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Question: I had $225,000 in my 401(k), and I transferred $125,000 into an annuity yielding 7% because I desired a steady income stream. Now that I’ve reached 65 years of age and plan to retire within half a year, I’m uncertain about how to proceed with the remaining $100,000. Do you think hiring a financial advisor would be beneficial? Are you also searching for a financial advisor? This complimentary resource provided by SmartAsset has the potential to connect you with an advisor who could suit your requirements. )
Answer: Congratulations on your upcoming retirement! It’s completely understandable to think about hiring a financial advisor at this stage. Whether you actually need one largely hinges on your personal preferences and comfort level when handling your own money. We'll delve deeper into this topic further down.
Encountering problems with your current financial advisor or planning to find a new one? Send an email. picks@Pawonation.com .
Initially, though, before deciding how to allocate the $100,000, you should grasp the broader view of your life and financial situation along with what role this sum will play for you. Examine additional revenue streams, anticipated expenses, planned withdrawals from different accounts upon retirement, as well as the associated taxes—this advice comes from Justin Pritchard, a certified financial advisor at Approach Financial.
"Calculate the amount of money required for your annual living expenses and subsequently divide this figure into a monthly budget, factoring in any earnings from Social Security or other resources such as a retirement plan," explains certified financial planner Patrick Logue from Prudent Financial Planning. This This guide can assist you in determining additional financial aspects you need to address to assess whether you're financially prepared for retirement.
After realizing this, recognize that your $100,000 offers various possibilities — you might choose to take withdrawals from it, move it into a different retirement account, or leave the funds within your 401(k). The best choice for you hinges on your plans for utilizing those assets.
"To help you make the right choice, an advisor will collect your financial data and pose questions related to your personal circumstances. After assessing your present financial status, they'll identify the optimal location for your funds," explains certified financial planner Danielle Miura from Spark Financials.
Certainly, you could manage this process independently as well—though it would entail comprehending exactly how much capital you’ll require for retirement and determining the level of financial risk you're prepared to accept with that $100,000, among other factors. Keep in mind that because you have the choice to maintain the funds within your 401(k), allowing them to accumulate over time, experts advise against withdrawing the money unless absolutely necessary for basic living costs.
A portion of this financial picture? Figuring out specifics like whether it’s a single-premium deferred annuity (SPDA) could provide clarity, according to Logue. A single-premium deferred annuity involves funding your account with one large payment upfront. In turn, it provides assured income along with tax-deferral benefits for investments within the plan. The advantage here lies in receiving a fixed interest rate guarantee, simplifying retirement strategy formulation. Additionally, taxation isn’t applicable until withdrawals start being made from the annuity.
If this seems overwhelming, you might find it beneficial to consult with an advisor. And you can utilize this tool to find an advisor who could be suitable for your requirements.
"If you choose to collaborate with a financial advisor, it's wise to seek out a fiduciary who is legally bound to act in your best interests and cannot suggest products or services solely due to receiving some form of financial incentive," explains Alana Benson, an investment representative from NerdWallet. Here are the various kinds of advisors you may come across, and here Here are the questions to ask them.
Regardless of whether you choose to tackle this solo or bring in professional help, keep in mind that financial planning extends far beyond managing investments. It involves mitigating possible threats to your retirement, optimizing taxes, safeguarding assets, conserving estates, and much more. Without a comprehensive long-term care strategy, the danger to your accumulated wealth rises significantly. Failing to create an appropriate and forward-thinking care plan could ruin years of saving efforts," asserts certified financial advisor Grace Yung from Midtown Financial Group.
Encountering problems with your current financial advisor or seeking to engage a new one? Send us an email. picks@Pawonation.com .
The questions have been condensed for succinctness and clear understanding. The tale was initially released in 2022. .
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