Newbie-Withdraw Strategy for 2018. Annual, monthly?

[GravitySucks]

Good point. I have not completely figured out my tax strategy. Do I pay as I go or just wait till Turbo Tax lets me know the damage in April of the following year?

Pay quarterly or face State and Fed fines!

 

[Katsmeow]

Supernova72 - When DH retired his 401k had similar rules to what you mentioned. He could do one withdrawal of any amount he wanted but after that he had to set up a specified amount that couldn't be changed.

So what he did was move his 401k into an IRA and he would withdraw from that as he chose (not that some states do not give the same protections to an IRA as a 401k so that might be a reason not to do that in those states).

Typically we have certain higher expenses in January than the rest of the year so the January withdrawal is higher than other. We generally then plan for a certain amount to be withdrawn monthly for the rest of the year.

In practice, we vary it. So, if we are "ahead" on money and have built up a lot of cash in the checking account then we will skip the next month's withdrawal. On the other hand, if there is some major expense that occurs sooner in the year than we anticipated (or wasn't anticipated at all) and we don't have enough built up to cover it, then we will do a higher withdrawal.

Basically I like to have about 2 months expenses in cash and do withdrawals as necessary to accomplish that.

 

[supernova72]

Pay quarterly or face State and Fed fines!

That's right---I don't have a paycheck with regular withholding anymore! Thanks!

 

[Katsmeow]

That's right---I don't have a paycheck with regular withholding anymore! Thanks!

Well... unless there has been some recent change...you don't really have to worry about it if you are taking IRA withdrawals and withholding taxes from the withdrawals. Withdrawals from IRA distributions are treated as paid evenly throughout the year even if made in a large payment toward the end of the year.

https://www.kiplinger.com/article/retirement/T045-C000-S004-withhold-taxes-from-your-rmds.html

We do most of our tax payments from the IRA so there is no need to file estimated taxes.

 

[supernova72]

Well... unless there has been some recent change...you don't really have to worry about it if you are taking IRA withdrawals and withholding taxes from the withdrawals. Withdrawals from IRA distributions are treated as paid evenly throughout the year even if made in a large payment toward the end of the year.

https://www.kiplinger.com/article/retirement/T045-C000-S004-withhold-taxes-from-your-rmds.html

We do most of our tax payments from the IRA so there is no need to file estimated taxes.

OP here. For me I left my funds in my 401K vs roll to IRA since I'm not 59.5 and would need to tap those funds early. Our plan lets us do that without the 10% hit. But I can chose to have taxes withheld or not. Need to figure that out.

 

[rodi]

I do the quarterly withdrawal (from an inherited IRA with RMD requirements). That way I pay taxes each quarter. I withdrawal into my taxable account - and then do monthly transfers of after tax money to my checking account.

I don't see any reason to change the system since it makes sure taxes are covered quarterly.

 

[supernova72]

I do the quarterly withdrawal (from an inherited IRA with RMD requirements). That way I pay taxes each quarter. I withdrawal into my taxable account - and then do monthly transfers of after tax money to my checking account.

I don't see any reason to change the system since it makes sure taxes are covered quarterly.

I still like the idea of a regular income stream to cover known expenses like taxes (property and Fed). It would feel more like when I was working. Definitely in new territory on this. It would be nice to see the pension check and another $1k or so from the 401K on a monthly basis.

Sound like your plan is working well (quarterly, then monthly).

 

[kimcdougc]

After 3 years of retirement we are living off of a pension and after tax accounts. I do keep all that cash in a high interest mm account. I then transfer enough for the year into a high mm account that is attached to my checking account. I have enough transferred automatically monthly into my checking account to pay bills and live on.

I did do a Roth conversion this year in the IRA but managed to keep it in the 15% tax bracket. Will take this money from the Roth to replenish my high interest account when needed.

 

[supernova72]

After 3 years of retirement we are living off of a pension and after tax accounts. I do keep all that cash in a high interest mm account. I then transfer enough for the year into a high mm account that is attached to my checking account. I have enough transferred automatically monthly into my checking account to pay bills and live on.

I did do a Roth conversion this year in the IRA but managed to keep it in the 15% tax bracket. Will take this money from the Roth to replenish my high interest account when needed.

Great, Thanks. Sounds like you have a good plan on allocating funds for annual and then monthly expenses. As weird as it sounds I have 3 separate savings accounts. One for property taxes, one for vacations, one that was (post tense) for my one time severance in Ally.com which is now about gone. Cheers.

 

[supernova72]

I search the forum and at risk of this being discussed many times I'm going to throw it out there. So new in terms of withdraw strategy.

I'm 18 months into an ER due to Megacorp downsizing. Have posted here several times leading up to it and have really appreciated all the feedback.

The skinny: Starting in 2018 I'll need to tap in to my company 401K to supplement my expenses. I *retired* with a pension and medical that essentially covers my day to day expenses. What it won't cover is taxes (house and Fed), homeowners insurance, and vacations if I chose to travel next year.

For the past 18 months the above expenses were covered from an account that was my severance which has not dried up (5 trips---Whoa).

I'm 57 and might not go back to *work* and if I do it will be PT most likely.

IT project manager and Financial Analyst (cost accountant).

I have about $800K in my 401K. I would next to WD 2.8% in 2018 and 1.8% thereafter (big tax hit in 2018).

My question is do most folks do it in January and be done with it? Or do the pay themselves on the monthly or quarterly basis---or with WD as they need it. Apologize in advance if this is a repeat question. New territory for me. Cheers.

OP here; Circling back on some things I've found out about my 401K plan withdraw rules. If I take a monthly $ amount and stop it I can't re-start it again. Seems weird.

Even though I wanted a regular paycheck of sorts to supplement my pension, I'm now leaning towards doing a one time withdraw this month for all of 2018. They withhold 20% for taxes of course.

My plan is to dump that amount (about 2% of my 401K balance) into an Ally.com savings account and move money as needed for property taxes, quarterly fed taxes, vacations. Thanks for all the feedback. Much appreciated!!

 

[Sasset]

I am trying to figure out the withdrawal plan as well, so this has been very interesting. Good info! I don't need to withdraw this year, but need to figure it out for the future. I may do a roth conversion this year though, since I will have a very low income this year.