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Staggered Retirements/Portfolio draws
Old 04-14-2015, 12:40 PM   #1
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Staggered Retirements/Portfolio draws

I will retire pretty much right on my 55th birthday, and my wife will continue to work for 3-4 more years. The whole plan looks pretty good now, and is more or less based on the fact that we will not downsize anything in the near term. We are assuming our expenses stay what they are now, plus some inflation on the non fixed stuff. But I am not sure how to weather this single income period.

We presently sock away about 33% of our combined income. One thought is to live on her salary, stop saving the 33% and be in a lower tax bracket and make ends meet without touching the portfolio until she retires.

Another thought, live off one salary, continue to save (10-20%) and pull from the portfolio to make up the shortfall.

One thing not getting much thought is cutting back. Other than my reduced commute/gas/lunches at work expenses, we don't expect much to change in the way we live. We enjoy our travel and dining out and don't see giving that up in early retirement.

Thoughts? The fiscally conservative part of me wants to not touch the portfolio, let it grow until we HAVE to pull from it and make ends meet until she retires somehow. But the other spoiled side of me doesn't want the stress of having to worry about money month to month.
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Old 04-14-2015, 12:52 PM   #2
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Suggest giving one of your options a trial run and see how stressful it is. You can always switch to the other option, correct?
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Old 04-14-2015, 12:58 PM   #3
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"Another thought, live off one salary, continue to save (10-20%) and pull from the portfolio to make up the shortfall."

Wouldn't this just be taking out of the left pocket and putting it in the right pocket?
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Old 04-14-2015, 01:15 PM   #4
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Originally Posted by mystang52 View Post
"Another thought, live off one salary, continue to save (10-20%) and pull from the portfolio to make up the shortfall."

Wouldn't this just be taking out of the left pocket and putting it in the right pocket?
yeah and this is probably a bad idea since you already paid tax on salary and you are likely to pay capital gain on the portfolio withdrawal again. Should simply spend the salary amount first and bridge the gap from portfolio if salary is not enough to cover the spending.
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Old 04-14-2015, 01:17 PM   #5
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Originally Posted by mystang52 View Post
"Another thought, live off one salary, continue to save (10-20%) and pull from the portfolio to make up the shortfall."

Wouldn't this just be taking out of the left pocket and putting it in the right pocket?
+1

Maybe you're thinking you would withdraw from your IRA while she contributes to her 401k? Maybe that makes some sense in some circumstances, but they don't pop into my head right now.

Maybe a tax angle? Could you be spending taxable account money while she puts money into a tax deferred? That could make sense, depending on tax brackets.
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Old 04-14-2015, 01:31 PM   #6
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Are all of the investments in tax deferred accounts, or is some of it after-tax? Depending on your tax bracket, it might be advantageous to keep investing 10-20% into a tax-deferred account like a 401(k), but then pull some money out of an after-tax account, if you have one.

For instance, if you're in the 25% bracket, you get a tax savings of 25% on that 10-20% you're socking away into a 401(k). And if you pull the other money out from an after-tax account, and it's long-term capital gains/qualified distributions, they would be taxed at 15%.

I might be missing something, though.
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Old 04-14-2015, 01:38 PM   #7
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Originally Posted by mystang52 View Post
"Another thought, live off one salary, continue to save (10-20%) and pull from the portfolio to make up the shortfall."

Wouldn't this just be taking out of the left pocket and putting it in the right pocket?
Yeah. Duh. Didn't think that through much did I?
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Old 04-14-2015, 01:46 PM   #8
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My family is in the same situation - I'm retired and DW is still working. Our strategy is to continue to max out her contributions to her tax deferred account while taking distributions from my tax deferred account. At first glance this seems rather pointless, but the advantage to us is that I'm quite a bit older. My RMDs will start significantly sooner than hers, so it is a net advantage to us to draw down my account while hers is still building. It allows us to keep more money in tax deferred accounts for more years than if we were spending all of her paycheck while leaving my tax deferred money alone.
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