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Chapter 20. And Now It's Time to Retire > Ready, Set, Go! - Pg. 197

And Now It's Time to Retire 197 For What It's Worth Popular thinking is that when you retire, you'll need only 80 percent of what your then-current income is to maintain your standard of living. But that may be a fallacy. Think for a moment about what retirees like to do --travel, eat out, and play golf. Now add skyrocketing medical expenses to the equation. You had better plan on needing 100 percent of your preretirement income, especially in the first few years of retirement. Current In- come $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $70,000 $75,000 $80,000 Years to Retirement (4% Inflation Rate) 5 $30,416 $36,500 $42,583 $48,666 $54,749 $60,833 $66,916 $72,999 $85,166 $91,249 $97,332 10 $37,006 $44,407 $51,809 $59,210 $66,611 $74,012 $81,413 $88,815 $103,617 $111,018 $118,420 15 $45,024 $54,028 $63,033 $72,038 $81,042 $90,047 $99,052 $108,057 $126,066 $135,071 $144,075 20 $54,778 $65,734 $76,689 $87,645 $98,601 $109,556 $120,512 $131,467 $153,379 $164,334 $175,290 25 $66,646 $79,975 $93,304 $106,633 $119,963 $133,292 $146,621 $159,950 $186,609 $199,938 $213,267 30 $81,085 $97,302 $113,519 $129,736 $145,953 $162,170 $178,387 $194,604 $227,038 $243,255 $259,472 35 $98,652 $118,383 $138,113 $157,844 $177,574 $197,304 $217,035 $236,765 $276,226 $295,957 $315,687 Ready, Set, Go! Okay, now we're going to flash forward a few years. Your retirement party is in a month, and you have a lot of decisions to make before then. The first thing on your agenda is how to get at all that money you have stashed away. After all, that money is yours, and you're at least 59½ years old; you won't have to pay any penalty, just taxes, if you begin to withdraw your funds. And we'll show you how to reduce the tax bill with some proper planning. You have a bunch of choices on what to do with your money. Leave It Depending on the plan's provision, you may not have to move it out. That's right. You can leave the money in your 401(k) plan with your present employer. But why would you want to leave it there? Because it's easy. It makes sense if you are happy with the choices and the mutual fund company that manages the funds (but remember, that same mutual fund company will be happy to help you roll your 401(k) into an IRA). You don't have to start with- drawing from your 401(k) until you reach 70½, so you can put off the decision for a while. This allows you time to review your other choices. There is no tax liability until you begin to withdraw the money.