cash during retirment

[jwr62]

we need to live off some of our savings for about 18 months after retirement.
I will need about 40,000 so should I
(1) withdraw from investments mainly the Bond funds ?
(2) have dividends and interests from funds go into cash?
(3) take 40,000 and put into a cash place.. but not making any interest?

would love some thoughts

thanks

 

[DrRoy]

You do not say how you have your current funds invested, taxable, IRA, etc. Without that info, I would say that you start with (2), and then withdraw from other accounts if needed so as to balance minimizing taxes and maintaining your AA.

 

[jwr62]

You do not say how you have your current funds invested, taxable, IRA, etc. Without that info, I would say that you start with (2), and then withdraw from other accounts if needed so as to balance minimizing taxes and maintaining your AA.

Funds IRA Roth 66,000
reg IRA 833,000 60% stocks 40% bo

 

[pb4uski]

Assuming that you are over 59 1/2, I would take from IRA... 1/2 in 2016 and 1/2 in 2017 to spread out the tax implications but taxes may not be an issue... you can keep it in an online savings account that pays ~1% and set up an automatic monthly transfer to your local bank account that you use to pay your bills.

 

[jwr62]

Assuming that you are over 59 1/2, I would take from IRA... 1/2 in 2016 and 1/2 in 2017 to spread out the tax implications but taxes may not be an issue... you can keep it in an online savings account that pays ~1% and set up an automatic monthly transfer to your local bank account that you use to pay your bills.

we will be 63 years old.. I am retired and husband will retire in March 2017..
so you are saying to take ?

 

[pb4uski]

I would leave Roth alone to continue to grow tax free for use later on or passing on to heirs.

Since you need $40k to live on for 18 months, you'll need to take from the tIRA. You could split the distribution between tax years to minimize your tax. Contrary to what I posted earlier, since your husband is still working you may want to wait until 2017 to do the distributions if you can since he'll have a full year of earnings in 2016 and only a quarter year in 2017... but how you approach it to minimize taxes depends a lot on your specific tax situation.

IMO, it doesn't matter much whether you take it out in one or two big chunks and keep it in an interest bearing savings account or just set up an automatic redemption of $2,250/month for the 18 months that you need it or any other withdrawal approach. Just remember to rebalance back to your desired AA within the tIRA.

 

[Sunset]

Is this the last time you will need funds ?
If not, then in addition to what pb4uski said, you could turn off re-investment in the regular IRA, so dividends become cash, that way you would have a stream of income ($10,000 - $15,000 per year) regardless of what the stock market does in the next few years.

 

[2017ish]

Agree with others, and as pb4uski said, it really doesn't matter when you take the funds from the IRA, except for managing taxes between years.

On the topic of taxes, you should consider looking at when/if you should do Roth Conversions or "unneeded" IRA withdrawals to avoid a tax torpedo at 70 when you combine RMDs with Pensions. Also, look at what happens to the survivor's tax situation if one of you, as is likely, dies before the other. That might also argue for earlier-than-necessary withdrawals (or conversions) to equalize the tax hit across the years.

 

[pb4uski]

This tax calculator may be of use to you in deciding how to spread out your withdrawals.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/html5/index.html

Agree with others that once you are both retired that you may want to consider low tax cost Roth conversions if you can do so.

 

[wallygator69]

You can take any contributions to a ROTH out at anytime without penalty.

We were considering 72-t but we don't need to we can just take ROth money out to get to 60 years old.

We can also do Roth conversions to hit the sweet spot for ACA.....

 

[pb4uski]

In OP's case no penalty on tIRA distributions either since they are >59 1/2 so taxes is the only issue.