I withdrawal from my retirement accounts monthly. Is there an advantage to withdrawing annually into a savings account and then drawing 1/12th each month into a checking account. It would seem to me to be more beneficial to do it monthly because the rest of the money has more time to build. Any thoughts?
Monthly or Annually
- Thread starter ripper1
- Start date
The problem with monthly withdrawal is having to sell on a schedule. Works OK when market is rising, but remember 2008. Would you want to be selling every month to fund your spending back then? I take 2 years of expenses, put 1 year in a CD and 1 year in savings. At the end of one year I draw another year. This way I have a 24 month window to pick when to sell. Allows me to ride out a down market.
RHLnFLA
Dryer sheet aficionado
- Joined
- Mar 6, 2007
- Messages
- 35
In October I do a confirming projected cash flow for November and December as well as a preliminary expected tax burden for the year. I then adjust my retirement distributions accordingly. With the annual disbursement you give up the flexibility to adjust if the need arises.
Again, back to 2008, IRA RMD's are based on the previous year's end of year value. So you probably want to have the RMD amount in something stable before the start of the new year, cash, short-term bonds, stable value fund.
If you're just selling off short-term stable assets, no problem withdrawing monthly.
If you're selling equities, you will on average do better waiting as long as possible (since the market rises on average). And you should be withdrawing enough times to make that average out to your favor. Just beware of commisions if you intend to make lots of small sales instead of one big one.
I'm nominally 100% equities, but I raise cash when my portfolio is ahead of projections and reinvest cash in bear markets. I have had a couple of times in the past where I have sold equity MF shares monthly (at zero cost) to meet expenses. That's probably how I'll continue once my current cash runs out, until RMD's hit or the economy looks to be heading one way or the other. I have to say that with the current economy I'm happy to play it safe and have excess cash on hand to either spend or reinvest.
If you're just selling off short-term stable assets, no problem withdrawing monthly.
If you're selling equities, you will on average do better waiting as long as possible (since the market rises on average). And you should be withdrawing enough times to make that average out to your favor. Just beware of commisions if you intend to make lots of small sales instead of one big one.
I'm nominally 100% equities, but I raise cash when my portfolio is ahead of projections and reinvest cash in bear markets. I have had a couple of times in the past where I have sold equity MF shares monthly (at zero cost) to meet expenses. That's probably how I'll continue once my current cash runs out, until RMD's hit or the economy looks to be heading one way or the other. I have to say that with the current economy I'm happy to play it safe and have excess cash on hand to either spend or reinvest.
I'm only 2 years into ER and haven't had to sell equities so far. Quarterly dividends have made up ~70% of withdrawal needs, with top ups from cash (maturing CD's so far, and for 2012).
Once I start selling equities I'm not sure what the best strategy will be for us. I only have a limited number of mutual funds and won't have access to IRA's for 3 years yet, and have enough in cash & short term bond funds to easily carry us through to them.
Once I start selling equities I'm not sure what the best strategy will be for us. I only have a limited number of mutual funds and won't have access to IRA's for 3 years yet, and have enough in cash & short term bond funds to easily carry us through to them.
Ed_The_Gypsy
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You are asking me?
I figure to take it once a year and husband the distribution over 12 months, but sh*t, I might want to buy that Viper...or a heart transplant.
Man plans, God laughs.
I figure to take it once a year and husband the distribution over 12 months, but sh*t, I might want to buy that Viper...or a heart transplant.
Man plans, God laughs.
rescueme
Thinks s/he gets paid by the post
No pension, pre-SS, and currently withdraw monthly from a taxed deferred (e.g. IRA) MM account which receives almost no income; in fact, if I withdrew from a taxable or deferred, the short-term yield would be the same.
The only reason I do this is simply that I was paid (along with paying taxes - from my paycheck) monthly, before retirement.
I could withdraw on any cycle (daily, weekly, monthly, annually, whatever) but it would really make no difference IMHO. However, bening that I'm anal in nature as related to budget/taxes, these do change over a period of time, without my input for change.
Utility costs (I'm on a budget plan) change several times per year (up/down). RE taxes change (usually increase) various times a year, depending on the tax. Other budget items may change (such as increased costs for an elderly dog - as an example) over a period of time.
That means that the monthly budget changes over the year, and the amount withdrawn (along with taxes due) also change over time (did I mention I'm anal on budgets
). I withdraw only what I need to cover expenses for the next month.
Additonally, since DW is yet to retire, our tax situation is not the same year to year. During Jan through Nov, I also pay FIT on my withdrawls. In late November, I'll receive my current year's initial release of Turbo Tax and plug in the numbers to do a "guesstimate" of FIT due, with the taxes already paid by DW/me during the year. For the last four years of retirement, I have skipped having FIT tax taken from my December withdrawl since we have already paid enough taxes (along with DW's anticipated FIT for December yet to be paid) to ensure a $0 FIT refund/due.
