Nearing Retirement

Retirement can open a world of new opportunities, so you'll want to make sure you have the finances available to live the way you want. When you retire or are very close, your retirement plan is just as critical as when you were saving.

  • Income & Expenses
  • Investing in Retirement
  • Withdrawal Strategies

Developing a retirement budget can help ensure that your money will last throughout your retirement. Many people spend one-third or more of their lives in retirement, so it's important to have a plan. Taking inventory of your retirement income and expenses will help you know exactly where you are.

Use the Planning for Your Retirement tool to create your budget as part of your overall plan. You'll have a comprehensive plan in about 15 minutes.

Keys to Developing a Retirement Budget

  • First, itemize income from all sources, including retirement savings, pension payments, social security and other investments you may have. You may also decide to continue working part-time or sell property that will provide income.
  • Next, consider your retirement expenses. In general, you will need 70% to 80% of your pre-retirement income to maintain a similar lifestyle in retirement. You want to include all factors such as taxes, real estate costs, vehicles, health care and personal care.

Next: Investing in Retirement

A solid retirement portfolio can provide income for expenses and may continue to earn you money, even as you begin to make withdrawals. Here are some tips for investing when you are close to or in retirement.

Create an Emergency Account

First, set aside money for the unexpected. Your emergency account should be large enough so that you don't need to sell some of your investments. A good guideline is to set aside enough to cover three to six months of your living expenses.

Balance Risk and Reward

Dividing your investments among stock, bond and money market mutual funds can help balance your portfolio. Although this kind of diversification strategy has been successful for many investors, it cannot ensure against loss.

Know Your Comfort Level with Risk

Preserving your retirement savings is of utmost importance, so most retirees opt for a more conservative portfolio. How much risk you keep in your portfolio is an individual decision, but one you will want to consider for your retirement investments.

Review Your Portfolio

Do a quick check-up on your retirement portfolio.

  • Planning for Your Retirement
    Find answers to your most important questions about retirement. Whether you are just starting out, already retired, or somewhere in between, this tool can help you plan, invest and manage your retirement investments.
  • Fund Solutions for Your Retirement
    Explore our two series of actively-managed asset allocation funds.

Next: Withdrawal Strategies

During retirement you will begin to shift your strategies from building your investments to planning your withdrawal strategy. Consider the following as you think about how and when you will withdraw money from your savings.

Determine Your Withdrawal Rate

A major factor in determining how long your money will last is how much you will withdraw each year. Experts say a good place to start is with a 4% to 5% withdrawal rate. 

Develop Your Withdrawal Strategy

Your strategy will help you determine from which accounts to withdraw first and how you want to receive your payments.

  • Consider taxable versus tax-deferred account withdrawals and whether you will receive regular payments versus a lump sum.
  • You'll also want to have a good understanding about the IRS's rules for Required Minimum Distributions (RMDs). The RMD Distribution Guide can help clarify those rules.

Decide When to Receive Withdrawals
There are many options for how and when you want to receive your money during retirement. You can set up an automatic withdrawal plan to receive your money as often as you would like. Learn more about our Paycheck In Retirement service that allows you to receive a regular paycheck, just like when you were working.

Past performance is not a guarantee of future results. Investment return and principal value will fluctuate and it is possible to lose money by investing.

Earnings in an IRA are tax-deferred until withdrawal. A 10% penalty may apply to withdrawals before age 59½.

Brokerage Services are provided by American Century Brokerage, a division of American Century Investment Services, Inc., registered broker/dealer, member , .