Question about how to withdraw spend down

[Cerys]

I'm a new widow, and a new retiree -- and while I've been in charge of the financial side of our marriage the whole of 36 years, I now have all of it at my disposal.

So it's just me -- no kids, and 1.3 million. Never been a huge spender. House not paid off, but mortgage payment is less than 400., and no other debt. I will be taking retirement withdrawals for 7 years till I can collect widow's benefits.

Here's my question, in the now my IRA account (we were self employed and I transferred all 401K's into my care at a brokerage house) I have a little over 100K in cash.

I also have to stay under the ACA income limits (high end) so I'll be taking 45K a year.

I'm thinking if I direct my IRA mutual funds to disburse all the dividends and capital gains into the IRA cash account, I won't have to try to figure out what to sell and when... I just take it from my cash account. And I need to do that because we had our own business and we have tons of retirement funds and only 150K in "not retirement" -- 90 of it in a mutual fund.

And given that the drama of the last two years is over, I can start paying attention to the finances again. Rebalancing is in order.

Or is this something I should discuss with my accountant?

 

[pb4uski]

I agree, have dividend and capital gains go into IRA cash account and then do withdrawals from IRA cash account to your taxable accounts or checking account so you can control what your income is.

I would withdraw as much as you can from the IRA and still stay under for ACA whether you need it then or not... I think the limit for 2019 is a little higher than $45,000.... $48,560.

What do you mean by rebalancing is in order? Any asset allocation rebalancing within your IRA has no tax or ACA impact.

 

[joeea]

I'm a new widow, and a new retiree -- and while I've been in charge of the financial side of our marriage the whole of 36 years, I now have all of it at my disposal.

Sorry for your loss.

So it's just me -- no kids, and 1.3 million. Never been a huge spender. House not paid off, but mortgage payment is less than 400., and no other debt. I will be taking retirement withdrawals for 7 years till I can collect widow's benefits.

What are your annual expenses?

Here's my question, in the now my IRA account (we were self employed and I transferred all 401K's into my care at a brokerage house) I have a little over 100K in cash.

I also have to stay under the ACA income limits (high end) so I'll be taking 45K a year.

Why do you have to stay under the ACA income limits?

I'm thinking if I direct my IRA mutual funds to disburse all the dividends and capital gains into the IRA cash account, I won't have to try to figure out what to sell and when... I just take it from my cash account. And I need to do that because we had our own business and we have tons of retirement funds and only 150K in "not retirement" -- 90 of it in a mutual fund.

And given that the drama of the last two years is over, I can start paying attention to the finances again. Rebalancing is in order.

Or is this something I should discuss with my accountant?

Yes, this is something you should discuss with your adviser - accountant and perhaps an hourly fee-only fiduciary financial planner.

 

[GravitySucks]

Sorry for your loss.
Welcome to the Forum.

 

[Cerys]

Thanks everyone for the sympathy. I can’t believe it’s been a month. Seems both like yesterday, and years ago.

I want to stay under the ACA limit to qualify for the subsidy. Annual expenses were about 40-45K with two, but lots of money went out for self employment tax, health insurance and retirement. We earned about 125K a year. Not having all the self employment stuff and adding to retirement cuts a lot out, and I think I can survive quite nicely on 40K.

I’ve got lots to handle right now, and I am clearing out and getting the house ready to sell in spring, so I’m not planning trips or anything spendy.

I’ll clear enough out of this house to pay cash for the next one (High COL to lower COL).

 

[CRLLS]

I recommend that you estimate each year's financial income, expenses and taxes (the total financial plan) for the next 20 years or so. Then look at the total situation. We also took retirement funds up to the ACA subsidy limit and filled the rest of out annual spending from cash. We thought this was a good plan. Looking back on it, we didn't plan far enough at the time. That plan prevented me from doing Roth conversions. When RMD's hit, the tax on those will be in the next tax bracket and be higher than if we had converted earlier to the top of our then tax bracket and received no ACA subsidy.

Every one's situation is different.

 

[Moemg]

Sorry for your loss . I was also widowed and the one piece of advice I can offer is do not make any big decisions for a year . You may think you are perfectly okay but you will look back and realize you were not . Take care of yourself !

 

[Carpediem]

I agree, have dividend and capital gains go into IRA cash account and then do withdrawals from IRA cash account to your taxable accounts or checking account so you can control what your income is.

Just for my own clarification/education, is "IRA cash account" the same as an IRA money market fund (e.g., VMMXX)?

 

[W2R]

Sorry for your loss . I was also widowed and the one piece of advice I can offer is do not make any big decisions for a year . You may think you are perfectly okay but you will look back and realize you were not . Take care of yourself !

+1

I am so sorry that you are going through all this and wish only the best for you. I second Moemg's recommendation that you do not make any big decisions for a year, if you can do that.

I can't even imagine what you and Moemg have been through. I felt pretty bad even when my ex passed away in 2018. Take care of yourself!

I don't know the first thing about the ACA so I'll let other members respond to that part of your post.

 

[GravitySucks]

+1 I made way to many decisions on major events the first year of widowhood. Thought I was fine, I was not.

Sorry for your loss . I was also widowed and the one piece of advice I can offer is do not make any big decisions for a year . You may think you are perfectly okay but you will look back and realize you were not . Take care of yourself !

 

[Cerys]

I do know about the one year rule. And I’ve seen it in action, and will abide it.

The Big Move though, has been in the plan for some time. Before diagnosis (GBM), MY intent was to get back to family. For just this reason — I have a few well meaning friends, but they are all still working long hours, with their own lives — in reality I have very little support here and I have family who really want me back.

After diagnosis, the Big Kahuna agreed I was right. He promised to move heaven and earth to get me home.

After the surgery to remove what they could of the brain tumor, my husband forgot about his promise to get me home. In no way was this like a mean or passive aggressive thing. It’s a factual thing. We called it “information falls out of his head”. He literally did not remember. There was tons of things he couldn’t hold on to. That’s why every doctor’s appointment , I was right there with him, writing everything down. Half an hour after he couldn’t remember he’d been to the doctor.

He also didn’t die from the cancer. Well — he did, but not the typical way. Three months after diagnosis, he suffered a massive seizure. I called for an ambulance and on the way there, he seized again, and his heart stopped. They couldn’t bring him back.

And my family would drop everything and fly out here to help, but I’m not ready to do that yet. I’m not saying it might not get there...but I’m not ready.

That’s why I like the cash idea. To me, that’s a “I don’t want to make a decision” decision. (yes, it’s a money market, but not a fund)

 

[pb4uski]

Just for my own clarification/education, is "IRA cash account" the same as an IRA money market fund (e.g., VMMXX)?

Yes, that is the way I interpreted the OP.

 

[trumpeting_angel]

My thoughts are with you. It does, indeed, sound like the last couple of years were incredibly difficult. We are glad you are here!

Your accountant can help you sort out the relative value of keeping income low for ACA subsidy, vs. Roth conversions, vs. whatever else they come up with. I just met with mine and though I'm generally a DIY when it comes to finance, it was enormously helpful. There are so many moving parts. @CRLLS experience is exactly something I could have fallen into if not careful.

Welcome!