Where do you actually get your money in retirement?

[gcgang]

Retired 9 years ago at age 58. No pension, still delaying Social Security.

I’ve always run everything with a brokerage Cash Management Account, where all my taxable assets are held. Any cash in the account - dividends, interest, deposited checks - automatically sweep into a money market checking. Bills are either on autopay, or I do online bill pay.

I used to ladder Treasuries, as they matured I’d spend them. Rates got so bad I did open online Ally bank for CDs. My last TNote comes due in July. For spending money after that, I’ll periodically transfer 6 months expenses from Ally to the CMA.

Used to be that the money market checking would keep you up with inflation, but those days are gone, for now.

Only reason I’ve had a brick and mortar bank account in the last 40 years has been to rent a safety deposit box.

[Bruno]

I funded a couple of MYGA annuities, each with over 200K cash. I get about 5k per month for the next 7 years. That and SS I usually send extra cash each month to Discover savings acct. I have not ever pull any thing from my Fido, EJ or VG accounts. I am not sure this is good way of doing it. I think i need to figure out how to do a backdoor Roth.

[TheWizard]

Quote:

Originally Posted by 2017ish As others have indicated, this is a highly variable question. We retired at 57/56, no pensions, minimal Roths (although started Roth clocks 5+ years before retirement), and grossly disproportionate tIRAs. Had enough in taxable to make it to 59.5, along with a HELOC standing by, just in case. We withdrew from taxable as needed to sustain spending, and aggressively converted to Roths--paying taxes from taxable. In 3 years, we exhausted the taxable accounts, and started withdrawing as needed from tIRAs, whilst continuing Roth conversions (now doing so to top of 32% bracket, paying taxes out of the tIRAs). Beginning last year, we set up an automatic monthly withdrawal from tIRAs that equates to about 3/4 of allowed spending. Every 6 months, we sell from whatever we are heavy in to fund 6 months of withdrawals. To the extent we spend more than 3/4 of our allowed amount, we sell an overweighted position as needed. ACA subsidies were never an option, nor is completely avoiding IRMAA. Plan to keep on this path at least until DW hits 70. If we are lucky, we won't get our Roths equal to our tIRAs by then--although we'll try our damnedest!

32% tax bracket for Roth conversions is high.
Are you confident you'll still be in that bracket, or at least have a similar AGI once you're age 72 and beyond?

I did Roth conversions well into the 24% bracket over the past decade but now that I'm 72 with RMDs, I've stopped doing them. But my AGI (and taxes) will stay about the same, inching upward, due to my planning...

[DrRoy]

We get about 1/4 from my pension. I then accumulate all interest, dividends, distributions, and matured bond $ from the taxable account. If we need more I sell equities. It varies from year to year. No SS or RMS's yet.

[old medic]

Unlike most, monthly pensions will be the biggest leg on our stool. But this thread is still a great read, so here is ours.

58.5 and just retired, my pension is enough to meet our required expenses with a little left over, add $700/month in a couple years. May continue PT just enough to fund my HSA and maybe start a tIRA. Also have plenty of cash job opportunities should I wish.
DW, 53.5, still working 3-5 more years, currently putting about 35% into 401K , may increase to help with my ACA . She will get about the same amount in her pension plus has insurance as a benefit.
A year in cash savings, currently 6 years in 401K/Roth and growing. Just started Roth's for us last year and plan to put the max in each year, possibly more (conversions) if there is room within the ACA window.
I will need to wait till Medicare before considering SS due to ACA, and she will also have SS. Hopefully it will still be available...
We should have around a 5-7 year window from when she retires until I start SS that we can convert a bunch of our 401K to Roth at the lowest tax rate.

[SecondCor521]

Quote:

Originally Posted by disneysteve I understand the big picture side of funding my retirement but I'd love if some of you could walk through the actual day to day nuts and bolts of how/when/where you draw your money from to pay your expenses in retirement. I realize it will vary person to person. It will depend on if you have a pension, if you're already taking SS, etc. So let's focus on a 57-year-old guy with no pension and not collecting SS yet. Wife is 58, also no pension or SS. We have cash accounts, taxable mutual funds, traditional and Roth IRAs, a small SEP IRA, a 401k, and an inherited traditional and Roth IRA. The inherited t-IRA has an annual RMD starting this year of so that piece is already handled. Assume that the portfolio is about 50% taxable, 50% retirement accounts. How do we approach accessing our accounts beyond that? Do you start by drawing out income (interest, dividends, capital gains)? Or do you still reinvest all of that and just sell shares as needed? How do you draw from your cash accounts, if at all? What sort of schedule do you follow? I hope my question makes sense. Basically, we have this 7-figure portfolio ready to go and I'm just trying to wrap my head around what happens when I actually retire and need to start spending from that portfolio. When the bills start coming in, where do I reach to get the money to pay them? Thanks in advance.

