Withdrawing from which account (retirees only)

[astromeria]

ats5g's post about withdrawal tax strategy inspired me to create this poll.

 

[Mr._johngalt]

I voted "some combination". SS plus trad. IRA for now. That's it.

JG

 

[REWahoo]

I'm in the 'some combination of both' category. I'm about 50-50, including converting a slug of traditional IRA money to a Roth while finessing to stay in the 15% tax bracket. That's the plan for the next couple of years.

 

[LOL!]

http://www.fpanet.org/journal/articles/2006_Issues/jfp1106-art8.cfm

is a brand-new article entitled
Optimal Withdrawal Strategies for Retirees with Multiple Savings Accounts by Stephan M. Horan.

I haven't read it yet (I am not a retiree), so I leave it up to you folks to read it and see if it is helpful. Also note that some of the references at the end of the article should be read as well.

Let there be discussion!

 

[tryan]

Living off the rents , which are "entirely taxable".

 

[Zathras]

Living solely off bond interest and dividends. No withdraws unless you want to count the fact that I am not reinvesting the dividends?

 

[astromeria]

Zathras, is that bond interest and dividends in taxable accounts? (You could be taking them from tax-deferred or tax-free accounts, after all.) I think of interest and dividends that one has automatically dumped into one's checking account as withdrawals--you could've left them in their accounts after all (whether taxable or not).

 

[OAG]

All goes in the same pot so the options are:

1. All SS and some Pension but no savings.

2. Mostly Pension and no SS or savings.

3. Mostly Savings, no Pension and no SS.

I think #1 is the current sources of Retirement living funds for 2006 and 2007.

 

[Nords]

We're killing off a mutual fund in a taxable account with huge unrealized cap gains (shares held for over 10 years) and a 1.38% expense ratio.

 

[WilliamG]

"Voted" some combination. Have a five year projection for expenses and "income management" which allows us to manage taxable income toward but not above the 15% federal marginal tax rate. See the advantage of holding off paying taxes, but on the other hand don't believe tax law will get any better down the road. Spouse still works part time, so we wind up being able to fund Roths with some of this income.

 

[Zathras]

Well, the dividend stocks are tax deferred, the bonds are not, so I picked 'some combination'.

 

[nun]

I'm not ERed yet, but one thing I initially plan to do is to live off after tax money and either take an amount
equal to my exemptions and deductions taken from my 457 plan or convert that same amount to from my
IRA to a ROTH

 

[Khan]

Small but adequate pension.

 

[audreyh1]

I'm living entirely off taxable investments and have been since 1999. I can't pull from IRAs until 59 1/2. I can't draw SS until 62 or later. No pension.

Audrey

 

[nun]

I'm living entirely off taxable investments and have been since 1999. I can't pull from IRAs until 59 1/2. I can't draw SS until 62 or later. No pension.

Audrey

So I imagine you have no earned income. If that's the case are you doing IRA to ROTH conversions? to use up your income tax deductions and allowances.

 

[ex_CFO_now_RVer]

Have been harvesting capital gains at 15% rate. No state income tax...

 

[Patrick]

I can't pull from IRAs until 59 1/2.

What about SEPP? http://www.retireearlyhomepage.com/wdraw59.html

 

[OAG]

I voted Taxable first which, when it becomes necessary, I intend to do. In the meantime it is SS and part of Pension.

 

[OAG]

nun -- If one is in the 15% tax bracket and will remain therin in the future can you still make a case for converting before tax traditional IRA to a ROTH? I have a ROTH and a Traditional IRA but after running the numbers, and assuming the tax system remains static, I cannot make a case for further conversions.

 

[RockMiner]

nun -- If one is in the 15% tax bracket and will remain therin in the future can you still make a case for converting before tax traditional IRA to a ROTH? I have a ROTH and a Traditional IRA but after running the numbers, and assuming the tax system remains static, I cannot make a case for further conversions.

I believe that Roth assets are potentially more valuable in that they do not cause your SS benefits to be taxed at higher levels the way that conventional IRA's do. See old threads on the Scott Burns "Tax Torpedo" effect...

 

[sgeeeee]

I still am collecting royalty income from some of my books, but the rest comes from taxable accounts.

 

[audreyh1]

Huh?

I have no earned income. But my investments generate enough "unearned" income to disqualify me from doing any IRA conversions to Roth. This "unearned" income also uses up all my tax deductions and any additional "allowances" seem to disappear most years.

Audrey