Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Need Advice On Withdrawal Strategy
Old 01-02-2019, 05:13 PM   #1
Recycles dryer sheets
 
Join Date: May 2007
Posts: 411
Need Advice On Withdrawal Strategy

I sold my practice in May 2018 at the age of 54 and I continue to work about 12 hours a week for the new owner. After a lifetime of saving, 2019 looks to possibly be the first year where I will need to draw a bit from my portfolio to live off of.

I'm thinking that I could either liquidate my estimated needs for the year and have it in cash to draw from, or I could sell as needed in small amounts going forward.

I'm new to all this so I'm just curious- what do you all do?
novaman is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-02-2019, 05:27 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,129
It really doesn't matter much. It's probably good to have a certain amount in cash so you aren't forced to sell at a low, but there are ways around that, such as selling equities in taxable for spending money, and buying them back in an IRA if you have non-equities available.

Are you pulling from a taxable account? What I do is stop automatic reinvestments, and use that, and sell other investments as needed.
RunningBum is offline   Reply With Quote
Old 01-02-2019, 05:28 PM   #3
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 8,339
I'm not typical because "everything" is in "tax advantaged" accounts. That being said, I "do my taxes" in December and pull whatever amount from tIRA/401k that keeps my PTC ACA whole. Then, if during the year I need more, I pull from Roth/HSA.
sengsational is offline   Reply With Quote
Old 01-02-2019, 06:53 PM   #4
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,008
I usually pull quarterly or as needed.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 01-02-2019, 07:12 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,679
Quote:
Originally Posted by novaman View Post
..... I'm new to all this so I'm just curious- what do you all do?
5% (target) of my portfolio is in an online savings account that earns 2%... I have an automatic monthly transfer from that online savings account to my local credit union account that I use to pay my bills... I call this my monthly "paycheck".
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 01-02-2019, 07:25 PM   #6
Thinks s/he gets paid by the post
Onward's Avatar
 
Join Date: Jul 2009
Posts: 1,934
I pull monthly as needed.
__________________
And if I claim to be a wise man, it surely means that I don't know.
Onward is offline   Reply With Quote
Old 01-02-2019, 07:35 PM   #7
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 3,104
It's essentially the opposite of dollar cost averaging when buying in. If you think you can time the market, then either get more in cash now, or wait until later depending on your thoughts about what the market will do. Many on here do a big withdrawal at beginning of the year and then supplement as needed for a big expense. Many others do periodic regular withdrawals. In the end both can work, it just is a matter of your risk tolerance and thoughts on market performance. Get all cash now and help avoid selling at a lower value later, or risk selling now when it might be higher later. I don't think there is one right answer, as both methods can provide money.



Without getting into a lot more discussion, your question also leads to short term vs long term, and asset allocation ratios. But that would be a lot more involved than your original question.
__________________
The advice we're giving you is invaluable, that's why it's free
Experience is a good teacher, but the tuition can get expensive real fast

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is offline   Reply With Quote
Old 01-02-2019, 08:56 PM   #8
Thinks s/he gets paid by the post
VanWinkle's Avatar
 
Join Date: Oct 2017
Location: Morton
Posts: 1,777
Monthly paycheck from Money Market to local Bank account. Vanguard sends it like clockwork around the first of each month. Taxable account as I am not touching IRA until RMDs other than conversions.
__________________
Retired May 13th(Friday) 2016 at age 61.
VanWinkle is offline   Reply With Quote
Old 01-02-2019, 09:27 PM   #9
Thinks s/he gets paid by the post
Cut-Throat's Avatar
 
Join Date: Jan 2007
Location: Minneapolis
Posts: 1,172
Quote:
Originally Posted by novaman View Post
I'm new to all this so I'm just curious- what do you all do?

