When do you withdrawal from your portfolio?

[MRG]

Timely thread. Been retired for 8 years and had mainly lived from taxed assets. Our taxed money is pretty empty and need refilling.

I've let a couple hundred apple shares get called away so I have some cash in my IRA. How much to withdraw and when are still up in the air. It will probably be an iterative process throughout the year.

 

[5Miler]

For the past 10 years I have had an automatic monthly transfer from my Vanguard IRA to my checking account to provide my basic income. I set it up to transfer from my money market fund and occasionally replenish the money market funds by selling other index funds usually at market highs. So typically once a quarter or so I liquidate some holdings but if the market is too depressed I may hold off for a while as I keep about a years worth of cash buffer in my money market. I started off 10 years ago with a WR of just over 4% which is quite a bit lower percentagewise these days although I have never upped my withdrawal amount.

I just deleted the automatic withdrawal this week as I received my first SS check three days ago. I'll change to Roth conversions instead until RMDs in 4 years.

If I could change some things that I did, I would have put more money in my ROTH rather than my 401K as I must do what I can now to minimize RMDs. I also should have paid more attention to ROTH conversions while retired as I had 10 years to chip away at it that I squandered. I have been living very comfortably on my IRA/401K income enjoying minimal taxes when I should have sucked it up a bit and taken on more of a tax load to accomplish some meaningful ROTH conversions. Live and learn.

 

[marinauser]

I like to have one year's expenses in cash in the taxable account at the start of the year and about one year's cash in an IRA. Usually, dividend and capital gain distributions in the taxable account in December will get me to the desired cash level on Jan. 1. Should any added cash be needed during the course of the year for an unanticipated expense, then I can make a sale in the taxable account or withdrawal from the IRA. If taking from the IRA, I would rebalance that account to get back to the one year cash in that account.

 

[GrayHare]

If you do one large withdrawal at the end of the year, does that eliminate the need to do quarterly estimated payments?

Only if with your tax filing you report your income separately for each of four separate periods of the year. IMO that's tedious.

 

[lem1955]

I calculate the withdrawal amount based on- https://www.bogleheads.org/wiki/Variable_percentage_withdrawal
and then sell mutual fund securities in my tIRA up to that amount and keep it in VMRXX within my tIRA. I set up an automatic monthly withdrawal from VMRXX to my local checking account. If I don't need the cash I reinvest it in a taxable account that isn't yet as large as I would like it to be.

 

[Born2Fish]

I withdraw from 401k in December when I know my taxes. Fed and State withholding amounts are selected to avoid any tax penalties.

 

[OverThinkMuch]

I plan to stick with the 4% withdrawal rate practice when I retire in the next few weeks.
...
2) Would you recommend that I keep a years worth of expenses in a savings account and start withdrawing now or drain the savings and then withdraw?

Maybe you view it differently, but I view that 1 year as a cushion, and I avoid spending it until stocks crash. Then I spend from that, instead of selling stocks.

As you approach retirement, consider a bond tent - you allocate more to bonds as you retire, and wait for the dangerous early years... then push your stock allocation back up.

 

[sengsational]

If you do one large withdrawal at the end of the year, does that eliminate the need to do quarterly estimated payments?

Only if with your tax filing you report your income separately for each of four separate periods of the year. IMO that's tedious.

For a few years, I paid one estimated tax payment in December, got a letter with a penalty, wrote a letter and said I had no tax liability until the date I did the pull, and they reversed the penalty. I finally learned that there's no need for the letter.

You pay your estimated tax in December (only), then, when the tax software says "you owe a penalty" (for not doing even estimated taxes), don't do what I was doing, and answer "the IRS can calculate it". Instead, just select, "I'll calculate it". When you do, you can put in when you got the income (not evenly throughout the year), and, as if by magic, the penalty evaporates, and you don't get a letter!

An alternative is pull from a tIRA and you do "super withholding" enough to pay your taxes. I've got a plan this year to do a big 'in kind' Roth conversion, and then I'm going to pull from a tIRA in an amount where most of the pull will be going to the federal and state income tax authorities. You don't get dinged with with not doing even estimated taxes if you do it by tIRA withholding on a withdrawal.

