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CashFlow?
Old 08-04-2004, 12:32 PM   #1
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CashFlow?

How do you generate the income you need to live on for the upcoming year?

Here's the scenario; hubby and I will retire in 6 yrs, me 52, he 55 with about 2m in our 2 401k's. We'd like to generate about 65k/year to live on.

We'll likely roll over the 401K's to IRA's upon retirement. Now what? Do we live off of income generated by the IRA's or do we do a withdrawal every year or? I read somewhere it's good to have 3 yrs or so locked in and available in case of market changes so do we withdraw 3 yrs income up front?

Would love some input from those of you with experience. This is still pretty new to us.
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Re: CashFlow?
Old 08-04-2004, 01:08 PM   #2
 
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Re: CashFlow?

My "pile" is a small fraction of what you plan to have,
but I am close to SS, so..........

My plan is for the 2 of us to live off current income only
after I start to draw SS in 2 years. Will try to preserve
my net worth as long as possible (forever?). It has started to slip
now, but this will hopefully be stopped 2 years hence.

John Galt
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Re: CashFlow?
Old 08-04-2004, 02:29 PM   #3
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Re: CashFlow?

Hi RatherBeFishn -
I turn 59 1/2 next month and we will begin taking out of my IRA which was "built" from my company's 401k and the cash balance version of it's pension back when I retired at 55. We are new at this, but the plan is:
1.rebalance portfolio once a year and at that time seed money market in IRA with enuf for year of withdrawals. We plan to transfer from IRA money market to taxable money market on a monthly basis.
2.portfolio allocation includes 24% in short term bonds. at our withdrawal rate, this is around 6 years of expenses. all distributions in IRA are re-invested. short term bonds are "sleep at well at night" allocation for those rebalance years market(s) may be down.
3.we do a multi-year cash flow spreadsheet that includes special purchases, SS at age 62, etc. to help ensure cash flow looks adequate. This means sporadic use of other assets besides this IRA will be needed (e.g., Roths, I bonds, ex-company stock).

Look forward to responses from folks who have more experience!... regards, Bill
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Re: CashFlow?
Old 08-04-2004, 03:41 PM   #4
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Re: CashFlow?

I have only been retired a couple of years, but I keep about 10% of my portfolio in a bond fund that direct deposits the interest monthly in a local bank. This has so far been enough to supplement my pension, leaving the rest of the portfolio untouched. The future is a mystery.
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Re: CashFlow?
Old 08-04-2004, 09:04 PM   #5
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Re: CashFlow?

I've been retired about 12 years, my wife about 10 years. We aimed at an annual income of $60K, but gifts from my mother have pushed it higher, and our situation is further complicated by an inherited IRA that has an RMD (Required Minimum Distribution).

I reinvest all dividends and draw a fixed percentage (the RMD) each year to supplement our pension and social security income -- which already exceeds the $60K. I use asset allocation as a sort of emergency fund against a protracted down market. I keep at least 10 (more like 15) years of future income in fixed income securities, i.e. short-term bond fund (because interest rates are so low), CDs, and ING Direct account. I think of Vanguard's REIT index fund as similar to a fixed income security, so I keep 10% in that. For the remainder, I like Vanguard's total domestic and international stock market index funds.

I don't distinguish between drawing dividends or reinvesting dividends and then taking a fixed draw, except letting dividends reinvest and taking a fixed draw is much less work. And that's what retiring is all about!

db
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Re: CashFlow?
Old 08-05-2004, 08:27 AM   #6
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Re: CashFlow?

[quote]I've been retired about 12 years, my wife about 10 years. *We aimed at an annual income of $60K, but gifts from my mother have pushed it higher, and our situation is further complicated by an inherited IRA that has an RMD (Required Minimum Distribution)

DB:

Appears that you are a perfect candidate to start on a small gifting program.
Lots of unfortunate situations out there, that could have their lives changed with a small infusion.

Regards, Jarhead
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Re: CashFlow?
Old 08-05-2004, 08:20 PM   #7
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Re: CashFlow?

jarhead,

We try to do our part. Within the next 10+ years, I'm likely to inherit my 91 year old mother's estate. One of her brothers recently died 4 months short of 104, and she has a sister almost 99 and a brother 98, so I hope she has at least 10 more years. Right now, our trust leaves our money to open space acquisition, but I want to change that to include funding a number of four-year scholarships at UCLA and perhaps Stanford. My mother supports a number of religious causes, but that's not where I'd put money. I expect to set up the scholarships no later than when I inherit my mother's estate. We have contributed small amounts to open space purchases. I gave a little money (big by their standards) to my high school scholarship fund, but I didn't like the way the college counselor doled it out -- got the feeling she was more concerned with fostering her relations with the recruiters than with which students could benefit most from the experience.

db
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