Upon reaching the age of 59 ½, numerous changes start to take place, with the most significant being the ability to start withdrawing from retirement accounts like 401(k)s and IRAs.[1][2] This age is also crucial as it may signify a transition in one’s investment and retirement approach.
During the time when you are working, you find yourself in what is commonly known as the “accumulation phase” of retirement. This is a time when you are contributing to your retirement savings and attempting to grow your savings in preparation for when you stop working.[3] Upon reaching the age of 59 ½, you are finally presented with the opportunity to exit the accumulation phase and start gearing your finances toward living life in retirement because you are legally allowed to withdraw from the retirement accounts you used to save for retirement.
When withdrawals from your retirement accounts become possible, crucial decisions must be made. Are you going to start withdrawing your funds right away to cover costs or pay down debt? Are you going to withdraw from these accounts soon so you can delay claiming your Social Security to receive a greater monthly benefit?[4] Do you plan on continuing to work to help contribute more to your retirement funds? Perhaps your savings aren’t as substantial as you’d hoped. It might be necessary to work for additional years to achieve your financial goals. Moreover, consider the arrangement of your finances. Do you want to shift towards a more conservative investment approach to preserve your savings?
There are also many important risks that come with switching from a savings accumulation strategy to an income-generating and cost-covering one. These risks may include tax concerns that may arise when moving your savings between accounts and investments, risk tolerance, and the effect of stock market volatility. These questions are not always easy to answer without professional knowledge and guidance.
The truth is, there is no universal strategy for individuals nearing or who have passed their 59 ½ birthday. Your financial objectives and unique circumstances will significantly influence the decisions you make during this critical phase. A financial advisor can assist you in navigating this period by offering personalized guidance and recommendations based on your lifestyle and financial situation. If you’re curious about whether a financial advisor can benefit your financial situation, contact our team today for a complimentary evaluation of your finances.
