Lump Sum

[verizon1990]

What is the best way to draw money on a lump sum of $680,000? Assuming that is all I have. Could I roll over to an IRA and withdraw any interest yearly? A 72t? I would need approximately $25k a year. Thanks for your advice in advance.

 

[pb4uski]

Is this a lump sum from a defined benefit pension? Would you want the $25k withdrawals to increase with inflation? How old are you? Are you under 59 1/2?

$25k would be a 3.8% WR and should be safe. If you are 59 1/2 or older you could rollover the defined benefit lup sum into an IRA, put the whole shooting match in a decent balanced fund and withdraw $25k a year and increase withdrawals for inflation and have a very small chance of outlasting that money.

 

[verizon1990]

I am 50 years old. And yes, it is a lump sum from a defined pension. I am going to work part time still. But I really only need to find out the best way to draw from that lump sum whether it be dividends, interest, etc.

 

[frayne]

Fifteen years I ago at 54 years of age I retired, took a lump sum (pension payout & 401K) and rolled them into a self managed traditional IRA with Fido. I also set up and did the 72T. All of it was kind of a PIA but a good learning experience and I listened to and read everything I could prior to each step. Be careful and make sure you understand all aspects of the 72T requirements before taking any withdrawals. Good luck.

 

[sengsational]

One thing to consider, since you live economically, your ability to qualify for health insurance premium subsidies. If you go with a 72t, that might make you ineligible, and you'd be on the hook for premiums until age 65. If you have after tax savings to keep you afloat, then there's no hurry in getting an income stream from the assets associated with the pension. A rollover to a tIRA is not taxable and can be done now, and then you can take things as they come. The premium tax credit is worth a lot, so worth looking into.


The investment vehicles, once you get it in a rollover IRA, are personal to each. Say you call Vanguard or Fidelity and give them the defined benefit plan info. They'll get the funds, then you need to decide how those will be invested. Those who want hands-off approach often go with a target date fund. In your case possibly aligned with the year you will completely retire.

 

[pb4uski]

I am 50 years old. And yes, it is a lump sum from a defined pension. I am going to work part time still. But I really only need to find out the best way to draw from that lump sum whether it be dividends, interest, etc.

The last part, dividends or interest or principal, really doesn't matter since it'll all be sorted through when you rebalance. Money is fungible. If you use a balanced fund then the investment manager will do the rebalancing for you.

Since you're under 59 1/2 you only real option to withdraw without paying the 10% early withdrawal penalty is a 72t/SEPP.

 

[38Chevy454]

The last part, dividends or interest or principal, really doesn't matter since it'll all be sorted through when you rebalance. Money is fungible. If you use a balanced fund then the invetment manager will do the rebalancing for you.

Since you're under 59 1/2 you only real option to withdraw without paying the 10% early withdrawal penalty is a 72t/SEPP.

I agree, your only real option to withdraw money is 72t, since the investment is pretax money. Otherwise you will have tax early withdrawal penalties.
Only thing for you to decide is what investment AA, and how much to receive out of the 72t withdrawals. Given your age, a fairly high equity percentage is advisable to prevent inflation erosion of principle.

 

[Beststash]

Sharing a lump-sum spreadsheet I used while contemplating my decision.

Good Luck!!