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Early retirement offer advice
01-11-2015, 12:59 PM
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#1
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Recycles dryer sheets
Join Date: Jan 2014
Location: St. Louis
Posts: 90
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Early retirement offer advice
I am 52 and being offered early retirement by sweetening my pension. Looking for advice on how to draw from accounts if I take it. I have run FIRECalc and it says I will be fine. I have money in my 401K, which is invested in diversified stock mutual funds. I also have an inherited IRA, and a joint account, both of which are invested in mutual funds and bonds.
If I take the retirement as an annuity (I can also take as a lump sum), my pension will not be enough to cover my monthly expenses. I was thinking of this strategy:
- Leave the 401K alone till I reach 59 1/2
- Change the inherited IRA and joint accounts to pay out all interest, dividends and capital gains into a money market for monthly expenses
- Withdraw the rest of what I need for monthly expenses from the joint account. Maybe withdraw 3 years worth of expenses and put in CD's, kind of like a mini "bucket strategy" approach.
Thoughts on this approach? Anyone see any issues with this or perhaps a better way to do things?
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01-11-2015, 01:16 PM
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#2
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,212
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I'm a big fan of the 3 legged approach - SS, pension/annuity, savings. So I'd keep the retirement pension in the annuity form.
I have a similar situation - and kept my (small) pension in the annuity form... and have the dividends/cap gains paid out as cash in my benificiary IRA - I use those as the source for my distributions. I pull cash from my taxable accounts to make up the difference for my spending.
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Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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01-11-2015, 01:29 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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Depending on where you expect your normal marginal tax rate to be, there is no reason not to take money from the inherited IRA and leave the 401k alone. If you take more than you need to live on, you can roll the excess into a Roth.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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01-11-2015, 06:31 PM
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#4
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Recycles dryer sheets
Join Date: Jan 2014
Location: St. Louis
Posts: 90
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Thanks to you both for your replies and good to hear others are taking the same approach. Any other input?
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01-11-2015, 07:06 PM
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#5
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Recycles dryer sheets
Join Date: Oct 2014
Posts: 125
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I'm retiring on 1.31.15 @ age 54 and, similar to you, have an early out/buy out offer and plan the following approach: leave my 401K alone a few years and live on my annuity and personal savings. Once my personal savings are down to a certain level (maybe $50K) then I'll start tapping into my 401K.
Good luck in your retirement.
Sent from my iPhone using Early Retirement Forum
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01-11-2015, 08:03 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,902
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Quote:
Originally Posted by 2B
Depending on where you expect your normal marginal tax rate to be, there is no reason not to take money from the inherited IRA and leave the 401k alone. If you take more than you need to live on, you can roll the excess into a Roth.
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An inherited tIRA cannot be converted to Roth. Withdrawals from an inherited IRA cannot themselves be rolled into one's own Roth IRA. Of course, if you also have earned income at least some of those dollars can be placed into your own IRA.
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02-11-2015, 01:15 PM
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#7
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Recycles dryer sheets
Join Date: Jan 2014
Location: St. Louis
Posts: 90
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When do mutual funds pay out their capital gains/dividends/interest? Do they all pay out at the same time (beginning/end of year), or does it depend on the individual fund? And can I tell this by looking up my specific funds?
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02-11-2015, 02:38 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,545
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Quote:
Originally Posted by Raymond01
When do mutual funds pay out their capital gains/dividends/interest? Do they all pay out at the same time (beginning/end of year), or does it depend on the individual fund? And can I tell this by looking up my specific funds?
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Depends on the fund. Many pay monthly (bond funds) or quarterly dividends. Some pay just yearly. Cap gains are usually at year end. Look up each fund on line and look for "distributions". Usually pretty easy to figure when they pay dividends and cap gains.
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FIRE'D in July 2009 at 51...Never look back!
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02-11-2015, 02:41 PM
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#9
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Recycles dryer sheets
Join Date: Jan 2014
Location: St. Louis
Posts: 90
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I found it, thanks!
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