What’s the frequency and strategy for withdrawal your investments?

[AvidGolfer80]

Just doing as much research as I can before I FIRE (hopefully in the next year or two). I can’t seem to find anything written or discussed around the topic of when to withdraw from investments and how frequently(that is withdrawing as income). I assume there is a method or strategy that will be most beneficial for your investments.

I would assume withdrawing small amounts at a higher frequency would be most beneficial while trying to take less when markets are down.

 

[RobbieB]

I can only hit the IRA once a year, so I do. The rest I can hammer as needed.

 

[RunningBum]

You have the right idea, IMO. Keep money invested for as long as you can, maybe do a little market timing and take extra when you think it's around the top.

Try this current thread: https://www.early-retirement.org/forums/f28/annual-vs-monthly-ira-withdrawals-106892.html

I just turn off dividend reinvestment in my taxable account to give me some spending money, and withdraw the rest as needed.

If you are on the cusp of getting an ACA subsidy, one strategy is to forego it one year and sell/withdraw enough for 2-3 years, if that allows you to take the subsidy those other years.

 

[Ole Red 29]

you might search "bucket strategy". there are lots of folks who keep enough money for years of expected expenses in "cash". I tend to try to keep a few month's of expenses in cash and withdraw as needed.

 

[jebmke]

I withdraw when I need cash. Most of our expenses are on credit cards or direct debit. DDs hit around the beginning of the month. CC balances are known at the end of the month. I know exactly when pension and SS direct deposits will hit. So, by the first of the month, I know pretty well how much cash I need to fund the next 4-5 weeks. So I go into my Vanguard account and transfer funds to the bank for that month.

 

[audreyh1]

Just doing as much research as I can before I FIRE (hopefully in the next year or two). I can’t seem to find anything written or discussed around the topic of when to withdraw from investments and how frequently(that is withdrawing as income). I assume there is a method or strategy that will be most beneficial for your investments.

I would assume withdrawing small amounts at a higher frequency would be most beneficial while trying to take less when markets are down.

I withdraw from taxable accounts in early January for the entire year. Then I don't have to worry what the retirement portfolio does for the rest of the year! I also rebalance right after withdrawal and generally leave things alone.

 

[Souschef]

As I mentioned on a previous thread, my withdrawals are scheduled around events
Quarterly estimated tax payments Jan,Apr, Jun, Sep

4 son's birthdays Jun,Jul,Aug,Sep
Granddaughter's tuition

Charitable donations
I have a simple spreadsheet to keep track
All of these are withdrawals to meet my RMD.

 

[LOL!]

I withdraw when I need the money. I sell things with an eye on not creating any income taxes that I do not have to, so I sell equities in my taxable account.

If spending money from my portfolio messes up its asset allocation, then I rebalance in my IRA to clean the mess up. No taxes that way.

 

[OldShooter]

I withdraw when I need the money. ...

Yup, me and DW too. If it's serious money, which usually it is not, AA is a consideration on what to sell. For example, a week or so ago we paid our safe harbor tax bills from the IRAs and I had DW sell some US total market equity because it had grown slightly disproportionately compared to the total international market equity that we own. I sold some money market to pay my withholding because that account AA was in pretty good shape and the amount was somewhat smaller due to Roths I hold. We don't lose a lot of sleep over small AA variances, however.

@AvidGolfer80, it's completely predictable and understandable that you are stewing about this in contemplation of retirement. But when you get there, relax and remember what General Helmuth von Moltke the Elder taught us: No plan survives first contact with the enemy.

 

[scrabbler1]

Because I am not old enough to collect SS or my frozen company pension, or to withdraw from my rollover IRA, I have to rely on only my taxable account for a few more years to generate enough income to pay the bills. Most of the income comes from one bond fund whose monthly dividends go to my local bank's checking account.


Until this year, I had a stock fund whose quarterly dividends acted as a supplement to the monthly bond fund's dividends. But that stock fund was generating so much cap gain distributions it was costing me more and ore on the ACA premium subsidy. It therefore became a better move to reduce my expenses by adjusting my portfolio to generate less income and increase greatly the ACA subsidy. So, my reduced monthly expenses are easily covered by only the monthly bond fund dividends.

 

[Cobra9777]

I think a lot of people here routinely withdraw once per year, typically in January, and then immediately rebalance. I'm in the "as-needed" camp. And I try to be somewhat opportunistic about the timing, meaning that I balance cashflow needs with market and tax considerations.

Our regular "paycheck" consists of two small pensions and dividends from the taxable account (SS is still many years away). That covers roughly 60-65% of spend. Then, we almost always sell some stock in the taxable account every January. I do a large Roth conversion every December, which drives a large tax payment on January 15. We also pay our property tax in late January. Those two tax payments combined can be as much as 30% of annual cash outflow.

Beyond that, we just sell when needed for large expenditures like travel, home improvements, or a new car... OR any time the opportunity seems right to replenish cash and rebalance... again, by trying to balance cashflow, market, and tax considerations.

We hold a fairly small amount of cash, typically 1-3% of the portfolio. That roughly equates to 6-18 months of cash needed beyond the "paycheck." If we didn't have the two pensions, I'd probably hold more cash. But even that small balance provides some timing flexibility, which I like.

