NOT touching 401K after retirement

[rodi]

I think it's interesting that people are differentiating between 401ks and IRAs... They are very similar.

Like many here have posted I rolled my 401k over to a trad IRA. I've been roth converting from that. Have not withdrawn from tIRA or rIRA. I have been making RMD withdrawals from my inherited IRA - which is required by law. Dad died long enough ago that it's a full stretch... It definitely helps our monthly cashflow because my pensions are tiny, I don't take SS yet. Hubby is on SS. And we have rental income... but that inherited IRA is definitely part of our spending.

I think everyone's situation is a bit different. Some have bigger pensions. Some are making moves to reduce taxes later. Some are sitting on large non tax-preferred accounts. We all make our own decisions based on our personal situations.

 

[pb4uski]

One of the complications is: once you start RMDs, you need to take the RMD from where the accounts stand on January 1st before you can do any rollovers.



So do a rollover 401(k) --> IRA this year after RMD from 401(k) to allow QCDs in future years...

Are you sure about that? I do recall that in calculating the RMD that you need to look across all your tax-deferred accounts, but you seem to be saying across all 401ks separately from across all traditional IRAs.

In any event, while there might be an exceptional circumstance, I've never understood why anyone over 59-1/2 would choose to keep a 401k and not roll it over to an IRA.

 

[Out-to-Lunch]

In any event, while there might be an exceptional circumstance, I've never understood why anyone over 59-1/2 would choose to keep a 401k and not roll it over to an IRA.

Just a digression: Here is my particular edge case: The ability to do unlimited numbers of rollovers.

We are planning to buy a new house. Although we are prequalified on financing based on our assets and pension income, I want to retain some flexibility in case something goes awry with current financing plans. In particular, my fallback plan is to start a series of monthly withdrawals from the 403(b) to show "income." And then treat each one as an indirect rollover to the tIRA. And then stop this after the closing date. To me, this flexibility is worth the ~$40/quarter that my 403(b) charges.

 

[TheWizard]

Are you sure about that? I do recall that in calculating the RMD that you need to look across all your tax-deferred accounts, but you seem to be saying across all 401ks separately from across all traditional IRAs.

In any event, while there might be an exceptional circumstance, I've never understood why anyone over 59-1/2 would choose to keep a 401k and not roll it over to an IRA.

Yes, you need to take RMDs separately from 401k accumulations and IRA accumulations.

And I'm decently sure that you can't move tax-deferred money from one type of account or custodian to another until you've completed the RMD on that account for the year. Even moving an IRA entirely from Vanguard to Fidelity, for instance, *might* not be allowed until RMD complete.

As to your second point, I have a 403(b), not 401(k), that I'm keeping in my (former) employer's plan at TIAA for a few reasons:
I have access to TIAA Traditional paying 5%+ nowadays.
That plan offers a few Vanguard Institutional index funds with slightly lower ERs than I could get on my own in an IRA.

However, QCDs are only available from an IRA so I might make a change at some point...

 

[pb4uski]

Just a digression: Here is my particular edge case: The ability to do unlimited numbers of rollovers.

We are planning to buy a new house. Although we are prequalified on financing based on our assets and pension income, I want to retain some flexibility in case something goes awry with current financing plans. In particular, my fallback plan is to start a series of monthly withdrawals from the 403(b) to show "income." And then treat each one as an indirect rollover to the tIRA. And then stop this after the closing date. To me, this flexibility is worth the ~$40/quarter that my 403(b) charges.

I know that you are limited to one IRA-to-IRA indirect rollover per year... are you saying that the one per year limit doesn't apply to 403b to IRA indirect rollovers?

 

[rkser]

In my case, will be touching the remaining of what is in the IRA at RMD time in 6 years at age 73 & also by donations at age 70 .

Every year I have been doing Roth conversions from IRA & are in higher grades of IRMAA.
Maybe I should temper them.
Roth IRA is our old age Nursing Home money and remaining goes to our 2 kids.

Right now, we spend the dividends, capital gains from selling from the taxable accounts & DW just applied for SS at age 62.

Coming to think of it, we will probably be leaving a lot of money to children who are doing well by themselves.

Spending more than what we do now has been tough. We pretty much do what we want to do now without going crazy with money.
We spend reasonably but do not spend just for the sake of spending.

Yes over saving while working & the favourable Market are the reasons.

Thanks

 

[stephenson]

Hmmm ... good, thought provoking comments!

