Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Rules for Roth WD
Old 12-14-2018, 09:47 AM   #1
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
Rules for Roth WD

DH seems to think once you WD from Roth, you have to continue WD over a period of time. We are over 59 1/2, had our Roth's well over 5 years. Contributed as usual every year. I want to WD from Roth before our other portfolio funds for the tax advantage. That would get us 4-5 years living expenses tax free, including SS and pension.

Question: Are you forced to WD from Roth once you've WD a portion of it once?
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   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 12-14-2018, 09:49 AM   #2
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: 36,204
No, you can withdraw as much or as little as you want. Since you are over 59 1/2 and have had the account for over 5 years then all withdrawals are tax free and penalty free.

However, generally speaking, Roths should be the last account that you withdraw from. What other portfolio funds are you saving from withdrawal and why?
__________________
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 12-14-2018, 10:22 AM   #3
Full time employment: Posting here.
 
Join Date: Sep 2016
Location: Way up North
Posts: 561
+1

The typical situation for an early retiree is for it to be advantageous to do Roth conversions before RMD's and SS start. Not the other direction, by spending from Roth. Have you modeled your anticipated taxes out into your 70's to see what the eventual cost will be for some tax saving now ? Most situations are benefited by paying some tax early to moderate the eventual "tax torpedo" that many have waiting at RMD age.
bada bing is offline   Reply With Quote
Old 12-14-2018, 10:39 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,973
OP - Have you run the numbers in some tax software to be sure.

Since you are in IL , withdrawals from IRA/401K are not taxable in the State. So only Fed taxes should be a concern.

What will your taxes be at age 70 when you have to take RMD's ? Depending upon your IRA/401K balance and current income, you could possibly now start taking some from IRA and pay a low rate of tax, instead of waiting and paying a high rate of tax. ?
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 12-14-2018, 11:32 AM   #5
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 2,599
To answer the OP question.

You can withdraw once from a Roth and are not compelled to withdraw annually.

If you have a traditional IRA, once you reach age 70.5 years, you are required to take a minimum distribution annually. So take as frequently (or not) as you like from your Roth. Plan on taking annual distributions from your Traditional once you turn age 70 - or there are tax penalties.
- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 12-14-2018, 11:48 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 11,197
Agree with the posters. The only way I could see withdrawing from Roth before 70 yo is to supplement your income needs while managing your MAGI for ACA purposes, if you don't have supplemental cash.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 12-14-2018, 11:50 AM   #7
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 3,587
Note the rules for Roth IRA and Roth 401k withdrawals are a bit different.

OP, could you please confirm that the Roth you are talking about withdrawing from is a Roth IRA and not a Roth 401k?

One concrete point of difference is that once you reach age 70 1/2, you are indeed required to take RMDs from Roth 401ks.

-gauss
gauss is offline   Reply With Quote
Old 12-14-2018, 12:20 PM   #8
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
Quote:
Originally Posted by Dtail View Post
Agree with the posters. The only way I could see withdrawing from Roth before 70 yo is to supplement your income needs while managing your MAGI for ACA purposes, if you don't have supplemental cash.
Yes, the MAGI for ACA (if it's still there) is a concern. We are 61. If our cash doesn't last until 65, I think, the Roth is the way to go. We have outside I bonds paying 4% and I don't want to give that up. Just today, we got rid of some bond funds and bought 3.5% CD's within VG. Both are not Roth 401K.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 12-14-2018, 12:41 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,973
Quote:
Originally Posted by Rianne View Post
Yes, the MAGI for ACA (if it's still there) is a concern. We are 61. If our cash doesn't last until 65, I think, the Roth is the way to go. We have outside I bonds paying 4% and I don't want to give that up. Just today, we got rid of some bond funds and bought 3.5% CD's within VG. Both are not Roth 401K.
Ok, that totally explains the situation.
Note, that using the I bonds (in a few years perhaps) will lower your income the next year. Meaning an IRA withdrawal could be done.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 12-14-2018, 01:45 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,996
Quote:
Originally Posted by gauss View Post
Note the rules for Roth IRA and Roth 401k withdrawals are a bit different.

OP, could you please confirm that the Roth you are talking about withdrawing from is a Roth IRA and not a Roth 401k?

One concrete point of difference is that once you reach age 70 1/2, you are indeed required to take RMDs from Roth 401ks.

