Retirement withdrawls- Monthly or Annually

[REWahoo]

Next year, we will have to begin taking funds from IRAs for actual living expenses. Based on that, we need to answer the same question as OP. Monthly or yearly? I'll let you know!

One point I've not seen made (forgive me if I missed it) is the ability to fine-tune your tax liability if you withdraw monthly. This could be important, especially if you are on the edge of a higher tax bracket.

If you withdraw a full year of expected expenses and for some unforeseen reason have additional income in that year, you could end up paying an unnecessarily higher tax on the incremental income. Withdrawing from your IRA monthly will allow you to adjust your income if needed and better control your tax liability.

 

[ziggy29]

One point I've not seen made (forgive me if I missed it) is the ability to fine-tune your tax liability if you withdraw monthly. This could be important, especially if you are on the edge of a higher tax bracket.

If you withdraw a full year of expected expenses and for some unforeseen reason have additional income in that year, you could end up paying an unnecessarily higher tax on the incremental income. Withdrawing from your IRA monthly will allow you to adjust your income if needed and better control your tax liability.

Great point.

You may think you're only going to have an income of (say) $50,000 in a year (still in the 15% bracket for joint filers), but what if you later take (gasp) a part-time j*b or get some unexpected windfall that kicks you into the 25% bracket? By taking it out when only you need it, you might be able to withdraw less from the tax-deferred accounts when you come across "more money" and stay in the lower tax bracket.

 

[CuppaJoe]

I plan to take a good look at taxes in Oct. to see if I should take some 2009 or 2010 expenses out of the tax-deferred part of the PF before the end of the year. Roth conversion is another issue to look into. So far, I've been withdrawing only from the already taxed part of the PF but want to leave a lot in that section to continue to play it off the tax-deferred part.

 

[bbbamI]

It's pretty easy for us now and for the next 4 1/2 years. The pension check will be coming in once a month and we'll transfer money from our money mkt account to our checking account about every 2 months or so. This money is in taxable accounts.

It will be a whole 'nuther ball of wax when we start taking money from IRAs.

 

[Chester_A._Riley]

As for my TSP, I will be getting equal monthly payments sent to me. It seems to me that they withhold taxes, but if they don't then I will just withhold it myself - - I'll have to manually put the projected taxes on the TSP money into my savings account and the spending portion in checking. Basically, anything in checking is fair game for spending.

As I understand it, my federal pension and social security don't withhold state taxes so I'll have to manually withhold them in a similar way. What a headache. It sounds like we really have to work at being retired! I will be paying estimated taxes quarterly.

The feds will withhold for state taxes. I use a monthly TSP transfer to my credit union, with no taxes withheld, to maximize my taxable income up to the top of the 15% federal bracket. Being lazy and forgetful, I use the federal retirement system to withhold enough for both federal and state taxes, a method that can be adjusted monthly on-line, as necessary.