Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 04-30-2016, 11:41 AM   #21
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Quote:
Originally Posted by donheff View Post
I suppose it is market timing to a degree but the standard withdrawal advice is to sell your appreciated assets and then re-balance to get back to your AA. So, in a big up year in equities, you would sell equities for your withdrawal and then re-balance. In a bear, you would tap bonds and re-balance.
Oh, I see what you mean, now. I guess you'd be selling them anyway when you rebalance. There's also the matter of timing to consider - - when you rebalance, vs when you take your RMD's.

Quote:
Originally Posted by donheff View Post
That is what I do know. But with several TD accounts in old age trying to figure out which funds to tap could get daunting.
Yes, I agree wholeheartedly and suspect it wouldn't be worth it to do that once we are in our 80's.

Quote:
Originally Posted by donheff View Post
So, like Hermit and some of the others, I will probably simplify things be setting a simple AA in each account and letting the financial institutions calculate RMDs and liquidate proportionally, maybe even go to monthly distributions to checking. DW would like something simple like that if I kick the bucket and the kids would probably prefer that if we ask them to handle stuff for us.
That seems like a very sensible resolution to me. I can imagine that taking RMD's from multiple TD accounts could get pretty confusing. I just lucked out, or "skated", on that one since the only TD account I have is the TSP so it's pretty simple.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-30-2016, 12:12 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,008
Quote:
Originally Posted by donheff View Post
I do and will give some to charity and take the deduction. I will need most of the RMD money and will invest the remainder in taxable (equities) for my estate. The bottom line is you have to get money out of TD accounts sooner or later and the question I am trying to address is whether I should figure on doing the work to figure out which assets within the TDs to liquidate in any given year or go with a simpler proportional approach.
Just so that you're clear that money donated from an IRA directly to a QCD doesn't even appear as income to you, yet satisfies your RMD requirement. No deduction is taken. It's more efficient that way. In addition it allows you can take the standard deduction yet still benefit tax-wise from the charitable donation directly from the IRA.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 04-30-2016, 12:19 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2008
Posts: 5,178
There was a thread on withdrawal studies a while ago. You may find it interesting. Although studies were not perfect and may be a bit biased, withdrawing proportionately across all funds in the article didn't look bad at all.

http://www.early-retirement.org/foru...yet-81129.html
tmm99 is offline   Reply With Quote
Old 04-30-2016, 12:54 PM   #24
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 3,506
You should approach this from an asset location standpoint.

Here's what I would do.

It would be more efficient to maintain all equity (or as much as possible)in after-tax accounts and the fixed income in the tax-deferred accounts. This will protect as much of the qualified dividends and cap gains distribution from being taxed as income as possible.

If RMDs are more than enough for expenses, you shouldn't be selling anything from your after tax accounts. Use the excess to buy equities in the after tax account.

For selling within the IRA, it doesn't really matter. Sell (and possibly buy) to maintain the total AA (after tax + IRA)
walkinwood is offline   Reply With Quote
Old 04-30-2016, 01:28 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: No fixed abode
Posts: 8,764
Obviously we're going to answer the question we want to answer, not the one you asked. You should know this by now.

I suspect that selling what's most overvalued (market timing) would be optimum, but I also suspect that in the long run it won't make that much difference. So if you enjoy rebalancing and trying to optimize your returns, go for it. Otherwise just do an across the board sale and don't worry about it.

Regarding Roth conversions, I agree that they don't buy you much at your age. However, there's still a gain for your heirs in inheriting a Roth instead of a tIRA. That might make some conversions worthwhile, although this late in the game it might not.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 04-30-2016, 01:44 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
Quote:
Originally Posted by tmm99 View Post
There was a thread on withdrawal studies a while ago. You may find it interesting. Although studies were not perfect and may be a bit biased, withdrawing proportionately across all funds in the article didn't look bad at all.

http://www.early-retirement.org/foru...yet-81129.html
This guy's papers are right on point. His updated paper would put a CAPE based decision (with no re-balancing) a bit ahead of proportional but probably not enough to make me lean that way in my 80s -- proportional would be good enough then.

Quote:
Originally Posted by walkinwood View Post
You should approach this from an asset location standpoint.

Here's what I would do.

It would be more efficient to maintain all equity (or as much as possible)in after-tax accounts and the fixed income in the tax-deferred accounts. This will protect as much of the qualified dividends and cap gains distribution from being taxed as income as possible.

If RMDs are more than enough for expenses, you shouldn't be selling anything from your after tax accounts. Use the excess to buy equities in the after tax account.

