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Cash Flow in retirement
Old 05-02-2019, 07:21 AM   #1
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Cash Flow in retirement

A few more years for me to go to meet my goals and for the kids to be settled.But we are getting close - although that's a whole separate post.

Anyways, just wondering what people do as far as withdrawals from their retirement accounts: Do you take a lump sum once a year and move it to cash or a checking account? Or do you take monthly drawdowns ?

I think it might be easier to keep track of the drawdown rate if it is a set amount once a year .
Just curious what people have found is the best approach.
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Old 05-02-2019, 07:37 AM   #2
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I'm far from an expert on financing but here was my approach and plan to that question. I built up my savings in cd's (ladder) a few years before I retired. I only take money from those accounts to live. I leave an amount in a daily savings to live from and never have to touch my investment or retirement accounts. One reason why I do that is because I don't want to have or show any income or as little as I can.
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Old 05-02-2019, 08:06 AM   #3
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I have no affiliation with this blogger, but this is what I did. We retired last Fall, and it's working for us:

How To Build A Retirement Paycheck From Your Investments

This one helped too, for Asset Allocation:

https://www.theretirementmanifesto.c...down-strategy/

He writes in understandable language for someone like me who couldn't explain seeking alpha if I had to.
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Old 05-02-2019, 08:13 AM   #4
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Quote:
Originally Posted by NJSail View Post
A few more years for me to go to meet my goals and for the kids to be settled.But we are getting close - although that's a whole separate post.

Anyways, just wondering what people do as far as withdrawals from their retirement accounts: Do you take a lump sum once a year and move it to cash or a checking account? Or do you take monthly drawdowns ?

I think it might be easier to keep track of the drawdown rate if it is a set amount once a year .
Just curious what people have found is the best approach.
I've been RE for 4 years and withdraw money as needed. This usually is just capturing dividends as they occur. When I need a larger chunk (like paying estimate taxes) I will pull that a little early to make it ready.
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Old 05-02-2019, 08:14 AM   #5
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I'm far from an expert on financing but here was my approach and plan to that question. I built up my savings in cd's (ladder) a few years before I retired. I only take money from those accounts to live. I leave an amount in a daily savings to live from and never have to touch my investment or retirement accounts. One reason why I do that is because I don't want to have or show any income or as little as I can.
interesting approach - my plan is to keep a SWR of under 4% , and build a large dividend portfolio, combined with my real estate holdings, cash value life insurance, etc..
I have no issues tapping dividends and interest and will consider principal drawdown over time.
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Old 05-02-2019, 08:15 AM   #6
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I've been RE for 4 years and withdraw money as needed. This usually is just capturing dividends as they occur. When I need a larger chunk (like paying estimate taxes) I will pull that a little early to make it ready.
yep - that makes sense. Do you also keep a large chunk in cash?
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Old 05-02-2019, 08:18 AM   #7
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Once a year I determine the amount I want to withdraw, then I set up an automatic monthly transfer from my IRA to my savings account. I have taxes withheld from that. From there, I do transfers to my checking as required. I have taxes withheld from that.As you can probably tell, I don't follow the "bucket" strategy.
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Old 05-02-2019, 08:35 AM   #8
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Our dividends are set aside in a MM account within TRPrice.
We usually send three or four months worth of spending to our checking when checking gets low. So three or four times a year as needed.
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Old 05-02-2019, 08:47 AM   #9
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I retired at the end of last year (2018). I had closely monitored my spending for 2 years prior to that and used those numbers to roughly estimate my income needs for 2019 and onward. I am trying to minimize my taxable income to take advantage of ACA Medical Premium Subsidies. I set up roughly 3 years of estimated income needs in a Money Market Mutual fund and a local bank savings account. 2/3 is in the MM and 1/3 is in the savings account. In addition to these accounts, my investment dividends are generating roughly 2/3 of my anticipated income needs. I do NOT re-invest them. Every month, I move any dividends that were received into my local checking account and spend from there. I also transfer any additional money needed from my local savings account into my checking account. I will continue to deplete the local savings account as needed until it only holds a small emergency fund amount. When that happens, I will pull a chunk from the Money Market fund to replenish the local savings. Unless my spending needs rise or my dividends decrease, I probably will be able to go more than the 3 years I targeted with the money in savings/MM since I'm also using dividends for income. After these money pools are depleted, I will sell something to replenish my savings/MM accounts and continue the cycle. I track all this closely in spreadsheets and in Quicken. Since this is my first year of retirement, I want to ensure my plan is working to my satisfaction.
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Old 05-02-2019, 09:14 AM   #10
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Originally Posted by street View Post
I'm far from an expert on financing but here was my approach and plan to that question. I built up my savings in cd's (ladder) a few years before I retired. I only take money from those accounts to live. I leave an amount in a daily savings to live from and never have to touch my investment or retirement accounts. One reason why I do that is because I don't want to have or show any income or as little as I can.
I like that idea for a few years, but what happens when RMD, SS and if you have a pension kicks in? We won't W/D from portfolio for 2-3 years but are pre planning "buckets" to avoid tax burden later. tIRA can be problematic at that point in time.
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Old 05-02-2019, 09:46 AM   #11
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We take 50K from our investment accounts. We move it into an online bank HISA. We transfer money to our chequeing account as required to supplement our pensions. We review the requirement every year after tax time when we gain an understanding of what our income tax installment payments will be.
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Old 05-02-2019, 10:05 AM   #12
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Many people do their pull in January. I do mine in December. Why? Dialing in on taxable income.


