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Retirement day is a financial rite of passage, a transition from accumulating wealth to spending it.  At age 59-1/2 you may begin withdrawing money from a traditional retirement account without incurring the 10% early withdrawal penalty. But distribution planning is complex, and just because you can take the money doesn't mean you necessarily should.

Which money should you spend first during retirement? Your employer’s retirement plan?   Personal accounts? What kind of holdings should you sell, and in what order? The answers depend on your personal circumstances. Many individuals —particularly if you won't owe estate tax—fare better spending non-retirement accounts first. Key variables include:

· Expectations about future tax rates

· Your cost basis in taxable assets

· Whether your portfolio includes concentrated holdings

· Whether you hope to leave something to heirs

Among the potential benefits of tapping personal accounts first are:

· Lower current taxes. Cash in personal accounts has already been taxed, and appreciated assets may qualify for taxation at long-term capital gain rates, currently a maximum of 15%. Withdrawals from employer plans and traditional IRAs are taxable at ordinary rates as high as 35%.

· Continued tax-deferred growth. Spending taxable accounts first allows your retirement account to keep growing free from current taxation.

· More for heirs. Leaving an IRA to loved ones lets them continue the tax-deferred ride. With a “stretch” IRA, beneficiaries withdraw from the account over their life expectancies—especially attractive when their tax brackets are lower than the IRA owner's. Note, though, that many company plans have in the past forced non-spouse beneficiaries to empty the account, generating immediate taxes. Rolling plan assets to an IRA could allow your heirs to maximize your retirement money.

Which taxable assets should you sell first? Annual rebalancing may be your guide. By selling from portfolio positions that have grown larger than your target allocations, you get cash to live on while keeping your investments well diversified.

Questions like these are an important part of your overall financial plan. If we can be of assistance to you, please contact us.