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Younger Seniors Burning Thru IRAs
Old 05-16-2013, 11:30 AM   #1
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Younger Seniors Burning Thru IRAs

Younger Seniors Are Burning Up Their IRAs - Businessweek

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The Employee Benefit Research Institute, a nonprofit research group, said May 15 that 48 percent of people who were aged 61 to 70 and in the bottom half of the income distribution withdrew money from their IRAs annually during the period studied (2002-10). Even in the top quarter of incomes, 29 percent of people aged 61 to 70 annually pulled money out of their IRAs, EBRI said.

The sizes of the withdrawals were substantial, too, ranging from 12 percent of funds for young seniors in the top quarter of incomes to 17 percent for those in the bottom quarter.
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Old 05-16-2013, 11:38 AM   #2
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The article does nothing to put the IRA withdrawals in context, and correct me if I'm wrong, but aren't you supposed to spend your IRA in retirement?

If you are spending the IRA to put SS off to age 70 it's a good thing. Maybe those seniors want to reduce their RMDs. The level of IRA withdrawal might be troubling if it's greater than 4% (sorry now that's 3%) and it's all being spent, but we need more detail in the article.
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Old 05-16-2013, 01:34 PM   #3
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And maybe they are converting to Roths.
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Old 05-16-2013, 01:34 PM   #4
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Didn't red the article but wonder if this includes transfers to Roths? we convert a small amount each yeear, also just drawing down the IRAs at 62 & 65 now and investing what is not spent in taxable accounts thereby reducing future RMA impact.
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Old 05-16-2013, 01:50 PM   #5
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It doesn't sound like they are converting to Roths, since the article says that some of the 70-80 crowd are taking their RMDs and investing what they don't need to spend elsewhere. That analysis and the absence of such a remark for the 60-70 yr old crowd implies they are spending, not converting, but one can't be certain.

I do agree with nun, that some may be spending more out of their IRA early and waiting until 70 to collect SSA, at which time they'll reduce the IRA draw.

The article leads with
Quote:
The money in your IRA is supposed to last a lifetime
but the reality is that you just need money to last a lifetime; it doesn't have to be your IRA money, and you don't have to draw it down evenly.
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Old 05-16-2013, 02:33 PM   #6
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Quote:
Originally Posted by RunningBum
It doesn't sound like they are converting to Roths, since the article says that some of the 70-80 crowd are taking their RMDs and investing what they don't need to spend elsewhere. That analysis and the absence of such a remark for the 60-70 yr old crowd implies they are spending, not converting, but one can't be certain.

I do agree with nun, that some may be spending more out of their IRA early and waiting until 70 to collect SSA, at which time they'll reduce the IRA draw.

The article leads with

but the reality is that you just need money to last a lifetime; it doesn't have to be your IRA money, and you don't have to draw it down evenly.
People, on this forum certainly have a plan on effective use of their retirement accounts in conjunction with SS. But based on my cynical view, I doubt the public at large is so much. SS office says 41% of people draw it immediately at 62. I wouldn't be surprised if there isn't a significant amount of people drawing early and spending down at same time. Anybody I ever talk to about withdrawal allocation and 3-4% portfolio withdrawal rates don't understand and can't pay attention long enough to understand. I imagine many of them will just spend until it's gone, then make do with the SS they have, with a lower lifestyle.
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Old 05-16-2013, 02:36 PM   #7
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Quote:
Originally Posted by RunningBum View Post
It doesn't sound like they are converting to Roths, since the article says that some of the 70-80 crowd are taking their RMDs and investing what they don't need to spend elsewhere. That analysis and the absence of such a remark for the 60-70 yr old crowd implies they are spending, not converting, but one can't be certain.

I do agree with nun, that some may be spending more out of their IRA early and waiting until 70 to collect SSA, at which time they'll reduce the IRA draw.

The article leads with

but the reality is that you just need money to last a lifetime; it doesn't have to be your IRA money, and you don't have to draw it down evenly.

I plan to draw down my IRA/401 first when I retire.... I think that the taxes paid on this amount when 'younger' will be made up for by lower taxes when starting to get SS and having to pay taxes on that amount....

I also want to keep my ROTHs growing as much as I can....
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Old 05-16-2013, 05:18 PM   #8
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I'm pretty confidant that a lot of people take money from IRAs a a rate that they can't sustain for a lifetime. That's just the way some people are.

But, others take "a lot" as part of a plan. For example, we've done Roth conversions, and we're deferring SS and spending IRA instead. Some people intentionally spend extra in the early years of retirement when they are still healthy.

It takes more detail to figure out how many of these people are really setting themselves up for serious trouble, and how many are pursuing some rationale strategy. There are so many variables that I don't see 12% and 17% as particularly scary averages.
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Old 05-16-2013, 05:28 PM   #9
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Originally Posted by Independent View Post
It takes more detail to figure out how many of these people are really setting themselves up for serious trouble, and how many are pursuing some rationale strategy. There are so many variables that I don't see 12% and 17% as particularly scary averages.
MY ER plan calls for me to withdraw 14% annually from my 457 plan from age 52 and it will probably be empty by the time I'm 61 or 62. According to the article I'm in deep trouble. Then I'll withdraw from my IRA at around 5% to do ROTHs and defer SS until age 70.
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Old 05-16-2013, 06:37 PM   #10
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I say to those people spending down their IRA's:

THANK YOU!
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