Tapping your nest egg during military retirement can be a little scary at first, but if you go about it with the right attitude, you can make your money last for the rest of your life. Before you start dipping into your hard-earned savings, take these six tips for tapping into your nest egg:
1. Calculate your retirement pay first
The first key to figuring out how to tap your nest egg and how much to tap at once is to calculate your actual retirement pension pay. Your pay will depend on when you entered the military, how long you worked in the military, and which retirement plan you signed on for at the beginning of your career. The USAA has a great pamphlet that helps you figure out active duty retirement pay plans in a simple way, as they can be rather confusing.
2. Pull it into more conservative investments
One article in US News notes that it’s important to start shifting your retirement savings as you near retirement. You’ll take it from higher-risk investments such as stocks into more conservative investments. It’s important to start this process before you actually retire, so that your savings will be as safe as possible from market fluctuations as you near retirement and as you start retirement. Before you tap into your nest egg, talk to your financial adviser about where you should be investing your nest egg.
3. Overestimate your longevity
One mistake that many Baby Boomer retirees make is to underestimate their longevity. While your parents and grandparents may have lived until seventy-five or eighty, it’s not unusual for today’s retirees to have a life expectancy of ninety or even one hundred! Make sure you plan your retirement and tap your nest egg as if you’ll make it to a hundred so you know for sure that you’ll have enough left to get you through the rest of your life.
4. Be careful with credit
It’s important as you near retirement to become ever more careful with credit. Retiring with too much debt is one of the number one ways to tap into your next egg too quickly. It’s not a horrible idea to check out some good credit card deals as you near retirement, and a credit card can useful for emergencies when you may not have cash in hand. However, make sure you’re using credit as responsibly as possible so that you don’t put yourself into a position of needing to go back to work or tap too much of your nest egg to pay off debt.
5. Withdraw with a strategy
One of the most important tips for tapping into your next egg is to do so with a strategy. If you retire in your sixties or early seventies, military.com says you’ll probably be able to withdraw a maximum of five percent a year from your retirement accounts. That may not be much to live on, but you may have to learn to make it work so that you don’t outlive your money. Even if you have better retirement savings and great rates of return, it’s essential to have a strategy for withdrawing so that you don’t withdraw too much too soon and leave yourself penniless in the long run.
6. Leave the most tax-advantaged accounts for last
Part of your withdrawal strategy needs to be which accounts to tap first. As a military retiree, your nest egg is likely spread around to a few different types of accounts. Leaving the most tax advantaged until last will ensure that you get the most mileage out of your money and that you reap the full benefits of that tax advantaged growth until the last possible moment. Not sure which accounts to draw from first? Talk to your financial adviser about setting up your withdrawal plan so that you get the best possible tax advantages.
Tapping into your nest egg after decades of hard saving is certainly not easy, but it’s something you must do if you’re ever going to retire. Daniela Baker from CreditDonkey says, remember, you saved all that money so that you could enjoy your retirement! You’ll enjoy it more, though, if you spend reasonably and have a solid plan in place for tapping your nest egg during military retirement.