When do you withdrawal from your portfolio?

[RetiredAt49]

I plan to stick with the 4% withdrawal rate practice when I retire in the next few weeks. I have enough cash in savings to cover a years worth of expenses so I have a couple of questions:

1) When do you withdraw from your portfolio (weekly, monthly, quarterly, annually)? Any tips/strategies?
2) Would you recommend that I keep a years worth of expenses in a savings account and start withdrawing now or drain the savings and then withdraw?

 

[GrayHare]

I liquidate and withdraw when the asset values are relatively high compared to recent prior months.

 

[steelyman]

I made my 2021 withdrawal sales and will move the money out next week. Rebalance follows in January.

 

[CincyDave]

1. No set schedule. When the checking account gets low, I just transfer some from my 401K to the checking account.

2. If this is your only cash, I would leave that alone and withdraw from investments, but hard to answer this one without more info.

 

[audreyh1]

I do it during the first few trading days of the new year, pulling out the entire year’s withdrawal. This timing works for me for several reasons - I usually have a cash influx in December due to mutual fund distributions, I also have some idea of my tax liability by then and need to set aside funds for taxes and estimated taxes from my withdrawal, and I rebalance to my target AA after withdrawal if needed. I find doing this once a year simplest for me, and then I don’t even have to think about it for another year!

 

[Souschef]

All my withdrawals are from my IRA's to meet my RMD. Our SS and small pensions cover all our expenses, especially now we are not spending $40K a year on travel.
The withdrawals are for:
$15K gifts to each son
State & Federal Estimated taxes
QCD Charitable contributions
GD tuition for nursing school

 

[aja8888]

Usually in the first quarter each year when I know what my RMD will be. I have it transferred to my brokerage account. We live off SS and cash in savings.

 

[Tetto]

I do it during the first few trading days of the new year, pulling out the entire year’s withdrawal. This timing works for me for several reasons - I usually have a cash influx in December due to mutual fund distributions, I also have some idea of my tax liability by then and need to set aside funds for taxes and estimated taxes from my withdrawal, and I rebalance to my target AA after withdrawal if needed. I find doing this once a year simplest for me, and then I don’t even have to think about it for another year!

So when you do your annual withdrawal you alway rebalance? Why? Just curious because I envision when I’m in your shoes someday, the bulk of my portfolio will be in something like an S&P index fund- which requires virtually no intervention from me I suppose…

 

[SecondCor521]

I withdraw as needed. Depending on a bunch of factors, it can vary by frequency from a few months to nearly a year.

I prefer to keep minimal cash, so that's why I personally don't do the year at a time approach. But I like the simplicity of the annual draw.

Since I am currently drawing from taxable because I am not yet 59.5, I do end up realizing capital gains when refilling my checking account. I therefore do pay attention to the calendar in this regard. For example, currently I'm running a bit low on cash, but will aim to make it to 1/1 before refilling so that those gains are taxed in 2022.

Regarding your last question, I don't think it matters much. Personally I'd drain it then withdraw, but I think it's really personal preference. It won't make that much difference in the big scheme of things. (Actually, that's probably true of the first question as well.)

 

[NW-Bound]

I withdraw throughout the year from my before-tax accounts to replenish my checking account. I usually take out enough to last 3 to 4 months of spending.

I always have a lot in cash or a short-term T-bill fund. The withdrawals do not involve selling stocks or bonds. I trade stocks and bonds based on market condition, and not to get cash for withdrawals.

 

[sengsational]

For withdrawals that have a tax impact, I do those in December, after I have the tax software loaded with things that have already happened. I also pay estimated taxes or set withholding on tIRA withdrawals to pay the bulk of the income taxes.

But if it's just getting money from after tax investment accounts to one of the spending accounts (no tax impact), it's just "as needed" (when the checking account gets low).

I do have a spreadsheet with one column per month that models spending account balance for the year. At the top is the beginning of the month balance in the spending accounts. Subtracted from that is an estimated 'burn rate', a single monthly value that covers almost all spending categories. But I also subtract a few 'below the line' categories, that are 'lumpy', like income taxes, real estate taxes. And I add-in periodic transfers from investment accounts. Those are the transfers to fund the checking account when the balance gets low.

 

[Bamaman]

I am very thankful to have made 13 years in ER without having to get into my IRA Rollover accounts.

