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Tools for drawdown strategies
Old 06-07-2019, 03:34 AM   #1
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Tools for drawdown strategies

I found this Kiplinger article useful for sorting out the tools currently available for drawdown strategies:

How to Draw a Steady Portfolio Paycheck in Retirement

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Firms rolling out new drawdown services in recent years include United Income and Personal Capital, which charge asset-based fees, and Income Strategy, which charges a flat monthly fee for software subscriptions or an asset-based fee for an advice package. Some established robo-advisers such as Vanguard Personal Advisor Services also offer drawdown strategies.

Can such services deliver on their promises of personalized, tax-efficient drawdown strategies?
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Old 06-07-2019, 05:40 AM   #2
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When it comes to the most tax-efficient way to tap your accounts, the conventional wisdom is to draw from taxable accounts first, then tax-deferred, keeping Roth accounts for last. But a different approach will work better for most middle-income retirees, Meyer says. If you retire at 65 and plan to delay Social Security until age 70, he says, consider tapping tax-deferred accounts first. By drawing on those 401(k)s and IRAs, you whittle down the taxable RMDs that kick in after age 70Ĺ—which can in turn minimize taxes on your Social Security benefits.
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Old 06-07-2019, 05:54 AM   #3
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Just retired at 60.5 years old with two pensions; will take social security at 62. The pension income alone puts us above the 85% taxable amount for social security. And the combination of pensions and social security will, with the standard deduction, put us at the bottom of the 22% marginal tax bracket. We currently spend less than the combination of pensions plus social security.

My plan is to Roth convert from my regular IRA every year up to the top of the 22% bracket in the hopes of avoiding the RMD tax torpedo. If we want to splurge on our spending, we'll draw first from taxable, then from the Roth.

Next year, before I start social security, we'll only be in the 12% marginal bracket. So I intend to realize some capital gains in my taxable account to take advantage of the 0% rate on them.
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Old 06-07-2019, 06:02 AM   #4
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Is there a reason that you are starting SS at 62 rather than deferring and taking advantage of the 12% tax bracket to do tax-deferred withdrawals or Roth conversions for 4-8 years (62 to 66 or 70)?
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Old 06-07-2019, 06:09 AM   #5
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These sound like gimmicks to garner fees. If you need a service to manage withdrawals you probably already use an advisor to manage your portfolio. I would certainly hope withdrawal advice is already part of the FA package.
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Old 06-07-2019, 07:38 AM   #6
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Is there a reason that you are starting SS at 62 rather than deferring and taking advantage of the 12% tax bracket to do tax-deferred withdrawals or Roth conversions for 4-8 years (62 to 66 or 70)?
Yes, there is. The young wife was a schoolteacher for 30 years, so she is not eligible for social security on her own record. (in CT, teachers don't contribute to SS). She also is not eligible to receive a spousal benefit or a survivor benefit due to the governmental pension offset (GPO). It is very likely that I will predecease her, being both older and male. When that happens, my social security income goes away completely. For that reason, it is more advantageous to support our living expenses now with my social security and preserve more of our portfolio for her use after I die.
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Old 06-07-2019, 07:55 AM   #7
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Got it... that makes sense. I figured that there was a reason.
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Old 06-07-2019, 08:33 AM   #8
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Originally Posted by Gumby View Post
Just retired at 60.5 years old with two pensions; will take social security at 62. The pension income alone puts us above the 85% taxable amount for social security. And the combination of pensions and social security will, with the standard deduction, put us at the bottom of the 22% marginal tax bracket. We currently spend less than the combination of pensions plus social security.

My plan is to Roth convert from my regular IRA every year up to the top of the 22% bracket in the hopes of avoiding the RMD tax torpedo. If we want to splurge on our spending, we'll draw first from taxable, then from the Roth.

Next year, before I start social security, we'll only be in the 12% marginal bracket. So I intend to realize some capital gains in my taxable account to take advantage of the 0% rate on them.


How do I file this away for future reference? Save it as a Word doc? Try to find it on this site maybe...(Although the search function here is horrendous).

This is going to be our exact plan. Thanks for sharing.
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Old 06-07-2019, 09:23 AM   #9
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How do I file this away for future reference? Save it as a Word doc? Try to find it on this site maybe...(Although the search function here is horrendous).
What's wrong with using a bookmark so you can find it easily in the future?
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Old 06-07-2019, 10:18 AM   #10
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Originally Posted by TDub View Post
How do I file this away for future reference? Save it as a Word doc? Try to find it on this site maybe...(Although the search function here is horrendous).

This is going to be our exact plan. Thanks for sharing.

I'm using Windows 10, just highlight the particular text you want to capture, and copy it to the clipboard, and paste it into a document.
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Old 06-07-2019, 12:37 PM   #11
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How do I file this away for future reference? Save it as a Word doc? Try to find it on this site maybe...(Although the search function here is horrendous).

This is going to be our exact plan. Thanks for sharing.
Click the Quote button. Select all. Copy. Paste to your spreadsheet that keeps all of your guidance nuggets.
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Tools for drawdown strategies
Old 06-07-2019, 02:48 PM   #12
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Tools for drawdown strategies

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Originally Posted by REWahoo View Post
What's wrong with using a bookmark so you can find it easily in the future?


I donít see this option on the app on my iPhone. Iíll check out the full site on my laptop for this feature. Thank you!

ETA: Youíre referring to an internet browser bookmark I now realize. Yeah that would work well.

