Distribution Planning

[oilman]

Hey all! Been lurking on the forum for a long while and picked up some valuable information. Retired January of 2017 and will begin taking distributions in January of 2020 from my previous employer 401k. Leaning towards taking equal monthly distributions, but have also given thought to single distribution for the year in January. Would like to get thoughts from those with more knowledge and experience as to which is the better of the two, and reasons why you prefer one over the other. Thanks

[RunningBum]

I think you'll find it's mostly personal preference. Some like a monthly distribution since it feels like the paycheck they are used to. Some like to take their X% yearly withdrawal at the start of the year. And some like to take as needed, every few months, often supplementing dividend distributions.

If you consider that it's probably to stay invested as long as possible, the monthly distribution would seem to make a lot of sense, but there are good reasons to do the other ways too. Personally I take as needed, with dividend distributions, since they aren't always even.

[braumeister]

^^^
Exactly.
Take it as you need it, if possible.

[jazz4cash]

If you choose an asset allocation that includes cash equivalents for a year or two of spending and rebalance accordingly it won’t matter. You can then take distributions according to whatever frequency you desire. You don’t want to be forced into selling stocks when they are down to meet spending needs. In most cases CD ladders or high yield savings will beat the employer plan cash equivalent option so you may want to move a chunk annually via rollover and choose more frequent distributions as desired.

[Ed_The_Gypsy]

I take a small fixed monthly distribution from the Roth of roughly 3% /12 like a paycheck and the RMD from the tIRA in early January with extra withdrawals as necessary. So far, the principal has not gone down. YMMV, and remember to have taxes withheld as appropriate.

[NW-Bound]

Quote:

Originally Posted by braumeister ^^^ Exactly. Take it as you need it, if possible.

+1

I draw money when my checking account is down to a few $K. And it turns out that I refill it about every 2 to 3 months.

I do keep an eye on my YTD withdrawals for tax purposes, and also the 12-month trailing expenses to catch any lifestyle creep. Right now, my expenses are actually shrinking with time. Not lifestyle creep, but no shrinkage either that I notice. No escaping from the Bernicke effect.

[marko]

Quote:

Originally Posted by NW-Bound I draw money when my checking account is down to a few $K. And it turns out that I refill it about every 2 to 3 months. .

Exactly what we do as well. A big W/D from banked dividends in early January and then back fill as necessary.

[audreyh1]

I think it's a personal preference. I prefer a single Jan annual withdrawal as it makes the math and the process easier for my rebalancing. I withdraw a fixed % of the portfolio value on Dec 31. I usually have a lot of distributions in cash from Dec, so I can withdraw my annual income and rebalance what remains. Then I get to leave the portfolio alone for another year (baring a major market upheaval).

How you calculate your annual income and how and when you rebalance (if you even have a target AA and rebalance) may determine the most convenient times to make your withdrawals.

[foxfirev5]

For tax management purposes at age 63 i prefer to take my distribution near the end of the year. Once RMD's kick in I may just switch to a single distribution early in the year to get it out of the way.

[Trawler]

I am in the camp of take cash when the portfolio is high as I keep a large cash position in both IRA (401K rollover) and taxable accounts of 3 to 5 yrs worth expenses in total. Then manage realized income with a WDs from IRA cash to manage income taxes and ACA tax credits. Mostly CD ladders. As the farmer says take the eggs when the hen lays them and it works for me.

[HI Bill]

For me, this is a two-part process. 1) Sell equities when they're high, and move to a MM fund at the brokerage house; 2) Transfer roughly equal monthly installments from MM account to a brick and mortar bank.

That way, when I eventually want to qualify for a loan, I'll have a record of regular deposits. Monthly deposits to checking also help me ensure that I'm sticking to my budget, and understand whether I"m running a surplus or deficit. Since half of my spending, roughly, is travel-discretionary, it's nice to know readily what's remaining in the budget!

[CardsFan]

Our after tax fund is not very tax efficient, so we have Cg's/Div/Int to the tune of 40% of our spending. That gets moved as needed to the checking account. We also have some bond funds that are at about par value, and we have been selling these, monthly, to create the "paycheck". That leaves room for some Roth Conversions in the 12% bracket.

FWIW, I envy the young-un's here that are trying to learn. The concept of tax efficient investments was nowhere close to my radar screen even just 20 years ago.