If you have after tax (regular money, not in any kind of IRA), it's pretty simple: run your asset allocation measurement and sell whatever is above it's target and rebalance across all tax categories. There's a little more complexity if you are holding appreciated assets since you'll want to take advantage of capital gains treatment.


So, the December idea...get tax software in November and play with your options for funding the following year. For me, everything is in an IRA of some sort, so I'm optimizing for PTC, but capital gains is another thing to work on.
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Old 05-02-2019, 12:57 PM   #13
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At the risk of TMI, here goes

Before retirement, I adopted the Sequence of Risk financial plan and built a large cash bucket (about 3 years of spending). This is my savings bucket and the money is parked in high interest savings accounts like Amex savings.

I also have a Checking bucket that is used to pay all expenses.

I make a monthly transfer from the Savings bucket to the checking bucket. That part is easy.

Refilling the Savings bucket takes a little bit of planning.

Firstly, I have to limit my income to stay under the ACA fiscal cliff of $64K. I get about 1/3 from capital gains, 1/3 from dividends and interest and 1/3 from IRA transfers.

This income is less than my spending, so my savings bucket is generally in decline.

The dividend and interest amounts from my taxable accounts flow into checking and basically reduce the amount transferred from the savings account.

Once a year, I plan a sale of some investment, in my taxable accounts, to generate cash and recognize some income. No real plan, just whenever. If I want to generate $20K of capital gain, then I sell the necessary amount of equity. I transfer the entire proceeds from the sale into the savings buffer. Naturally, I also keep an eye on my AA as I plan this sale. The trickiest part is to balance the income recognized with the amount of cash needed. If I need a lot of cash, then I sell investments with the least amount of gain.

Lastly is the IRA/401K transfers. I usually take 1/2 of planned distribution on May 1.

The hardest part is the December transfer. I have to accurately estimate my income for the year and transfer the amount to hit my $62K income target. I have to work though all the dividend estimates and make the final transfer around Dec 26th.

I start filing my taxes in November to figure out my numbers.

I am a quicken user and just starting learning how to use the projected balance feature. I have modeled various transfers into and out of my savings bucket up to 1/1/2024. This way, I can keep this bucket containing around 1 year's living expenses at the minimum.
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Old 05-02-2019, 01:01 PM   #14
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Only 21 months retired and so far just living off some SS and taxable cash accounts.
We hold the cash in Ally Bank and transfer it monthly to BOA for expenses.
When we start using TIRA next year, will rethink monthly vs. yearly.
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Old 05-02-2019, 01:04 PM   #15
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We never lived paycheck-to-paycheck when I was working. So I wasn't concerned about building a monthly "paycheck" after I retired.

We just take money out of the IRA when the bank balance gets too low. I check once a year to see how we are doing.
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Old 05-02-2019, 01:53 PM   #16
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Quote:
Originally Posted by NJSail View Post
A few more years for me to go to meet my goals and for the kids to be settled.But we are getting close - although that's a whole separate post.

Anyways, just wondering what people do as far as withdrawals from their retirement accounts: Do you take a lump sum once a year and move it to cash or a checking account? Or do you take monthly drawdowns ?

I think it might be easier to keep track of the drawdown rate if it is a set amount once a year .
Just curious what people have found is the best approach.
I take a lump sum once a year from my retirement accounts and move it to a high yield savings account. Then the high yield savings account sends a monthly “paycheck” to my checking account to cover routine expenses. I draw from it too to pay taxes or the occasional large purchase.

I prefer to do the single large annual withdrawal because it’s easy to calculate how much to take out and I rebalance my retirement fund afterwards. I also like to know that a year’s worth of expenses is covered and ignore market fluctuations during the year.

I take all fund distributions in cash, but leave them in the retirement account until the Jan withdrawal. Most of these distributions are paid in Dec, so it works well timing wise both for the annual withdrawal and for rebalancing.

FWIW our annual withdrawal is based on the prior Dec 31 value of the retirement fund each year.
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Old 05-02-2019, 02:05 PM   #17
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Quote:
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II built up my savings in cd's (ladder) a few years before I retired. I only take money from those accounts to live. I leave an amount in a daily savings to live from and never have to touch my investment or retirement accounts. One reason why I do that is because I don't want to have or show any income or as little as I can.
When your RMDs kick in, you'll have higher income, presumably, due to RMDs+SS/pensions. Most folks would want draw down their brokerage and retirement accounts prior to their RMD age to smooth out the taxes that are paid out over time. Deferring all withdrawals from such accounts might push you into a higher bracket.

For example, I'm only 53, but next year am planning to take an amount from an inherited IRA equal to the standard deduction ($24.4K for MFJ), not paying any taxes on that income.
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Old 05-02-2019, 02:06 PM   #18
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I pretty much know what my cash needs for the next month are by the end of the month. I sell something at that time to cover the next month's requirements.
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Old 05-02-2019, 02:52 PM   #19
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I take all fund distributions in cash, but leave them in the retirement account until the Jan withdrawal. Most of these distributions are paid in Dec, so it works well timing wise both for the annual withdrawal and for rebalancing.
audreyh1, When you say "fund distributions", are you talking about dividends only? Or dividends and CGs?
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Old 05-02-2019, 03:18 PM   #20
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audreyh1, When you say "fund distributions", are you talking about dividends only? Or dividends and CGs?
All of them.

As it happens, funds that pay higher capital gains distributions tend to be the ones that have outperformed for the year, so taking the distribution in cash usually helps to rebalance the fund.

Also, most of our retirement investments are in taxable accounts, so I prefer not to automatically reinvest any distributions in case I need to trim the fund soon anyway or to avoid a wash sale situation. After taking my withdrawal I then calculate whether I need to add some back into each fund. I rarely do for equity funds.
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