Weston: 3 tasks for new retirees who will pay later


Inflation and market volatility can be problematic for anyone, but they are particularly dangerous for retirees. If you don’t earn income, you can’t ask for a raise to compensate for the price increase. Meanwhile, bad markets early in retirement can significantly increase the chances of running out of money.

One way to cope is to identify discretionary spending that you can reduce. Cutting spending can help you offset inflation, but it can also help you ride out bad markets, says Katherine Roy, chief retirement strategist at JP Morgan Asset Management.

Traditionally, retirees were encouraged to withdraw a certain percentage of their investments in the first year – 4% was a popular figure – and to increase the withdrawal by the amount of inflation each year. JP Morgan research, however, shows that people are less likely to run out of money if they forgo that inflationary boost when markets return less than 5% in a year, Roy says.


Many people’s tax situations change as they transition into retirement, and they may have unique opportunities to manage their tax bills, says Azeles.

Good savers, for example, could find themselves in a higher tax bracket at age 72, when the required minimum withdrawals from retirement accounts typically begin. In some cases, it may make sense to do partial Roth conversions in your 60s to spread out and reduce that tax bill, Azeles says. A tax professional or financial planner can help you determine if conversions are a good idea, and if so, how much to convert each year to avoid triggering a higher tax bracket or Medicare surcharges.

Comments are closed.