I use VPW and withdraw the entire yearly amount in very early January each year. I sell the Shares in my Mutual Fund and Transfer the Cash into a 'Spending Account' that is earning about 2% currently.... In fact, I just did this yesterday.
Cut-Throat is offline   Reply With Quote
Old 01-02-2019, 09:38 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 8,361
I transfer the monies monthly from my online savings into my brick and mortar. Not taking yet from TIRA/401K.
__________________
TGIM
Dtail is online now   Reply With Quote
Old 01-02-2019, 10:00 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 29,891
Quote:
Originally Posted by novaman View Post
I sold my practice in May 2018 at the age of 54 and I continue to work about 12 hours a week for the new owner. After a lifetime of saving, 2019 looks to possibly be the first year where I will need to draw a bit from my portfolio to live off of.

I'm thinking that I could either liquidate my estimated needs for the year and have it in cash to draw from, or I could sell as needed in small amounts going forward.

I'm new to all this so I'm just curious- what do you all do?
I like to withdraw my annual income at the start of the year. I park most of it in a high yield savings account — some of them are yielding 2.2% or better — and then have what I need monthly sent to my checking account, kind of like a paycheck.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 01-02-2019, 10:44 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 5,582
I withdraw about a quarter's worth of expected expenses and then see how long it lasts. I have some non-portfolio income which can make it last longer. But like audreyh1, I park it in a HYSA and then have a monthly transfer to checking.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 01-02-2019, 10:52 PM   #13
Full time employment: Posting here.
googily's Avatar
 
Join Date: Jul 2013
Posts: 627
If you aren't worried about ACA or Medicare cliffs, how much do you worry about withdrawals and your tax brackets? I'm plowing the max into my 401k/mega backdoor this year (still working), and so need money to replace that pay. I'm somewhat close to the top of the 22% bracket at my default (before charity, TLH, etc), so I find myself strangely hesitant to draw from my inherited IRA, because that will raise my income and send me into the 24% bracket. But I worry about getting too deep into my taxable account. On the other hand, I am looking at large RMDs in later years, which will also have me probably at 24% or whatever that current bracket would be. Is this reticence just the tax tail wagging the dog?

(Sorry to tag along into this thread, but it is related to withdrawal strategies .)
googily is online now   Reply With Quote
Old 01-03-2019, 06:40 AM   #14
Full time employment: Posting here.
 
Join Date: May 2015
Location: Atlanta suburbs
Posts: 633
Quote:
Originally Posted by novaman View Post
I'm thinking that I could either liquidate my estimated needs for the year and have it in cash to draw from, or I could sell as needed in small amounts going forward.
I took a retirement income planning class in Jan 2012. The individual who taught the class said something that sticks in my mind. He said that just like dollar cost averaging helps on the way up by allowing you to buy more shares when prices are down, dollar cost selling is worse for you when making withdrawals by selling more shares frequently when prices are down. I haven't done the math to confirm that my instructor was correct; I took him at his word. You are welcome to check this out on your own.

Anyway, I tend to just make the one withdrawal at the beginning of the year.
DEC-1982 is offline   Reply With Quote
Old 01-03-2019, 07:02 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,129
Quote:
Originally Posted by DEC-1982 View Post
I took a retirement income planning class in Jan 2012. The individual who taught the class said something that sticks in my mind. He said that just like dollar cost averaging helps on the way up by allowing you to buy more shares when prices are down, dollar cost selling is worse for you when making withdrawals by selling more shares frequently when prices are down. I haven't done the math to confirm that my instructor was correct; I took him at his word. You are welcome to check this out on your own.

Anyway, I tend to just make the one withdrawal at the beginning of the year.
That doesn't make sense because you don't know whether stock prices will be down or up in the future. And the general trend over time is up, not down, over time. The instructor is off in both the buying and selling scenario. In 25 of the last 30 years the stock market finished higher at the end of the year than when it started. That favors buying early while it's low, and spreading out selling over the year.
RunningBum is offline   Reply With Quote
Old 01-03-2019, 08:45 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 2,767
I keep 3 years worth of expenses in my stable value fund in my 401k. Yesterday, I pulled my annual allotment which will be put in a bank MM account. I will transfer monthly stipend last day of month.

