audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
It seems that a lot of these schemes go to considerable trouble to avoid the "reduction in income" scenario.
But, IMO, it's not that big a deal if you have plenty of discretionary spending in your budget (a good idea if you retire very early). Facing an occasional drop in income is far from a disaster, particularly if it has recently increased due to the portfolio doing well.
We have mostly taxable investments. I have tracked the after tax income from our portfolio for many years. Taxes create an interesting "income smoothing" effect on taking a % of remaining portfolio. In years where the portfolio has a big jump, taxes tend to be higher because more is paid in cap gains distributions. In years where the portfolio suffers a loss, cap gains distributions drop significantly, even to zero, and there may even be options for tax loss harvesting.
No such smoothing by taxes effect if you are withdrawing income from an IRA or 401K
But, IMO, it's not that big a deal if you have plenty of discretionary spending in your budget (a good idea if you retire very early). Facing an occasional drop in income is far from a disaster, particularly if it has recently increased due to the portfolio doing well.
We have mostly taxable investments. I have tracked the after tax income from our portfolio for many years. Taxes create an interesting "income smoothing" effect on taking a % of remaining portfolio. In years where the portfolio has a big jump, taxes tend to be higher because more is paid in cap gains distributions. In years where the portfolio suffers a loss, cap gains distributions drop significantly, even to zero, and there may even be options for tax loss harvesting.
No such smoothing by taxes effect if you are withdrawing income from an IRA or 401K