-gauss
Correct me if I'm wrong, Once you are no longer working most 401K Roths can be rolled over into a Roth IRA and 0 cost, thus eliminating the RMDs.
CRLLS is offline   Reply With Quote
Old 12-14-2018, 01:49 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,996
Quote:
Originally Posted by Rianne View Post
Yes, the MAGI for ACA (if it's still there) is a concern. We are 61. If our cash doesn't last until 65, I think, the Roth is the way to go. We have outside I bonds paying 4% and I don't want to give that up. Just today, we got rid of some bond funds and bought 3.5% CD's within VG. Both are not Roth 401K.
You could take out just enough $ from a pretax IRA or 401K to stay under the ACA limits and supplement that with some from the cash or Roth.
CRLLS is offline   Reply With Quote
Old 12-15-2018, 07:06 AM   #12
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: 11,313
I agree that for most people building up the Roth in these years is the better strategy, But for some the OP's proposal makes sense. DW and I were in that position for the last few years but didn't have the Roth to turn to. We maxed out the lowest tax brackets because of pension income and could have avoided CGs in taxable withdrawals if we could have turned to Roth withdrawals instead. When DW turns 70 RMDs will be quite a bit larger than we will need for expenses so there would be no reason to tap Roths late, The only value of the Roths would be to the heirs. I would rather cut taxes in our 60s saving a little bit early on when the opportunity existed.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 12-15-2018, 08:49 AM   #13
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
My Roth is down -8.6% at this point in time. No benefit to loss in a Roth. 50% stock funds and 50% international stocks. Our other 401K funds have considerable CG since we stopped investing in stock funds when Dow at 17,000. If things get worse, what's the point of Roth? Can't market time a Roth, has to be within specific dates so I picked what seemed good at the time.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 12-15-2018, 09:15 AM   #14
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: 36,204
Quote:
Originally Posted by Rianne View Post
.... Can't market time a Roth, has to be within specific dates so I picked what seemed good at the time.
Of course you can market time a Roth... you can just go between equities and cash/fixed income within the Roth.

So let's say have a Roth invested in equities and I am convinced that equities will go down... I sell equities in the Roth and hold cash/fixed income.... a year later I am convinced that equities will rise so I buy equities in the Roth.

BTW, I'm not recommending market timing at all... just pointing out that it can be done in a Roth.
__________________
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 12-15-2018, 09:37 AM   #15
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
Quote:
Originally Posted by pb4uski View Post
Of course you can market time a Roth... you can just go between equities and cash/fixed income within the Roth.

So let's say have a Roth invested in equities and I am convinced that equities will go down... I sell equities in the Roth and hold cash/fixed income.... a year later I am convinced that equities will rise so I buy equities in the Roth.

BTW, I'm not recommending market timing at all... just pointing out that it can be done in a Roth.
I hear you, these are trying times. If I sell now, I've lost 8% of my original contribution. If I'd gone into certain bond funds, lost also. I can wait this out and chance losing more or getting it back. I have a few years. Your conviction that equities will rise within the time frame I need them is positive thinking. I appreciate that.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 12-15-2018, 09:40 AM   #16
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: 36,204
Quote:
Originally Posted by Rianne View Post
... Your conviction that equities will rise within the time frame I need them is positive thinking. I appreciate that.
The "one year later" was an example, not an assertion.
__________________
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 12-15-2018, 03:56 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,973
Quote:
Originally Posted by Rianne View Post
My Roth is down -8.6% at this point in time. No benefit to loss in a Roth. 50% stock funds and 50% international stocks. Our other 401K funds have considerable CG since we stopped investing in stock funds when Dow at 17,000. If things get worse, what's the point of Roth? Can't market time a Roth, has to be within specific dates so I picked what seemed good at the time.
Surprising since you had it over 5 years ?
Or you mean it's down from the highest level it was at, but still is much higher than the amount of money you put into it, so you have not lost money.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 12-16-2018, 10:38 AM   #18
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
Quote:
Originally Posted by Sunset View Post
Surprising since you had it over 5 years ?
Or you mean it's down from the highest level it was at, but still is much higher than the amount of money you put into it, so you have not lost money.
I'm going by VG %. We've been with them since late 90's. So, I've added the max every year (OMG) I don't even know what year we started them. I think 1997, when they were offered. The overall gains are down 8.6%, but added and not WD. Overall since inception +4.6%, 1 year -8.6%
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne 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
Roth withdrawal rules LBrowning FIRE and Money 14 01-12-2018 05:59 PM
Roth rules wallygator69 FIRE and Money 26 12-21-2016 11:06 AM
New 401k rules for Roth IRA serie1926 FIRE and Money 2 11-29-2014 06:14 PM
converting IRA to Roth IRA based on new Roth Rules vs. 72t mbmmccoy FIRE and Money 27 09-28-2009 06:27 AM
To Roth or not to Roth, that is the question... cute fuzzy bunny FIRE and Money 8 03-02-2004 07:24 PM

» Quick Links

 
All times are GMT -6. The time now is 01:59 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.