GOLDEN YEARS
I’m 52 and retired with $1.9m but can’t use most of my money – expert gave an ‘investment’ trick to stretch my savings
The trick could be 'fishy' for some
RETIRING early is a dream for many Americans, but some who manage to do it struggle to stretch their cash.
A certified retirement counselor and YouTuber shared his advice for a 52-year-old retiree who stopped working at 50.
1
The challenge, according to Drew Blackston, was to make his money last at least until age 59 and a half.
That’s the age when most people can start withdrawing from retirement accounts without a penalty.
“All the laws and the caution tape fall off of your IRAs, your 401ks, and all your qualified retirement investment accounts,” he said.
But without work, the 52 year old, who had a healthy nest egg of $1.9 million, would need to find a way to use those savings to pay for living expenses.
Read More about Savings
Blackston worked out a strategy to help the retiree make the most of his money.
WAIT FOR IT
Blackston suggested using rule 72T — an IRS rule that allows some restricted withdrawals from an individual retirement account without any additional penalties.
For most, rule 72(t) is a “last resort,” according to Investopedia.
But using the rule on just some of his assets would allow the retiree to use it to pay for everyday expenses.
Most read in Money
On top of that, Blackston recommended putting some of the savings in a non-qualified taxable brokerage account.
This account would help cover costs.
I quit my full time job with just $850,000 and retired at 42 - now I juggle a few side hustles while my savings grow
These withdrawals would be taxable as income.
These strategies are not often used for older retirees, and can be risky.
“If these were his only two accounts, this strategy would be very, very fishy,” Blackston said.
But using these two accounts together while his other investments continue to grow would help the retiree make it to 59.5, at which point he could use the rest of his savings without penalty.
RETIREMENT TROUBLE
Financial advisors can be a source of wisdom for those looking to retire.
Blackston recently shared his advice for a 67-year-old with $380,000 saved.
Luckily, her pension helped out.
Where to save your retirement money
There are several different places where you can put the money you save for retirement. Each has different tax advantages, but not all of them are available to everyone.
401(k) - an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when the funds are withdrawn in retirement.
Roth IRA - an individual retirement account. Contributions are made post-tax but withdrawals in retirement are not taxed.
TSP (thrift savings plan) - a retirement savings and investment plan for Federal employees and members of the uniformed services. They work similarly to 401(k)s but may have more limited investment options.
Pension - an employee benefit that commits the employer to make payments to the employee in retirement. Pensions are becoming increasingly rare.
A 60-year-old woman recently called the financial podcast The Ramsey Show to lament her lack of savings.
Read More on The US Sun
With nothing saved, finance guru Dave Ramsey suggested she start putting money away.
Blackston recently shared his $25 savings tip with the U.S. Sun.
A 66-year-old sought Blackston’s advice for saving after a divorce.