Income Withdrawal Strategies

[bfrank12]

Hello I would like to ask if anyone has use the incomesStrategy.com website?
I have used the Maxi Planner which calculated income taxes and Medicare B premium from the current portfolio and income history.

I would like to find out which is the most effective withdrawal strategy, to minimize tax and ask about cost for healthcare insurance.

Is is preferable to buy both Medicare B and FEHB healthcare insurance?
Expected Medicare B premium $189.60 and FEHB health insurance $384 per month.

The following article proposed 3 withdrawal strategies:
Withdrawal Strategy Longevity of Financial Portfolio
Strategy 1: 401(k) then Roth IRA then taxable account 30 years
Strategy 2: Taxable account then 401(k) then Roth IRA 36.17 years
Strategy 3: Withdrawals each year from taxable account
and 401(k) and then Roth IRA and 401(k)
37.5 years


What does real live experienced withdrawal strategy showed or compared to the above?

Thanks for any imputs.

 

[gwraigty]

Your URL doesn't exist. If you meant incomestrategy.com, the site looks like too much of a hard sell to me. You'll get some good answers from forum members here, with more detailed information (tax brackets now and in future, etc.). Otherwise, the proposed strategies you list don't necessarily make sense.

 

[gwraigty]

Oops, just realized, probably because of the invalid URL, that Income Strategy has already been extensively tried out and discussed here:

http://www.early-retirement.org/forums/f28/retirement-tax-planning-income-optimization-99854.html

 

[donheff]

Is is preferable to buy both Medicare B and FEHB healthcare insurance?
Expected Medicare B premium $189.60 and FEHB health insurance $384 per month.

I don't have anything to add on withdrawal strategy but you tossed in this question about Medicare Part B so I will pipe in on that. Well over half of Feds take part B and use FEHB as their supplement. I am one of the ones who did not. If you don't take it and change your mind later you will pay a significant penalty to take Part B. On the upside you will save all the Part B premiums and will be in the same boat for medical coverage as you were when working - same cost, same co-pays, same deductible, same catastrophic limits (although you can't opt for an HSA). Since our Part B premiums will skyrocket when DW's RMDs kick in, we figure we are better off with FEHB alone.

On the Part B side,the big PPO FEHB carriers like BCBS and GEHA offer to drop all co-pays and deductibles and to pay out of network doctors if you pop for Part B. That reassures a lot of old folks but you need to do the math. If you use an HMO for your FEHB plan I am not sure how they deal with out of network doctors.

When I retired 15 years ago I attended a meeting with the guy who writes the annual FEHB Consumer Checkbook plan guide. For what it's worth he said skipping Part B is a no brainer.

 

[brokrken]

Leaving the Roth as the last source to be tapped doesn't seem prudent for an early retiree.

 

[HI Bill]

Leaving the Roth as the last source to be tapped doesn't seem prudent for an early retiree.

For most people, I would disagree.

Many choose to leave the ROTH intact as long as possible to allow tax-free growth, and to allow tax-free distributions once the RMD age for other investments is reached, lowering your taxes then.

From age 59.5 to 70, one may want to take $ from tax-deferred accounts (and/or complete ROTH conversions, increasing the ROTH assets) to reduce taxes on RMDs later, when SS is also being taken.

For most, if you have both tax-deferred, and taxable accounts, tapping taxable accounts with LTCGs up to the appropriate 0% LTCGs tax bracket limit ($80K for MFJ in 2020) offers a much better choice than tapping ROTH first.

 

[foxfirev5]

To me the old mantra of never touching the principal has been supplemented with leave the Roth as a last resort. Provided you put the long term high growth investments in the Roth. I'll let you work the numbers for yourself.

 

[pb4uski]

Leaving the Roth as the last source to be tapped doesn't seem prudent for an early retiree.

For most people, I would disagree. ...

+1 with Bill... best to leave Roths to last unless other withdrawal sources are pushing you into a really high tax bracket (higher than your ultimate tax bracket).

 

[brokrken]

Sorry, should have elaborated. My thought was around an early retiree trying reduce taxable income for ACA purposes. In that case, which will be mine, I’d first hit taxable, then Roth and then TIRA once 65. That’s the plan, but who the hell knows what healthcare will look like then

 

[Dtail]

Sorry, should have elaborated. My thought was around an early retiree trying reduce taxable income for ACA purposes. In that case, which will be mine, I’d first hit taxable, then Roth and then TIRA once 65. That’s the plan, but who the hell knows what healthcare will look like then

Many of us try to have enough just in taxable as the assistance in managing MAGI without using the Roth.
We lucked into it without even knowing about MAGI rules until retired.

 

[brokrken]

Dtail. That’s my plan, too. But if I’m short in the taxable there’s a small chunk in a Roth that I’d tap before the TIRA.

 

[bfrank12]

Thanks for all your input.
It gets overwhelming to figure out all the rules into retirement. When I listened the Morningstar Longview Podcast I realized that the big picture is to make it into early
retirement until we reached 70 yrs since there will be pension and both spouses Social Security income. The pension in our case is like an annuity and will help in longevity risk to 95 years.

In addition to trying to create a budget , the mental preparedness to transition into retirement is also a working effort on my part.
I find letting go of my inclination to work hard difficult because I feel the duty to provide financially for others as I know the income from work will.

Mentally doing what I want versus should/could requires great effort. Also I have been working on building mental and physical routine to transition into retirement. What activities will keep me feeling purposeful mentally? I feel that to continue doing my work at the current level is not healthy for my brain health because it can be stressful.

I am also trying to get all my health in order. Going to the dentist and having the implant done was probably $4000. I followed up on any health concerns. Swimming, learning yoga and learning hobbies is rewarding.

I understand that everyone has different portfolio and goals into retirement, therefore differing strategies. However, I truly appreciate the knowledge given so that I will understand the impact of differing options in retirement.

Preserving the ROTH will be my goal and I need to get more understanding on the different pro/cons coordinating health insurance w/ Medicare. If you budget for healthcare expenses in the portfolio and have catastrophic benefits in FEHB is this sufficient?
Thanks again and it is a joy to read everyone posts.