DCA withdrawals

[FIREd]

Right now I DCA into my 401K, but I use value cost averaging (VCA) in my taxable account. To me the latter makes more sense intuitively. I'd like to implement it in my 401K as well, but trading limits prevent me from doing so. I think that I will use a reverse VCA approach in retirement, i.e. sell more of the winners and less of the losers. Right now I use a spreadsheet to determine each month what and how much of it to buy, I guess in retirement I can set a a similar spreadsheet to determine what and how much of it to sell.

[Independent]

Quote:

Originally Posted by figner This is one of the reasons I like slice and dice: so that in withdrawal phase, I can just sell whichever funds are doing best (or least badly!), without having to sell as many losers with the winners. If my assets were all in a TSM type fund, this would be impossible. Of course, since the funds I buy are generally index funds, they will include both losers and winners. But at least if enough of the slices are uncorrelated enough, I should have some control over avoiding selling the worst losers.

Good point. It seems that this strategy is closely related to periodic rebalancing.

If your money is in taxable funds, rebalancing may not be tax efficient, so I think you're saying that:
When you're in the saving phase, you buy the classes that are under weighted (because of recent poor performance).
When you are in the withdrawal phase, you sell the over weighted classes.

It seem that, if your assets are in tax qualified accounts, then you can usually rebalance as much as you want and don't need to pay as much attention to exactly where you are buying or selling.

[FIREd]

Quote:

Originally Posted by Independent If your money is in taxable funds, rebalancing may not be tax efficient, so I think you're saying that: When you're in the saving phase, you buy the classes that are under weighted (because of recent poor performance).

That's the principle behind value cost averaging and that's what I use in my taxable account. I basically rebalance my account every month using new money. I buy the asset classes that were beaten down the most during the previous month. That way I don't have to sell anything to bring back my asset allocation into line and therefore I minimize my tax liability. Plus I get to buy more of what is relatively cheaper at the time.