What I haven't done:
- sold equity funds I bought as part of early taxable savings
- sold IRA savings from same period prior to megaaerocorp
- sold 401K to IRA after retirement fund from megaaerocorp
- sold gold (went off on numismatics for a hedge)
- sold Roth funds that I converted from after tax 401K with megaaerocorp
- converted anything to Roth - bad on me , but just never got around to it
- collected social security

What I have done:
- lived off military and megaaerocorp pensions
- collected up uninvested cash prior to retirement and bought a few cheap rental houses in northwest Florida (rental income has increased quite a bit)
- sold expensive house and moved to less expensive area with less expensive house
- started to buy nicer gifts
- trying to buy more expensive wine (I LOVE a bargain!)
- order what I want off a menu (definitely not part of my childhood training)

What I need to do:
- spend more money (it is hard without buying bigger boat, faster car, or airplane)
- listen to my better half and travel waaaaay more
- get with the Roth conversions!
- start social security when optimum (my sister was able to collect one check prior to passing this year - a very sad, but instructive story)

What I wish I could do:
- contribute to an IRA or 401K

Two college educated and successful kids so they will do well at one point ...

 

[Out-to-Lunch]

I know that you are limited to one IRA-to-IRA indirect rollover per year... are you saying that the one per year limit doesn't apply to 403b to IRA indirect rollovers?

Correct. Sorry that I didn't review that bit of info. But you inferred correctly: the once-per-year limit does NOT apply to rollovers from retirement plans (401k, 403b, 457...) to IRAs.

 

[cyber888]

Right, my Tiaa Traditional is paying 5.222% rate. So I'm not even bothering to put this in any bond fund.

Yes, you need to take RMDs separately from 401k accumulations and IRA accumulations.

As to your second point, I have a 403(b), not 401(k), that I'm keeping in my (former) employer's plan at TIAA for a few reasons:
I have access to TIAA Traditional paying 5%+ nowadays.
That plan offers a few Vanguard Institutional index funds with slightly lower ERs than I could get on my own in an IRA.

However, QCDs are only available from an IRA so I might make a change at some point...

 

[jazz4cash]

I've never understood why anyone over 59-1/2 would choose to keep a 401k and not roll it over to an IRA.

My 401k has two features that influence my decision to NOT roll over to an IRA. Megacorp does not distinguish between active employees and retirees. It has a stable value fund which was pretty good when fixed rates were ~0%. I can still take 401k loans which is a handy tool for income smoothing. Last year I was able to buy some great bonds without waiting for a CD to mature.

I believe I can aggregate and take RMDs from a single IRA but would need to take an RMD from each 401k individually. I rolled over my 2nd 401k because the fee structure for retirees was different.

 

[CardsFan]

We spend as much money as we want. If spending more would make us happier, then we would do that. But, so far, achieving the happiness threshold has not required withdrawing from our portfolio. And I didn't hate my job, so I was willing to work long enough to not ever have to worry about money again. I also will not feel shortchanged if I die with a big pile of unspent money.

+1 to the bold above. Working just a few more years, at something I rather enjoyed, has left us in the position to not worry about money. We are just not big spenders.

In our case, their is a benefit to DS and DDIL. It was not the reason we worked a little longer, but knowing there is something for them makes it feel like we are not just leaving it on the table.

 

[Exchme]

Roth IRA is our old age Nursing Home money and remaining goes to our 2 kids.

If it comes time for a nursing home, leave instructions to use the regular IRA money. The medical care related costs will be tax deductible.

 

[FloridaJim57]

Although I had a 401k, now an IRA, I have not touched it four years into retirement. First off I was lucky enough to inherit money that will probably last me another five years and my pension combined with my wife's and my own SS cover most monthly expenses. Upon retirment we spoke to a number of financial advisors all of whom gave us conflicting advice on which to spend first, taxable or non-taxable funds. What the hell, no one lives forever no matter which you spend first.

 

[rkser]

If it comes time for a nursing home, leave instructions to use the regular IRA money. The medical care related costs will be tax deductible.

Thankyou

 

[dheb]

I have a 403(b) instead of a 401(k). I have to draw from it to be counted as a retiree from my University (which keeps my employee health insurance) ... so I signed up for a monthly $8 payment ($10 before taxes are withheld). The account is part of my overall retirement strategy; but until I need it, why take it out earlier than necessary?

