Five ways to improve retirement math when you haven’t saved

A large segment of American workers are approaching retirement with very little or nothing saved: Among workers age 55 or higher and nearing retirement, 48 percent have saved less than $100,000, according to the Employee Benefit Research Institute. A third have less than $25,000.

The savings shortfall means many Americans face the prospect of retiring solely on Social Security, which replaces just 39 percent of pre-retirement income for the average worker retiring at 65, according to the Center for Retirement Research at Boston College.

But opportunities exist to improve on that math, even in the years just before retirement. I took a look at five strategies for rewriting your retirement plan today’s Retiring column in The New York Times – everything from ramped-up catch-up saving, delayed Social Security filings, working longer and re-working spending assumptions in retirement.

The last suggested strategy in the piece is designing a strategy for tax-efficient draw-down of funds in retirement:

Taxation of retirement income plays an important role in determining how long retirement savings will last.

Conventional wisdom instructs retirees to draw money first from taxable accounts, and then from tax-deferred 401(k) and IRAs. But [William] Meyer recommends a more nuanced approach by withdrawing from multiple accounts to minimize taxes.

Length restrictions in the column prevented elaboration on how this strategy works, but you can find detail on it in this article that I wrote on the subject recently.


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