Here's what I do....
I also thought about this before retirement, when distributions and cap/gains were reinvested automatically.
While everybody has a different "mix" (different AA, taxable vs. non-tax, etc.) I'll just comment on what I actually did for this years income (I retired early '07).
First of all, I have another 9+ years to SS. My income comes from two primary sources, an SPIA (oh no
) and my IRA's (all tax advantaged, meaning that I pay the full tax on withdrawls).
This past December (being an "up year
), I "refunded" my "cash bucket" to my target, which is three years of gross income. Two years are kept within a MM IRA (which defers taxes) and one year in a taxable account (taxes are paid, in December). This keeps me from selling in a down market (as we are having now).
As another person stated, most/all distributions are done in December (with smaller "adjustments" in another part of the year). This allows me to fund my "cash bucket" and also re-adjust to my stated AA (currently 60/40, which the cash bucket falls within the 40%) once a year, all at the same time.
While I understand those who "cash in" their gains/distributions (especially in the case of taxable accounts, who can get a lower tax rate on these gains, which I cannot), I find that this "process" works, for me.
What you should do? Don't know - don't care. As long as it works for you, that's all that counts
...
- Ron