Withdrawal Strategy - where do I start?

[PersianCatMom]

Currently @ 1.2 million with individual stocks, traditional IRA's, Roth IRA's, and 401Ks. Wife retired this year @ 41, and hubby in 6 more years @ 50. Pensions will kick in @ 60, so we'll have 10 years in which we need to use this bucket of $ to live on. Seeking advise on which account(s) to use (i.e., Roth contributions since that's not taxed) first, second, third, etc...

 

[2017ish]

Will your pensions be sufficient once they (and possibly social security) kick in? How much do you plan to spend each year--will you exhaust your savings in the 10 years? How much is in each type of account, and what do you project in 6 more years?

I'd lean towards using up taxable rather than any Roth, but it will depend.

 

[PersianCatMom]

Will your pensions be sufficient once they (and possibly social security) kick in? How much do you plan to spend each year--will you exhaust your savings in the 10 years? How much is in each type of account, and what do you project in 6 more years?

I'd lean towards using up taxable rather than any Roth, but it will depend.

Yes, pensions with be sufficient thereafter... only need to tap into the 1.2 million from 50-60 years of age. That's it. The 1.2 will continue to grow between now and then too (next 6 years). Why would you recommend taxable usage (ie. General stocks) versus non-taxable (ie. Roth)? Thanks for your insight on this!!

 

[Sunset]

Leave your Roth for as long as you can because it grows tax free.

<edited>

I would consider, you should have in taxable, money that is not in pure stocks, as while stocks are great right now, should they tank at some time during the time you need to use savings. It would be better to have a couple of years worth of money in CD's so you don't have to sell the stocks when they are low in value.

 

[pb4uski]

I think you need to do some spreadsheeting of your spending and income for the next 20 years... and then where the money will come from. Taxable accounts first, then Roth contributions.

If the above penalty free sources are insufficient then consider a Roth conversion ladder or a SEPP/72t.

 

[Yoheadden]

Like the others have said. Leave the Roth so that it grows tax free.
Do u have an emergency/cash fund ? U still have a few years before withdrawals begin, but one way of doing it is to have a cash fund (not to be confused with a separate emergency account), with 1-2 years of living expenses to live off of. Then replenish this with the taxable accounts. You also need to consider the tax consequences of withdrawing from the Nonroth accounts early.

 

[Out-to-Lunch]

You could take a look at i-orp.com (https://www.i-orp.com/Plans/extended.html). IMHO, you need to do your own thinking, but i-orp's goal is to help decide these very questions.

 

[Offgrid Organic Farmer]

Withdrawal Strategy - where do I start?

Live on the earnings from your portfolio. I would NEVER withdraw cash from an investment to live on.

 

[2017ish]

.... Why would you recommend [spending] taxable usage (ie. General stocks) versus non-taxable (ie. Roth) [first in retirement]? Thanks for your insight on this!!

Depending upon your basis in the taxable investments, you may have little tax on those funds. As for Roths, our strategy (prime wage earner looking at conservative 50 year time frame after age 56 retirement), is to get as much as reasonably possible into Roth so that taxes aren't an issue with 90-year old single taxpayer. Thus, in initial retirement years, rather than paying zero taxes, we choose to fill the 24% bracket via conversions.

IOrp is a good suggestion.

 

[pb4uski]

Live on the earnings from your portfolio. I would NEVER withdraw cash from an investment to live on.

Why not? Did you save it to hoard it or for your retirement? I guess your heirs and charities will appreciate it.

 

[pb4uski]

Depending upon your basis in the taxable investments, you may have little tax on those funds. ...

And even if you do have a low tax basis and significant unrealized gains, if your total income for a couple is less than $104,800 (in 2020)... taxable income is $80,000 or less... then long-term capital gains are tax-free.

 

[MrLoco]

Big problem here is that you don't mention at what % the money is spread around.

For example: Do the individual stocks make up 10 % of the overall portfolio or 50%? If it is the latter; imagine if the market tanks 50% next year and you lose 25% of your overall portfolio.

MAy want to move some (all?) of the stocks to diversified etf's to cushion any future declines in the stock market.

Keep in mind the stock market is at all time high's.

Again, the overall asset allocation ....stocks, bonds, cash ....becomes a critical factor as you need 10 years of a steady stream of reliable income.

 

[VanWinkle]

I would balance withdrawals between taxable and tax free to accommodate the best scenario for taxes. I would leave the Roth for last and only tap if necessary to control a large tax bill. The taxable account is your best bet to control taxes with capital gains preferred tax treatment.

 

[CRLLS]

Nobody has mentioned the elephant in the room. What is the health insurance plan? Withdrawing from a tIRA could exclude any subsidies. What is the backup plan should the ACA be deemed unconstitutional? Often, people balance the use of tIRA, Roth, other investments and savings in order to get those subsidies, which can be enormous.

 

[bizlady]

Dont't for get to take a look at the "what if"--- major expense of unexpected serious illness or death for one of you- can you cover those, and can the survivor make it on what is left?