Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Taking more out of 401K's while waiting for SS
Old 02-12-2016, 01:27 PM   #1
Full time employment: Posting here.
dtbach's Avatar
Join Date: Apr 2011
Location: Madison
Posts: 640
Taking more out of 401K's while waiting for SS

I am taking a WR of about 3.4% from my entire portfolio so I feel that is OK (I'm 63). But almost all of it is from my 401k's which means I'm taking a WR of about 8% from them (I'm not touching our ROTH money or non-401K investments). My reasoning is that for the next 5 years I have a mortgage and kid's college that I can use for deductions against this "ordinary income" stream.

Also, why not wait until 70 to get an income stream that is not dependent on the market and is COLA'd. And in addition my wife can take if necessary. My other thought is that once I have to take my RMD's, might as well reduce the amount.

Any thoughts on this strategy?

Wild Bill shoulda taken more out of his IRA when he could have. . . .
dtbach 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 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 02-12-2016, 01:51 PM   #2
W2R's Avatar
Join Date: Jan 2007
Location: New Orleans
Posts: 34,830
I don't have a 401K, but I have the TSP which is similar to a 401K.

During my retirement thus far I have been taking a bigger percentage from the TSP than from my overall portfolio. This was with the idea of slightly lightening my heavier tax load later in life (taking more TSP income early and less later on after I had other taxable income streams such as SS and RMDs). So, I guess my thoughts on this are similar to yours.

"You can never cross the ocean until you have the courage to lose sight of the shore." - - - C. Columbus
W2R is offline   Reply With Quote
Old 02-12-2016, 02:27 PM   #3
ziggy29's Avatar
Join Date: Oct 2005
Location: Texas
Posts: 15,419
I think you are fine with an overall 3.4% withdrawal rate. Especially if you aren't taking SS yet and can significantly reduce your WR when you start it.
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
ziggy29 is offline   Reply With Quote
Old 02-13-2016, 06:17 PM   #4
Thinks s/he gets paid by the post
Options's Avatar
Join Date: Jan 2008
Location: Los Angeles but not for long
Posts: 1,372
Are you currently working? If not, have you considered delaying SS until 70 while w/drawing from taxable and maximizing roth conversions until 70? This will help reduce/minimize the hit from the rmd's and ss "tax torpedo"? Wade Pfau refers to this process (as I'm sure others have) as tax bracket management (pay taxes now in a lower tax bracket in order to reduce being pushed into a higher tax bracket later).

I'm using this strategy and will stay in a very low tax bracket throughout retirement as a result (unless, of course, the PF really takes off, and in that case I'll be so pleased with the higher net worth I won't care about higher taxes). Annually, I'm roth converting 3 different funds up to the 15% tax bracket, then recharacterizing the two funds of lesser value. I intend to convert each January and recharacterize in December of each year.
"He who knows that enough is enough will always have enough."
40/60 AA; < 2.5% WR; Delaying SS until 70
ER Date: 5/15/15
Options is offline   Reply With Quote
Old 02-13-2016, 06:52 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
Join Date: May 2008
Location: Following the nice weather
Posts: 5,772
I just turned 60, so I can start taking from my tIRA now. I'm trying to decide whether to continue to live on after tax investments (a lot of which is cash), staying in the 15% bracket and doing Roth conversions to the top of it. The other alternative is starting withdrawing from the tIRA while staying in the 15% bracket. This would stop me from converting, but would allow me to leave my after tax money alone. And it would also make my RMDs after 70 smaller.

Since I put the money in the tIRA while I was in the 25% bracket, withdrawing at 15% is a savings, but I'm thinking that over time the Roth conversion would be the best option. Especially since I'm hoping not to have to draw on it, and to be able to leave it to DD as a tax advantaged inheritance.

But either way, I'm also waiting until 70 to start SS. It and RMDs will probably put us over the 15% bracket, so I guess I should maximize the conversions while I can.
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers
DW and I - FIREd at 50 (7/06), living off assets
harley is online now   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
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
While waiting for MichaelB Health and Early Retirement 48 10-25-2013 11:40 AM
Waiting period for 401k JohnDoe FIRE and Money 8 08-04-2011 09:28 AM
Contribute to 401k while taking FEIE? youngcoconut FIRE and Money 6 12-21-2010 11:42 AM
Stock Market Seems to Be Taking A Dive While ER.ORG Has Been On Other Assignments haha FIRE and Money 84 06-27-2008 01:56 PM


All times are GMT -6. The time now is 07:25 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.