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Withdrawals when spouse has a different retirement year?
Old 08-22-2019, 09:18 AM   #1
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Withdrawals when spouse has a different retirement year?

Withdrawals when spouse has a different retirement year?

I am 62 and ready to shift gears, reinvent myself. I’ve spent much of the last 45 years working to get ahead, struggling to balance career and family and am now tired of the rat race.
• DW is 52 with four years left until a Federal COLA adjusted pension with health insurance.
• We both have significant retirement plans accumulated.
• Plans in my name can be withdrawn anytime.
• DW’s will be available in about seven years
• DW works part time.
• Two kids in the house ages 12 and 15.
• No debts.
• My social security looks good. The tax-free social security dependent benefits for 5+ years sounds even better and should fund most of the remaining college savings needs.
So how much should I withdraw?
The cautious /conservative side of me says: 4% from just my plans. That amounts to a composite 2.25% of both plans combined and DW would continue to add to hers for the next 4 years. This would lower our monthly cash flow.
The abundance side of me thinks we probably have enough and wants to pull 7 % from my plans. That amounts to a composite 4%. DW could just put in enough to get the employer match. This would free up $ dollars for home projects and travel with the kids while we can.
At some point we are doing a little trading between retirement plans depending on contributions and withdrawals.
I am looking for advice from those who have been through this transition.

Thanks,
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Old 09-03-2019, 01:56 PM   #2
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I'm having a similar dilemma. I'm out of BigSoftware as of June 17. Wife still works for a small salary plus benefits. I'm on COBRA for the next 18 months. Kids are gone, house is paid for. No debt.

What I'm doing is looking at what do I 'need' to withdraw to maintain current life style. And how long will it last? FIRECalc has been a good tool.

I've also built my own s/s that allows me to adjust the annual growth/income from my portfolio, and then subtract withdrawals to provide an available to spend number. This is compared to anticipated monthly spend (currently equal to past three year average) to determine if I'm in the red or green, on monthly basis. Additionally, I've created a zero based budget with some pretty high numbers, so see worst case spend. I'm focusing on 1) maintaining current lifestyle/spend and 2) not running out of money in the process. 3) answering the question: "Do I nee do go back to work?"
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Old 09-03-2019, 02:02 PM   #3
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Quote:
Originally Posted by BigJ View Post
• W is 52 with four years left until a Federal COLA adjusted pension with health insurance.
• W’s will be available in about seven years

So how much should I withdraw?
If W retires after age 55, all the 401k-like funds are available without penalty upon retirement.

Have you looked at doing Roth IRA conversions?
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Old 09-05-2019, 08:16 PM   #4
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I take an amount equal to the difference between my pension and my take home pay when working (with SS and 401k deduction). So I have the same spendable income I had while working and it amounts to < 2% of our combined retirement portfolio. No SS yet.
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Old 09-07-2019, 06:12 AM   #5
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Your plan looks very front loaded. Your DW could live for another 40-45 years and in the normal course of events, being ten years older, you would be expected to pass first.

What are your expenses? You do mention college (is that State Tuition or Harvard Medical School). Is your house paid off? What is the plan for long term care for you? for her?

Will your DW be receiving SS? Is hers reduced due to be a federal employee? You mention her working part time and retiring at 55, which may indicate a lower SS and smaller pension. Are each of you getting 100% joint and survivor on the other's pension? This is all unclear. It is great that you both will be covered under her health insurance which is a huge benefit.

Typically it is recommended that the higher earner delay SS however, with you having a 12 year old, I understand why you want to claim earlier, however you should take into consideration the ongoing reduction in benefits.

Not to say you aren't in a position to retire, but I don't see the long term plan carefully mapped out. With a young wife, I don't see 4% as overly cautious at all. I also would not reduce her contributions to her retirement plan. You should be able to survive just fine on a somewhat smaller cash flow, as you no longer have work associated expenses, have time to shop for bargains, and a reduced cash flow would correlate to a reduced tax rate and/or allow for Roth conversions.
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Old 09-07-2019, 09:59 AM   #6
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My wife is still working. I have not worked in quite a number of years. We treat our assets as one single portfolio. We withdraw from assets as needed to meet our expenses in the most tax efficient way as possible. Does that sound too simple?

To make it complicated: My wife is able to have most of her paycheck go to her 401(k), HSA, and health insurance premiums. We also use her compensation to be eligible for Roth IRA contributions which we make. What that means is that our actual taxable income income is low enough that we hardly pay any income taxes despite having 6-figure expenses.

Many retirees with younger spouses decide to wait to age 70 to claim their own SS benefits because when they die, their surviving spouse will have more SS for their living expenses.

I don't think a composite 4% withdrawal rate works in today's financial environment unless you both intend to die sooner than 30 years from now. So if your 7% (including taxes!) is a composite 4%, then I would suggest cutting back to a composite 3.5% at most.

What are you going to do with all that money anyways?
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Old 09-07-2019, 01:17 PM   #7
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I don't think a composite 4% withdrawal rate works in today's financial environment unless you both intend to die sooner than 30 years from now. So if your 7% (including taxes!) is a composite 4%, then I would suggest cutting back to a composite 3.5% at most.
My planning figure, considering a significant chance of living 30 years (until 90), is 3.3%. While I would go a few tenths higher if need be, I wouldn't be comfortable at 4% in this low-interest rate environment.
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Old 09-08-2019, 02:50 PM   #8
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I am and would. 4% has always been for a worst case scenario and we are no where near worst case nowadays. But that is easy for me to say because I don’t need 4% to live and am taking it from tax deferred to take advantage of current tax rates so I just end up increasing Roth & after cash accounts. Maybe in 8 years at almost 70, I will sing a different tune. But then again, 30 more years at age 70 is unlikely, so I may just be blowing more dough.
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