I'm in a roughly similar position, except I am single, already FIREd, and do not yet have the inherited IRAs.

Big picture, switching from working to retired is, as you're guessing, quite different to manage. It has taken me several years, but I finally feel like I'm getting my sea legs. You're smart and thinking about these things so I'm sure you will figure it out as well.

Big picture, it's also a multivariable problem. You will likely want to wrap your head around cash flow, taxes, asset allocation, and long term planning. Each of these is really a separate topic but they often interrelate.

Also, few places give any sort of advanced advice, and the advice typically given is outdated, wrong, or simplistic.

Anyway, here's what I do, which is similar to others. I'll also briefly explain why I do things the way I do; that might be helpful to you to decide how you're going to do things (which will undoubtedly be different).

For day to day spending needs, I pay for things with a credit card. I use a Fidelity 2% cash back VISA because it gives me 2% cash back, is a VISA, and has no annual fee. That 2% cash back goes into my Fidelity HSA, which enables more Roth conversions, so is worth another 0.66%. So 2.66% tax free cash back on my spending.

My credit card and all my other bills are autopay from my main checking account. I've been on autopay for forever and never had a problem. Also, running everything through one central location means I only have to pay attention to cash flow in one place - if my checking account balance is positive, then I'm OK cash flow wise. I use Quicken and have all of my bills set up in there so I can project my checking account balance out several months into the future and see whether it's going to stay positive.

Like most people, I do funnel my taxable dividends, tax rebates, gifts, side gig income, bridge winnings, etc. into my checking account and spend those first. If/when I have an inherited IRA, my 10 year withdrawals would also go into this account to be spent.

(If I ended up in a cash flow positive situation and/or had anything beyond maybe 6 months in cash, I'd probably put some of that back in taxable and invest it.)

When Quicken shows me that my checking account will be running low, I sell mutual funds in my taxable account and deposit the proceeds into my checking account. I usually sell to raise a few months at a time; it is my personal preference not to have large amounts of cash lying around.

I also have a Roth conversion ladder going, so if my taxable were to run out before 59.5, I could draw on my Roth. It doesn't look like that is going to happen. However, any early retiree will need to look at the various ages of access and develop some sort of plan to make sure that they not only have enough money overall but also have enough money available when it's needed.

If I do have several months cash lying around, I have a tendency to shift some of that money into a savings account to earn a bit of interest, but that's not really a big deal these days.

Before I retired, I thought I'd have a schedule - like every January 1st and July 1st I'd sit down and do a formal cash refilling ritual. The way it has actually turned out, I am event driven. What this means is that I monitor everything via Quicken and Excel, and I've got a couple of dashboards that show me visually if everything is OK. If something is out of range, I know what I need to do to fix it.

So for example, my dashboards show me:

Is my cashflow OK?
Is my spending at a safe level?
Is my kids' college funded enough?
Is my kids' college money allocated the way I want?
Is my AA where I want it?
Is my Roth pipeline fully funded?

So I just update the data every few days, check the dashboard, and address any cells with red background. After doing this for six years, though, I intuitively know how things are going and that they're going just fine; the dashboards are just to do as well as I can just because I'm competitive with myself that way.

I also have other longer term bigger picture spreadsheets dealing with estate taxes, RMDs, and my HSA which I consult as well periodically.

That's how I do things anyway. Your situation is different, your goals are different, and you'll have different preferences, so your solution will be different. But again, you're smart and probably well prepared, so you'll figure it out. Give yourself some grace for the inevitable mistakes you'll make; they're highly unlikely to be fatal or even serious if you're even halfway thoughtful and have halfway decent luck.

[2017ish]

Quote:

Originally Posted by TheWizard 32% tax bracket for Roth conversions is high. Are you confident you'll still be in that bracket, or at least have a similar AGI once you're age 72 and beyond? ....

Pretty confident, yes. Even after 4.5 years of high spend and aggressive conversions, tIRAs remain at 4 million. If SS stays the way it is now, we will be getting near six figures once we both claim at 70. Tax rates are scheduled to snap back in 2026, meaning married filing jointly will hit 33% marginal rate at less than 250k taxable income. (And widowed/single at less than 200k).

