions for deposits depending on income levels or whether it's a plan through work, you will get tax deferral along the way, and you have to take required minimum distributions starting at age 72. So, what is the downside of pulling money out before age 72? It's taxed at ordinary income AND you miss out on additional years of tax deferral. Use before 59.5 is penalized as well. ROTH accounts have a different opportunity cost. It's after tax in, no tax out, and no required distributions. Because there are no required distributions, you can benefit from tax deferral indefinitely. Withdrawing for today while preserving for tomorrow is the imperative balance to strike - and it's not as simple as it seems.
Joyful retirement is a process, not a transaction. The world will still turn, markets will change. It's imperative to start considering all the downstream impacts of decisions - even ones as simple as where to withdraw some money from.
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