BTW, I only pay FIT. No local/state income taxes are due on retirement withdrawls (if you fit the requirements) in my state.
That's what I do (since you asked) ...
As far as selling anything from my portfolio (be it equity or bonds)? It does not enter into consideration since DW (in anticipation for her retirement)/me have more than a few years in MM funds.
We sell and add to our cash reserve whenever an "up period" occurs - be it from GNMA funds last year, or from equity funds earlier this year. We never sell equity/bonds just to provide current income. While we may lose a bit on yield on holding the cash in short-term MM accounts, it makes us (financially conserative) much more able to absorb the bumps in the market...
The only reason I do this is simply that I was paid (along with paying taxes - from my paycheck) monthly, before retirement.
I could withdraw on any cycle (daily, weekly, monthly, annually, whatever) but it would really make no difference IMHO. However, bening that I'm anal in nature as related to budget/taxes, these do change over a period of time, without my input for change.
Utility costs (I'm on a budget plan) change several times per year (up/down). RE taxes change (usually increase) various times a year, depending on the tax. Other budget items may change (such as increased costs for an elderly dog - as an example) over a period of time.
That means that the monthly budget changes over the year, and the amount withdrawn (along with taxes due) also change over time (did I mention I'm anal on budgets
). I withdraw only what I need to cover expenses for the next month.Additonally, since DW is yet to retire, our tax situation is not the same year to year. During Jan through Nov, I also pay FIT on my withdrawls. In late November, I'll receive my current year's initial release of Turbo Tax and plug in the numbers to do a "guesstimate" of FIT due, with the taxes already paid by DW/me during the year. For the last four years of retirement, I have skipped having FIT tax taken from my December withdrawl since we have already paid enough taxes (along with DW's anticipated FIT for December yet to be paid) to ensure a $0 FIT refund/due.
BTW, I only pay FIT. No local/state income taxes are due on retirement withdrawls (if you fit the requirements) in my state.
That's what I do (since you asked)
...As far as selling anything from my portfolio (be it equity or bonds)? It does not enter into consideration since DW (in anticipation for her retirement)/me have more than a few years in MM funds.
We sell and add to our cash reserve whenever an "up period" occurs - be it from GNMA funds last year, or from equity funds earlier this year. We never sell equity/bonds just to provide current income. While we may lose a bit on yield on holding the cash in short-term MM accounts, it makes us (financially conserative) much more able to absorb the bumps in the market...
Last edited:
GregLee
Thinks s/he gets paid by the post
That makes sense to me.
Moemg
Gone but not forgotten
I look at my investments and transfer the money to a Money Market account on Jan.1 unless I still have enough in the account . I then transfer a small amount monthly to my checking account to supplement my pension and SS amounts . The rest is basically for big ticket items during the year . Anything left over is transferred to the next year's budget .
Why wouldn't it work the same as dollar cost averaging investing, only backwards? If you try to time your withdrawals, it seems it would be like trying to time your investments; very difficult. If you invested regularly because of the theory of dollar cost averaging, why wouldn't withdrawals work the same way?
Curious.
My, as you call them "DW" is retired and I'm going to hopefully work part time next year. Whatever I make will be primarily saved so we can experiment with living off the retirement assets. We have about a year, or a little more, of expenses in liquid investments. We have some assets that generate monthly and quarterly income. We plan to live off the monthly and quarterly income and not touch savings. The quarterly income runs out in a little over 7 years, but the untouched retirement accounts and savings should continue to grow at about 5% per year. As we learn what we really need, the liquid assets can be adjusted up or down, but I do intend to keep a year's worth of living expenses in liquid assets. That number will be adjusted from time to time.
Curious.
My, as you call them "DW" is retired and I'm going to hopefully work part time next year. Whatever I make will be primarily saved so we can experiment with living off the retirement assets. We have about a year, or a little more, of expenses in liquid investments. We have some assets that generate monthly and quarterly income. We plan to live off the monthly and quarterly income and not touch savings. The quarterly income runs out in a little over 7 years, but the untouched retirement accounts and savings should continue to grow at about 5% per year. As we learn what we really need, the liquid assets can be adjusted up or down, but I do intend to keep a year's worth of living expenses in liquid assets. That number will be adjusted from time to time.
walkinwood
Thinks s/he gets paid by the post
If you assume that stock markets rise over the long term, you'll probably be better off taking a withdrawal every month rather than once a year. On the other hand, who knows!
I withdraw monthly from a Short Term bond fund (VFSTX) (in a taxable account) and it works for me.
Similar threads
Latest posts
-
-
-
What new series are you watching? *No Spoilers, Please*- Latest: sengsational
-
-
-
-
-
-