Given the RMDs and likely tax rates for a single person in her 80s-90s, 32% seems like a relatively safe bet.

[donheff]

Quote:

Originally Posted by 2017ish Pretty confident, yes. Even after 4.5 years of high spend and aggressive conversions, tIRAs remain at 4 million. If SS stays the way it is now, we will be getting near six figures once we both claim at 70. Tax rates are scheduled to snap back in 2026, meaning married filing jointly will hit 33% marginal rate at less than 250k taxable income. (And widowed/single at less than 200k). Given the RMDs and likely tax rates for a single person in her 80s-90s, 32% seems like a relatively safe bet.

Yeah. I am thinking of heading the same way this year. I want to talk it over with a CPA first but with large pension and SS income and large IRAs it probably makes sense to get more out up to 32% while we can.

[WestUniversity]

So we have SS and pension income, in addition to our investments.

Basically the total dollar amount of our budgeted MONTHLY expenses (less monthly pension payment amount and less monthly social security payment amounts) is auto transferred from FIDO at the beginning of each month. That transfer amount ends up being a portion of our investment income.

Our budgeted ANNUAL expenses (e.g. property taxes, HOA fees, homeowners insurance, etc.) and any unplanned “lumpy” expenses (major car repairs, large medical expenses) are transferred as needed.

Our cash gets topped up at the beginning of the year when I rebalance our portfolio to our desired AA.

Our budgeted annual spend is calculated using FIRECalc and the Rich Broke or Dead calculators online….

[Clover5]

No pension or SS yet, am 60. At the beginning of the year I sell bonds and stocks equal to the amount I planned for based on my allocation, i place that in an account called Savings. I then pay myself monthly with a automatic transfer from Savings to another account called Day to Day. That’s it…

[marko]

Dividends, MF cap gains and SS. That's it.

[davidfin]

I’m curious. Many of us during wealth accumulation, made regular (monthly) disciplined contributions to both pre and post tax accounts on our way to FIRE. I read many do annual lump sum cash conversions into their cash account. I’m wondering why that approach is superior to cash on demand such as monthly or quarterly conversions to provide necessary cash. I don’t think anyone can argue we have experienced one heck of a 10 year bull run. Intuitively I think I’ve probably done better using a cash on demand approach as opposed to being 6 figures in cash at the beginning of the year. Especially this year. Comments?

[jpeter1093]

Quote:

Originally Posted by pb4uski As part of our "retirement portfolio" I hold abut a year of withdrawals + $15k in an online savings account that yields a paltry 0.4% (last time I looked). I have a monthly transfer from that online savings account to a local credit union checking account that we use to pay our bills... aka our monthly "paycheck". I monitor the balance in the local credit union checking account, making sure it has enough to pay any outstanding bills. If we have any extraordinary spending and the checking account won't have enough then I do a special transfer. We have a few lumpy bills in November each year (property taxes and insurances) so I often need to do a special transfer in November, but I try to keep those special transfers to a minimum. I don't consider the checking account to be part of our retirement portfoio and it usually has a negligible balance ($5-10k). Then toward the end of each year when I do our rebalancing I replenish the online savings account to next years spending + $15k.

We do something very similar; but instead of replenishing based on the calendar; we replenish when the fund gets below 1 month of income back up to our annual income. My thinking is it makes selling the assets to replenish similar to cost averaging when I was working and buying stock from each paycheck.

[meleana]

We have a very large cash position outside of our IRAs and also inside. No monthly pensions and not taking SS until age 70. Hubby will be 68 in April and I’m 65. I quit my job in the fall of 2018 while hubby was still working and he retired 12/31/19.

We are living off cash per our fee only Financial Advisors recommendation. I put at least 6 months living expenses or more from our piddly earning savings accounts into our checking account and I double check the balance every 6 months. Of course, I also go over our checking account systems anyway each month.

Living off cash was very helpful in allowing me to be on a ACA plan for a year and a half until I could go on Medicare. Got pretty much full subsidies.

It also keeps our income low because our brokerage account is fairly tax efficient and I only have a small RMD I have to take every year from an inherited IRA. ( I also put that money into our checking account to pay bills - usually about $8000 after taxes).

Our budget is somewhat the same as when we worked plus or minus a few things. We are simple people and not into extravagance. Plus with the pandemic we have not travelled anywhere due to the hassles of it, so no extra expenditure there. Heck we’re on vacation every day anyway! Lol!

