Taxable account withdraw question

[targatom2019]

Age 50, I have 3 year expense for emergency, taxable account, Roth & TIRA.

If I need to withdraw just 5k per year then:
1. do I take it out of emergency bucket first or taxable account ?
2. If I do take it out of taxable account then do I take it out first then re-balalnce.



Thanks

Tom

 

[Rianne]

We're not touching Roth or tIRA for at least 3 years, maybe more (we're 62). Why would you use Roth or tIRA for emergencies? In our situation, we have CD ladders and cash set aside for emergencies. As CD's come do, we'll put into cash as needed. We always have $60-70K cash, but we're also on ACA and use it to offset income to avoid ACA cliff.

 

[Gotadimple]

1. Leave the emergency bucket alone, and take from Taxable.
2. Yes.
Also, have all distributions paid in cash rather than reinvested. Accumulate the cash throughout the year. Then re-balance and ignore the $5,000 you are withdrawing. After everything is rebalanced, take the cash.

 

[RunningBum]

Age 50, I have 3 year expense for emergency, taxable account, Roth & TIRA.

If I need to withdraw just 5k a year then:
1. do I take it out of emergency bucket first or taxable account ?
2. If I do take it out of taxable account then do I take it out first then re-balalnce.



Thanks

Tom

1) I don't have an emergency bucket since I have plenty available to tap from taxable in emergencies, but if I did, I wouldn't withdraw normal living expenses from an emergency bucket.

2) Re-balance what?

 

[sengsational]

Presuming that emergency is a cash allocation and "taxable account" has at least some fraction of equities, then I'd probably sell a bit of equities and move that, plus some cash, into the spending account such that when you're done, your asset allocation balance isn't altered.


I don't have what you're calling emergency fund; my asset allocation is defined across all buckets and it's set so that there is emergency cash available. There really is only 3 buckets: Roth, tIRA, and after tax. It sounds like you're doing asset allocation separately, within each bucket. Consider running the numbers for combined buckets.

 

[targatom2019]

Yes, I started a 3 fund taxable account before my roll over IRA and from what I learned the last couple months is to treat all accounts as whole and re-balance in the IRA roll over account.

 

[RunningBum]

Figure out which fund type is over-allocated and sell that one.

That raises all kinds of other questions, like, are you balancing your asset allocation across all accounts, and are you placing your asset types in the proper accounts? See https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

And as someone else suggested, don't reinvest dividends in taxable if you can use them for some or all of the $5K you need.

 

[pb4uski]

Age 50, I have 3 year expense for emergency, taxable account, Roth & TIRA.

If I need to withdraw just 5k per year then:
1. do I take it out of emergency bucket first or taxable account ?
2. If I do take it out of taxable account then do I take it out first then re-balalnce.



Thanks

Tom

I wouldn't necessarily differentiate between emergency and taxable account.

If you take it from taxable account will you be selling shares and have a taxable capital gain? What tax bracket are you in?

It can get complicated... for example, my state exempts the first $5k of capital gains from state tax so it is foolish for me not to sell enough to generate $5k of capital gains to use the exemption... even if I just turn around and reinvest the money.

 

[Al18]

Does $5K represent a significant amount (greater than 5%) of your total retirement assets? If not, I wouldn't bother with rebalancing.

 

[targatom2019]

No, 5k is a very very small portion of the overall portfolio.