 

[FLSUnFIRE]

My plan (as I'm on my OMY detour) will be to take a single withdrawal from taxable in December for the first year or two. I will float living expenses with HELOC withdrawals if needed but doubt I'll need to as I hope to have a bit more than a year of expenses in cash at the beginning of each year. This will allow me to manage taxable income for the year I withdraw. After a year or two I will start a SEPP from my TSP (401K equiv) on a monthly basis and continue to manage my taxable in a lump in December as needed (If the market doesn't tank, the calculated SEPP will likely fund 80%-110% of my expenses).

 

[Midpack]

I make at most four withdrawals a year, timing coincides with estimated taxes fed and state. I calculate what I need to pay in est taxes, normal expenses, unusual expenses expected and dividends coming in for the next three months - and make a withdrawal for all of it. I’m cash rich right now, so it’s very easy, but I’d probably still do it quarterly even if I was dealing with capital gains etc.

 

[foxfirev5]

Since all my withdrawals come from tIRA's I manage them for taxes. One early in the year for major bills, property taxes, vacations etc. Then in Nov/Dec I figure out my tax situation and make the final w/d's. One for Fed and State taxes, one for Roth conversions, and one for everything else (Ally savings, Series I Bonds etc.) This gives me maximum flexibility as I occasionally have a windfall - sale of property or DW's casino income ��

Once RMD's kick in the tIRA's should be at at manageable level with the above system, being nearly equal to the RMD.

If your taking out of just taxable accounts and are confident of no surprise income it really doesn't matter.

 

[Blue531]

I have built up a sizable individual stock portfolio so each month I sell some stock to pay my monthly expenses.

I am 56 and had just severed my employment this year. The "rule of 55" should allow me to make a withdrawal from that employers 401k without a 10% penalty and I will use this if I choose to change my strategy next year.

I suggest anyone considering retiring before the age of 59 and a half begin building up a brokerage account outside of their retirement accounts. Stocks, mutual funds and index funds are all available. This can make things convenient while your money still can grow.

 

[Green Papaya]

I keep several months worth of expenses in savings/checking, then replenish from taxable account when I need to. IRA distribution into taxable account couple of times a year with an eye toward ACA cliffs. I do not touch tax free account, just let it grow unless there is an emergency. I can do some tax loss harvesting in case I need to sell equities in taxable for a lumpy item, considering tax bill impact for the year. For AA changes, I move things around in tax deferred account.

 

[Time2]

I'm doing it a little differently. I tax plan, then do all my withdrawals this year, most of it later in the year. So, I now have next years expenses in a checking account. I have one more year of big expenses, DD in dental school.

I could probably put a large chunk of the checking account into something that pays a few bucks, but, it would be trivial in my mind.
This is our second full year of retirement, first year I just max'ed out LTCGs and paid $0 taxes, this year I'm maxing out Roth Conversions and will pay about $4400.

 

[Animorph]

This year had lots of stock gains. I have already taken out two years of expenses and we're getting close to a third. Following my retirement plan, when our portfolio exceeds the value at which I had planned to withdraw yearly expenses for some year in the future, I sell and withdraw that money (or move to bonds). I'm about two years ahead at the moment. That also means that if the market stays flat in the future I may not sell anything for two to three years.

If I don't get that opportunity to raise cash a little early then I sell and withdraw a little month-to-month. This has happened during bear markets, especially if I've reinvested some previously raised cash into the portfolio.

Hopefully this strategy smooths out the ups and downs of the market when compared to a simple assumption of 6% real gains and 3% inflation. Especially in the early years of retirement when we're leaning heavily on the portfolio before SS and RMD's arrive. So far it has worked as planned.

 

[iloveyoga]

I withdraw when I need cash. Most of our expenses are on credit cards or direct debit. DDs hit around the beginning of the month. CC balances are known at the end of the month. I know exactly when pension and SS direct deposits will hit. So, by the first of the month, I know pretty well how much cash I need to fund the next 4-5 weeks. So I go into my Vanguard account and transfer funds to the bank for that month.

This is very close to what I do also.....

 

[GravitySucks]

For the first six years I would sell what ever was up that quarter and move it to the credit union account. But November 2019 I got a bit nervous and aggressively rebalanced and left 2020s expected spend in the Money Market account that was paying better than 6 month CDs. I move out of the MM to CU about once a quarter.
Covids cut the spending so 2020 expected spend is now out to August 2021 expected spend. I'll be going back to mini rebalances every quarter at that time.

 

[SecondCor521]

I refill my bank account from my savings account when it runs low. I refill my savings account from my taxable account when it runs low. My taxable won't run out until I turn 59.5, which is 8 years from now. At that point I'll reevaluate.

I usually refill my savings account with 3-6 months expenses, with adjustments made for large upcoming expenses, end of calendar year (if I can push a LTCG from this year to next easily, then I probably will), and my tax situation.

I Roth convert in December once I know my tax situation for the year. This year I chose to do half of my Roth conversion in March when the market was obviously down.

I rebalance lazily and those rebalancing transactions take place in my t-IRA.

 

[CyclingInvestor]

First day of each quarter convert all accumulated dividends from IRA to Roth. Any balance over $40K buys more stock in the Roth. Transfer $$ from Roth to checking account as needed, typically about once a month.