So anyhow this low income results in a nice tax refund and also a teeny, tiny property tax refund ( less than $200) from our state.

But this year now that I’m no longer on an ACA plan, our advisor wants us to start doing Roth conversions. He says even doing this for a few years it will help a little bit for when we start taking SS at age 70 when the tax torpedo would hit. Of course, this means we will also have to take cash from our savings accounts to pay the taxes due.

I have to have another conversation with him to see how much we should convert and what the taxes will likely be because we have to make sure we have enough cash to live on until SS for both of us. Plus I still want to make sure we have an emergency cash fund outside an IRA if possible after that.

He thinks I’m too conservative with that. I like the idea of having 2-3 years cash in an emergency fund and he says a year is more than enough.

[davidfin]

Quote:

Originally Posted by jpeter1093 We do something very similar; but instead of replenishing based on the calendar; we replenish when the fund gets below 1 month of income back up to our annual income. My thinking is it makes selling the assets to replenish similar to cost averaging when I was working and buying stock from each paycheck.

Yup, I also look at it like dollar cost averaging on the way out.

[rrs26ja]

I retired at 61 and 9 months in 2018. I took SS at 62 as did my wife. I get a pension. At the time I managed all of our investments for the past 35+ years. About a year ago I hired a firm to manage my investments, and so far I am happy what they have done for us. However, at the time we retired I didn't know much about RMD. When I started looking into it and seen the taxes I am going to pay starting at 72 I started looking at options. The biggest option was to start taking money our of our IRA's and convert it into a Roth IRA.



So what are my regrets, the biggest is I shouldn't have taken SS at 62 for my wife and I. I should have started reducing my IRA's and waited to at least 66 and 3 months to get my full SS. This would have lowered my IRA balances which would have lowered my RMD. Now I am scrambling to get these balances down so I can reduce RMD at 72. Both my wife and I are 65.



There are some good Youtube videos by Safeguard Wealth Management on RMD's. Just to be upfront, these are not the people managing my assets.

[tpkinsl]

I like it simple and I like to sleep at night, so this is conservative. I am in the same position as OP - retired at 58, no pension, living off savings in a taxable vanguard account
1) we have an annual budget (say $100k for easy math)
2) we stopped all automatic reinvestments - this nets about 25% of what we need over the course of the year (so $25k)
3) as I do quarterly rebalance, I build up the other $75k by selling my winners and not rebalancing all the proceeds. It takes some thinking to get back to my AA but it is not hard
4) January 1 I move the $100k to an online savings. If the market crashes, I am good for a year - I sleep at night
5) every month we automatically move 1/12 from savings to checking
6) start again. It has worked well for 3 years.

[swabby01]

We are 180 degrees out from you relative to retirement so probably not of much help.
My pension coupled with my DW's salary (still working until she hits 62) more than supports our retirement expenses including travel if the world ever opens back up in a meaningful way.
Once wife retires, we will both start SS with her doing the early 62yo distribution. I am already past FRA so our joint SS would also cover our living expenses stand alone so will probably go into savings / investment.
Our biggest issue right now is to figure out how to manage distributions from IRA/401K's once we hit RMD age as we are not using any funds from them until RMD age forces us to.

[indiajust]

Cash management. How much and how often do you transfer. Anything above the annual cash draw falls into investing/reinvesting bucket. I like to see a year in cash in the brokerage account. I have no bank accounts and completed my roth conversions in 2014. I manage my cash during annual rebalancing. So I finish selling and buying in December and that sets my capital gains/taxes. Everything else is very predictable. No pension, just dividends and interest and cap gains. 58, still waiting to file FICA, but won't get much since only worked 16 years.

Cash management and watching budget over course of year. Stay in your comfort zone. I've been doing it since 2008. Just be careful with one time events and taxes around them.

[f35phixer]

we have not needed to pull anything from IRA's. DW (61) retired 2 years ago and I (63) am 1 year into it. We both have pensions with COLA and covered state/federal HI, along with SS. To be honest, haven't really worried about it, so ya made me look (DW does financials).

Our take home/month is $13,385 = 160,600/year Christ !

Guess I'll tell DW we can bump up our snowbird Jan - Mar 2023 budget up a little bit to say $6000/month ;-) we are living in trailer park singlewide which in fine, friends and family here BUT........ time to upgrade after our first year.