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Click the Quote button. Select all. Copy. Paste to your spreadsheet that keeps all of your guidance nuggets.


Time to create such a spreadsheet
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Old 06-07-2019, 02:59 PM   #13
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I just took 40 grand from the IRA. I agree with the "draw down" the tax deferred and plan to continue.
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Old 06-07-2019, 04:48 PM   #14
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Originally Posted by Gumby View Post
Just retired at 60.5 years old with two pensions; will take social security at 62. The pension income alone puts us above the 85% taxable amount for social security. And the combination of pensions and social security will, with the standard deduction, put us at the bottom of the 22% marginal tax bracket. We currently spend less than the combination of pensions plus social security.

My plan is to Roth convert from my regular IRA every year up to the top of the 22% bracket in the hopes of avoiding the RMD tax torpedo. If we want to splurge on our spending, we'll draw first from taxable, then from the Roth.

Next year, before I start social security, we'll only be in the 12% marginal bracket. So I intend to realize some capital gains in my taxable account to take advantage of the 0% rate on them.


Do you have any constraints related to healthcare? I would love to convert more every year to Roth, but need to keep income at around 60k/yr to optimize subsidies with ACA.
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Old 06-07-2019, 07:17 PM   #15
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Do you have any constraints related to healthcare? I would love to convert more every year to Roth, but need to keep income at around 60k/yr to optimize subsidies with ACA.
No, I have retiree health care for both of us from my former employer.
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Old 06-07-2019, 10:26 PM   #16
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My drawdown strategy is to:

- constrain my taxable income while I'm on the ACA to get subsidies.
- withdraw from after-tax accounts to live on.
- withdraw what I can each year from my IRA to convert to Roth, while keeping my taxable income at the constrained level.
- Once I'm on Medicare do larger conversions from IRA to Roth


Doing the above requires that I keep track of all income each year that I'm on the ACA, including tracking all investment income/divs/interest/cap gains so I'll know *if* I can convert some IRA to Roth at the end of the year.

I've had to really nerd-out on tax law, get into the details of what constitutes MAGI vs AGI and look at a 1040 statement in greater detail than I ever wanted to construct my spreadsheet with appropriate categories.
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Old 06-08-2019, 07:28 AM   #17
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My drawdown strategy is to:

- constrain my taxable income while I'm on the ACA to get subsidies.
- withdraw from after-tax accounts to live on.
- withdraw what I can each year from my IRA to convert to Roth, while keeping my taxable income at the constrained level.
- Once I'm on Medicare do larger conversions from IRA to Roth


Doing the above requires that I keep track of all income each year that I'm on the ACA, including tracking all investment income/divs/interest/cap gains so I'll know *if* I can convert some IRA to Roth at the end of the year.

I've had to really nerd-out on tax law, get into the details of what constitutes MAGI vs AGI and look at a 1040 statement in greater detail than I ever wanted to construct my spreadsheet with appropriate categories.
Had I to do it over again, I might have paid the full ACA costs rather than focus on getting the subsidy. That would have allowed me to Roth convert more thus reducing or even eliminating the RMD's that will hit. RMD's may bump you into the next tax bracket. IRMAA for Part B and Part D . One year of ACA subsidy was, very roughly, equivalent to one year RMD's additional tax in the next tax bracket. You might want to look into that and see if it makes sense for you.

Whoever knew that planning/managing retirement (early or not) was such a meandering path of financial choices. I guess these are good problems to have. It sure beats the alternatives. I never thought that I would be in such a good place.
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Old 06-08-2019, 07:32 AM   #18
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My drawdown strategy is to:

- constrain my taxable income while I'm on the ACA to get subsidies.
- withdraw from after-tax accounts to live on.
- withdraw what I can each year from my IRA to convert to Roth, while keeping my taxable income at the constrained level.
- Once I'm on Medicare do larger conversions from IRA to Roth


Doing the above requires that I keep track of all income each year that I'm on the ACA, including tracking all investment income/divs/interest/cap gains so I'll know *if* I can convert some IRA to Roth at the end of the year.
This has been exactly what I've been doing. I'm now at age 63 and wife at 61. We are now close to depleting the after-tax component and rely on IRA's for income. So at this point I'm very limited to converting to Roths.

Additionally, if I understand things correctly, we will need to maintain the ACA income constraints until she turns 65 for Medicare. This will then limit the amount of time further for Roth conversions until 70.5 for me, since I can't do increased Roth conversions until I'm 67.
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Old 06-08-2019, 07:39 AM   #19
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Had I to do it over again, I might have paid the full ACA costs rather than focus on getting the subsidy. That would have allowed me to Roth convert more thus reducing or even eliminating the RMD's that will hit. RMD's may bump you into the next tax bracket. IRMAA for Part B and Part D . One year of ACA subsidy was, very roughly, equivalent to one year RMD's additional tax in the next tax bracket. You might want to look into that and see if it makes sense for you.

Whoever knew that planning/managing retirement (early or not) was such a meandering path of financial choices. I guess these are good problems to have. It sure beats the alternatives. I never thought that I would be in such a good place.

This is something I need to look at closely. I don't think we will hit IRMAA, but the RMD's will most likely kick us into another bracket. So that analysis of what that cost is then vs now is something I should look at.
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Old 06-09-2019, 11:21 AM   #20
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I've run the numbers through I-ORP, which includes the IRMAA estimates, and I'm comfortable with my current strategy for these next few years. Try as I might there's no way to avoid taxes altogether.
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