For selling within the IRA, it doesn't really matter. Sell (and possibly buy) to maintain the total AA (after tax + IRA)
On the first two suggestions, I am already there, fully understand what you are recommending, and am on-board. On the last point, I am getting toward that conclusion, especially for my doddering years. That was the only thing I was really interested in when I posted.

Quote:
Originally Posted by harley View Post
Obviously we're going to answer the question we want to answer, not the one you asked. You should know this by now...
Yeh, that is what makes it fun. ...
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 04-30-2016, 05:08 PM   #27
Recycles dryer sheets
robertf57's Avatar
 
Join Date: Jun 2014
Posts: 337
This thread has touched on several issues, all of which impact the financial well-being of the retiree:

1) To answer the OP's original question, it makes no difference what you sell in the TD. Money is fungible. As long as you are maintaining a particular asset allocation by rebalancing at some interval, the only consideration is transaction cost(which should be trivial if you are on this forum.

2) you have decided that Roth conversions are not for you because you are in a high tax bracket. Ok.... Have you actually done the math on that? I-orp can be an eye-opener! And if it is a wash, my personal opinion is that tax rates will be rising. Choose accordingly.

3) RMDs are a separate reason to look at spending or converting the TD accounts above and beyond the tax rate issue. Make sure you have modeled RMD impacts as you age.

I think many people ( including me!) just look at the fact that they are currently in a high tax bracket and assume that Roth conversions are not for them. I was quite surprised when I actually reviewed the positive impact of moving money from TD accounts now into Roth.......




Sent from my iPad using Early Retirement Forum
robertf57 is offline   Reply With Quote
Old 05-01-2016, 05:28 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Quote:
Originally Posted by donheff View Post
I guess I am not expressing my question clearly. I have no question about what proportion to keep in equities or what accounts (TD vs taxable) to keep FI and equities. I just want to evaluate whether from a total return perspective when I make RMDs I need to consider whether to selectively pick sources or just proportionally liquidate.

Lets try another thought experiment. You have a $1,000,000 IRA with a 50/50 AA in VG total bonds and VG total stock indexes. You will need to do ~ $30,000 RMDs this coming year. Is it roughly a wash to let the financial institution make monthly 50/50 distributions from stocks and bonds with you doing periodic re-balances if needed or should you spend time evaluating market performance and picking which assets to tap at the end of the year?
In my case, I carry 1-2 years of cash so my monthly "paycheck" comes from that account and it gets replenished annually when I rebalance so it isn't an issue for me.

It seems to me that you have a few options.

1. Set up a proportional 50/50 autosell... easiest because you set it and forget it and just rebalance occasionally if things get out of whack.

2. Rebalance monthly when you do your withdrawal.. a bit labor intensive but you have the time since you are retired... once you get a process set up perhaps 10 minutes a month.

3. Take each month's withdrawal from the asset class that is overweight. Sort of in between 1 and 2.

If I were in your shoes, I would do 1, but that is because I'm lazy.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 05-02-2016, 08:22 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
Quote:
Originally Posted by robertf57 View Post
trivial if you are on this forum.

2) you have decided that Roth conversions are not for you because you are in a high tax bracket. Ok.... Have you actually done the math on that? I-orp can be an eye-opener! And if it is a wash, my personal opinion is that tax rates will be rising. Choose accordingly.
I am in the 28% bracket. I-orp recommends that I make some massive Roth conversions to gain a little theoretical spending long term (about 2% more per year). This would entail some big tax expenditures in the near term. I am not comfortable with that.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 05-02-2016, 06:53 PM   #30
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
Quote:
Originally Posted by donheff View Post
I am in the 28% bracket. I-orp recommends that I make some massive Roth conversions to gain a little theoretical spending long term (about 2% more per year). This would entail some big tax expenditures in the near term. I am not comfortable with that.
+1 I was in the same situation. I did not have after tax money to pay the taxes. I would have been pulling money out to pay the taxes and then paying taxes on the money pulled out to pay the taxes. It did not make sense to me. I'll just leave my money in the tax deferred accounts and be happy with the gains on the money I would pay in taxes.
Hermit is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Balancing withdrawal sources Chuckanut FIRE and Money 31 05-09-2012 06:21 PM
10 biggest sources of retirement income easysurfer FIRE and Money 17 05-16-2010 03:54 AM
Sources of retirement income FIREd FIRE and Money 64 06-08-2009 02:45 PM
Income sources RonBoyd FIRE and Money 9 02-28-2009 06:57 PM
Sources of Job Stress Jay_Gatsby Young Dreamers 2 08-04-2005 08:26 AM

» Quick Links

 
All times are GMT -6. The time now is 12:12 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.