Interpret the future withdrawals from savings chart

Tip: For easier reading, click    (above).

This graph shows the years in which you will need to withdraw money from savings (or sell investments) to cover your expenses. It also shows years in which you plan to exercise stock options.

The Lifetime Planner calculates withdrawals automatically. Typically, such withdrawals occur after retirement, unless you need money earlier for big purchases and unusual expenses. For example, you may need to dip into your savings in order to buy a house or to pay for college tuition. At some point, you may also choose to borrow money from your own retirement plan. It's a good idea to avoid withdrawals from savings unless it is absolutely necessary because your income is less than your planned expenses.

When withdrawals are necessary, the Lifetime Planner figures out how much money needs to be withdrawn to cover the cash shortfall as well as to pay taxes on the realized gains from selling an investment. The Lifetime Planner withdraws money first from taxable investments. Once that money is depleted, it will withdraw from stock options. If still more money is needed, withdrawals come from your tax-free retirement accounts. This withdrawal technique is designed to minimize taxes and maximize your investment growth.

Withdrawals can also occur because of legal regulations. For example, after age 70╜, IRS guidelines require you to withdraw money from certain retirement accounts. These withdrawals are known as "minimum required distributions." You must make these withdrawals, even if you plan to work to age 100 and don't need the money. The Lifetime Planner uses the money that's withdrawn to cover your expenses, and any surplus is automatically reinvested in non-retirement accounts. In addition, when stock options expire, the Lifetime Planner automatically projects a sale and reinvests the proceeds.

Before age 59╜, avoid withdrawals from retirement accounts at all costs since this typically results in a 10% penalty.