 

[GoodLife59]

I rolled my 401k into a traditional IRA. We’ll be doing the same for my wife soon. Year 1 and 2 I did draw from my IRA. Last year (year 3) I stopped while the stock and bond market tanked. Made up the difference with a lucrative consulting gig. I have a floor balance I’m trying to sustain and drawing monies above that floor for living expenses. This year, as there has been an initial rebound from 2022, I moved funds above the floor balance to a money market fund yielding 4.75% within the IRA. Hoping to smooth out the bumps created by rising interest rates and the debt limit issue.

 

[indiajust]

My tendency of frugal as habit forming. Going 20 years on my savings while the Roth grows... I can feel the pressure I put on myself to keep going without spending the Roth. I expect I will hit a tipping point with spending and change my habits.

Stretching is becoming my default. If I make a mistake that wipes me out, that would be a spending push. I will learn sooner or later.

 

[Hermit]

A few comments in the posts above about doing QCDs to manage taxes and avoid IRMAA. If one has charitable giving in their retirement plans, even regular giving such as church donations, it makes a lot of sense to me to maintain an IRA balance (or convertable 401k balance) for your lifetime to use for your charitable giving. I can understand converting what you can during low earning years, but overdoing it if you have charity plans would be a possibility. I never had low tax years. I never was below the 22% rate so that entered my planning too.

 

[davidfin]

Sounds exactly like our decisions and behaviors. Good job.

 

[RobLJ]

As the older pension generation dies off, what you describe will be a dinosaur.
In our case, virtually all of our retirement money was in 401k (in my case a 403b) and rollover IRAs for DW, along with savings.
We would not have been able to retire early without withdrawing from first my 403b, then my wife's IRAs (when she became eligible two years ago).
I realize everyone here is different. DW's sister has worked for utilities all her life, so has 3 pensions and a considerable 401k. I've spent several days talking to her, since she just took early retirement last month with a buyout, due to a dispute at work. She is not 59 yet, but has savings, so should do very well, particularly when the pensions kick int.
I worried about the last 6 years, but now I'm about to hit FRA (DW 4 years later); when SS kicks in we are gold, so I'm no longer worried. 7 years ago I was worried, even though I thought the withdrawal plan was solid. Our portfolio is about 10% higher than when I started to withdraw 6 years ago, so I guess the withdrawal plan was indeed solid, even though I was taking 7.5% out of my 403b for a couple years; it has gone down a bit, but not much while DW's IRAs went up.
I've been trying to convince DW to spend a little more on trips--we are hiking the Mount Blanc circle in August, so I guess I've been somewhat persuasive. When we both are taking SS (six years from now) it will pay for our essential expenses by itself--barring extreme health expenses but those are limited to 14k out of pocket due to my health care. The stock market has been good to us, even though I've invested pretty conservatively since 2005, when I realized that early retirement was a real possibility, barring a disaster in the stock market.

 

[Bryan Barnfellow]

We feel very lucky to have a traditional IRA and two Roths, which we are saving for self-funded LTC if needed.

-BB

 

[Winemaker]

In any event, while there might be an exceptional circumstance, I've never understood why anyone over 59-1/2 would choose to keep a 401k and not roll it over to an IRA.

I leave my hefty 401k intact for legal protection; as I have rental properties. While we have also purchased rental umbrella insurance as well, laws do change.

My 401k has a great stable value fund; and my equity allocation is in several Vanguard Institutional Funds which charge even lower fees than retail customer fund fees.

 

[jkp71]

Regardless of spending plan, it's usually a good idea to roll 401(k) accounts to an IRA when able due to the fees and lack of diverse investment options within a 401(k).

Best reason not to might be leaving a job at age 55 and needing to withdraw immediately.

 

[SumDay]

We both retired 5 years ago, and didn't touch our IRAs for the first year. We're withdrawing about 3% a year, and have also been doing some Roth conversions. DH turns 70 next month and begins his SS in July. It's WAY more than I'd anticipated, so we'll wait to see if we need to make an IRA withdrawal this year. First world problems.

 

[engineernerd]

OP, if you have played with FIREcalc enough you may realize this core truth:


There is a lot of uncertainty about how well a portfolio will do, especially over a long retirement as is typical for those on this site. A nest egg can grow enormously, or actually shrink - and it should be obvious that you don't know which will happen until after it happens. By that time it is too late to do much about it since retirees tend to lose most of their employability after a few years.


So my question to you is: is shrinking the risk that you will outlive your money and be poor when you are frail and elderly "over-saving"? That's a question each of us needs to answer for ourselves.


I for one see how little respect the elderly get in our society (especially old women but also old men) and want to have some wealth in my old age to protect me from that.