My first year of retirement, I took monthly withdrawals. That proved to be a royal pain in a$$, as I had to wait for the three day settling period, which had to be business days, and they would send a check via snail mail. I may or my not be in town. If I chose a wire transfer, it was $25 a pop.
Winemaker is offline   Reply With Quote
Old 01-03-2019, 09:36 AM   #17
Dryer sheet aficionado
 
Join Date: May 2014
Location: Philadelphia
Posts: 32
Curious, where do you make this annual withdrawal from? Is it an Ira? Is it savings? Will savings be depleted after so many years.
Joe0401 is offline   Reply With Quote
Old 01-03-2019, 09:43 AM   #18
Dryer sheet aficionado
 
Join Date: May 2014
Location: Philadelphia
Posts: 32
I will be 62in a few months. I retired at 60. I took a lump sum retirement rather than monthly and split that between stocks and bonds. Now I’m watching that take a hit on a daily basis. Maybe I should have taken the monthly from my work. Oh well. I have been living on savings. Soc security check will help out soon. Also have a variable annuity which earns 6% a year, as long as I don’t touch it till I’m 65, then I’m guarenteed 5% a year withdrawal.
Joe0401 is offline   Reply With Quote
Old 01-03-2019, 11:30 AM   #19
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 8,339
Quote:
Originally Posted by googily View Post
If you aren't worried about ACA or Medicare cliffs, how much do you worry about withdrawals and your tax brackets?
As indicated here, that's the primary driver for me.

Quote:
Originally Posted by sengsational View Post
I'm not typical because "everything" is in "tax advantaged" accounts. That being said, I "do my taxes" in December and pull whatever amount from tIRA/401k that keeps my PTC ACA whole. Then, if during the year I need more, I pull from Roth/HSA.

But the main reason why I'm posting is to address the "market timing" aspect comments, because I don't think they apply if you're following your AA rebalancing plan. Either that, or it becomes a "how tight are your bands", and that gets a bit personal


What I mean is that, along with the shift of value from "wherever" into the spending account, in my case, there's also a rebalance. So even if I "sell low" to get the cash, I concurrently "buy low" in another account, making it a wash.



For example, let's say the best account to get the cash for next year happened to be in US equities (not really the way it is for me, but just for the example). Even if I sold at the pit of despair on 12/24, concurrently I'd be buying the same amount (or more) in another account. Kind of selling stuff to myself.


So although I "have to" do an tIRA/401k pull in December in order to align my tax situation, it has no effect on my AA, so no "market timing" is involved.
sengsational is offline   Reply With Quote
Old 01-03-2019, 11:56 AM   #20
Full time employment: Posting here.
 
Join Date: Aug 2018
Posts: 549
Quote:
Originally Posted by novaman View Post
.... I'm thinking that I could either liquidate my estimated needs for the year and have it in cash to draw from, or I could sell as needed in small amounts going forward. ...
This article on Early Retirement Now address lump sum vs dollar cost averaging for investments. The basic logic is that since stocks generally go up over time, investing a lump sum is usually better than dollar cost averaging.

https://earlyretirementnow.com/2017/...ost-averaging/

For withdrawals, the opposite logic would seem to apply. It would usually be better to take the withdrawals a little bit at a time. The later withdrawals would come from stocks with higher valuations.

Of course, if you think the value of the investments is falling instead of rising, the opposite actions would be better.
Lewis Clark is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
New FIRE - Withdrawal strategy advice desired! CardsFan FIRE and Money 14 08-05-2016 05:01 PM
Need advice re FIRE Investment strategy TimSF FIRE and Money 14 10-18-2013 02:25 PM
Withdrawal Strategy Advice frayne FIRE and Money 25 09-25-2012 01:51 PM
Your advice on a withdrawal strategy Finance Dave FIRE and Money 28 07-01-2008 08:21 PM
Need Help With Withdrawal Strategy Bob Smith FIRE and Money 54 12-22-2003 06:12 AM

» Quick Links

 
All times are GMT -6. The time now is 09:11 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.