But I'm having to start RMD's in 2022, and the total IRA accounts are approaching 3x what they were in 2008. My projected RMD's are far more than my salary upon retiring--not including two social securities and a defined pension. After I make withdrawals and pay the income taxes, I've got to figure out where to put the tax paid funds.

You should consider keeping about 1 year's expenses on hand, and withdraw funds as needed. If you look close, it's not hard to find interest rates at relatively higher percentages than you'll get in a bank or credit union cash account.

 

[RobbieB]

I take a big pull from both the after and deferred tax stash beginning of year based on last years pull with modifications for additions. After a few years of this I'm getting pretty good at it.

 

[EastWest Gal]

I am pulling from after tax portfolio only for the next few years. I keep about 6-12 months of cash in the portfolio, and transfer to checking as needed. I was going to sell a bunch every other year, 2020 and 2022, to avoid the ACA cliff at least every other year, but that vanished until 2022. So this year and next, I am selling a few equities to keep the cash up, about twice a year.

I make quarterly tax payments, so the tax impact is spread out throughout the year. I decided to overpay this year, and will continue to do so, in the event I have to liquidate more assets than planned. We decided to do so home upgrades so it was nice that quarterly tax payments will more than cover the change in premium tax credits for health insurance.

I transfer from the Schwab account to the checking account as needed. I usually do it monthly, guessing our expenses.

 

[Dash man]

We replenish our checking account as needed each month or two. We either use dividends or sell some stock in our taxable account. We had been using maturing CDs, but we only have one significant one left and that matures in April.
I sold some stock this month to cover the upcoming tax payment for our Roth conversion, plus we expect out Long Term Care bill to arrive any day. We’re also giving each of the boys and their wives $25K for Christmas.
We haven’t touched our retirement accounts yet for spending. May not ever have to use them, but who knows what the future will bring?

 

[Finance Dave]

1. No set schedule. When the checking account gets low, I just transfer some from my 401K to the checking account.
.

+1

 

[DrRoy]

In December for the following year.

 

[Dtail]

I withdraw the full amount in January from my tIRA and then transfer it to my Ally savings account and move the monthly needed monies to BOA.
Easier decision for me, as I don't owe any Fed or State taxes at year end.

 

[jfn111]

We make one or two withdrawals per year as needed. We will probably make a withdrawal in January to fund the yearly contribution to the grandkids 529's.

 

[whatnot]

We take out twice a year. Half in January and the other half in June. Works for us.

 

[Midpack]

1. No set schedule. When the checking account gets low, I just transfer some from my 401K to the checking account.

+1, that’s what I do and it usually results in 3-4 withdrawals a year preceding paying (currently large) estimated taxes. But I’m not suggesting there’s one or a preferred method. I’ve read some here withdraw once a year, or automatic (monthly) deductions, both fine too. However, with cash earning next to nothing, I’m not sure I’d want a years worth of money sitting in a bank.

I’d think other income would be a big factor as well. We have zero income and no RMDs, those will come in a few years. If we had pensions, social security and/or RMDs - withdrawals would be a much smaller part of income picture and we’d probably be able to make withdrawals less frequently.

 

[easysurfer]

For me ...

1. When - beginning of year after rebalancing (done only once a year also)
2. Where - withdrawals are placed in a money market fund where I then set up a monthly deposit to my checking to act as my monthly "paycheck"

Theme is, I'm lazy and just wish to keep things simple .

 

[Sniggle]

If you do one large withdrawal at the end of the year, does that eliminate the need to do quarterly estimated payments?

 

[kcowan]

We have always set Dec 15 as the date but I think we will do it in Jan for 2022. I have some major expenses (art) and this will give me more time to cover the lump.

We also entered our "blow that dough" phase and this puts more demand on cash.

 

[Time2]

I just this week sold some IRA funds and transferred them to my bank to be ready for 2022 spending. I have found I can do a lot of tax planning Nov and Dec. I will be making another transfer soon that will be a Roth Conversion.
The funds I generated in Dec 2020 for spend in 2021 are down to $10k, so I have a little extra, I'm hoping the wife and I can do a better job of BTD this coming year.
If some unexpected expense came up during the year I may have to change the plan, but 3 years of retirement and so far so good.