 

[tsoispf]

We withdraw quarterly and have Fidelity withhold taxes based on our annual forecast. Funds are allocated based on early retirement milestones. Cash getting me to 59 1/2 in a little over a year. TIPs getting me to Social Security at 62. Then remaining t-IRA Index funds getting me to Medicare (DW will already be there). I hope to be completely on Roth income (besides Social Security) after that.

 

[FANOFJESUS]

If you do one large withdrawal at the end of the year, does that eliminate the need to do quarterly estimated payments?

Good idea. I sell at the start of the year sometimes and just pay in the taxes in one lump payment when I sell. I miss some interest but at .5% that is not a big deal

 

[RunningBum]

Usually around November I set a plan for where spending money will come from in the next year. Every few years I try to map out a tax-efficient plan for the next few years, which was especially important when the ACA cliff was an issue. I just did one of those last month that takes me out 5 more years until I'm 65, and then I'll need to do some kind of IRA withdrawal or taxable fund sale, but by then the ACA will be in my rear view mirror. Of course so much can change between now and then, but every year I'll review it to see how it's holding up and if I need to make any changes.

As far as when to withdraw, I just pull from one of my sources to my checking account as needed. I track my overall spending monthly so I'll know if I'm running over and will see if I need to make any other changes. For 2022, with what I've got in checking now plus 4Q distributions, then a CD maturing in March along with the 1Q distributions, I'm set for at least the first half of the year.

 

[FLSUnFIRE]

I'm new to being delightfully and optionally unemployed and have yet for my first withdrawal but to me WDR is more of a planning thing as I'll sell as needed to meet my actual expenses. I intend to withdraw in December to fund my next year's anticipated expenses with the goal of minimizing taxes. I will take out enough to fund the next year but at least enough to max out my MAGI (for ACA)/0% CG. If my projected expenses are less than maxing out MAGI/CG I will reinvest the difference harvesting gains and stepping up my basis. Eventually I will start SEPPs and that will take some of the decision making away from me.

 

[Doingitwrong]

Interesting answers. I’m not there yet, but thought I’d set up a paycheck that comes monthly.

 

[CyclingInvestor]

I convert the accumulated TIRA dividends each quarter, then pull from my roth into my checking account as needed. Excess $$ in the roth go to buying more stock. In December I make an extra conversion (sell in my TIRA, buy back in my roth) to get the total to the desired level.

 

[KCGeezer]

That’s what I decided on Doingitwrong. I figured I’d just reverse the dollar cost averaging I did for so many years. I Have taxes paid as part of each withdrawal since it’s part of the overall budget. So far lumpy expenses for cars, property taxes, etc. have all been covered in that ‘monthly paycheck’ as well.

 

[gcgang]

Almost ten years retired and just spending dividends, cap gain distributions from low basis mutual funds, and cash reserve.

No significant pension, must start Social Security within three years.

 

[GravitySucks]

Every 3 or 4 months as needed.
I DCAed in, I'm DCAing out.

 

[tmm99]

I do one withdrawal at the beginning of the year and another one around October once I know my tax status, etc for the year.

 

[misanman]

I pay myself a monthly salary from my tIRA. In addition to that I usually make a larger withdrawal in January and set that money aside for larger expenses that may come up during the year. Dividends in our investment and Roth accounts accumulate and can be used for occasional large projects, a new car purchase, major vacation travel, or significant home improvement. One goal is to keep income levels reasonably steady from year to year so that it is easier to manage to the income tax brackets.

 

[Dog]

That’s what I decided on Doingitwrong. I figured I’d just reverse the dollar cost averaging I did for so many years. I Have taxes paid as part of each withdrawal since it’s part of the overall budget. So far lumpy expenses for cars, property taxes, etc. have all been covered in that ‘monthly paycheck’ as well.

Same. I do have CDs and MM account for big lumpy expenses or to help cushion major market declines.

 

[thefist]

I recently refinanced my home, and purchased a vacation property. It took a lot of extra effort on my part to find a lender, because I have no regular income from W2, SS, pension or IRA yet.
So for that reason I may set up a withdrawal plan in taxable to create a paycheck. I have been selling as needed, or as valuations creep up, rather than monthly.

 

[wdberry62]

The past 2 years I've simply made withdrawals when the checking account balance gets low. However, this year I'm switching to a withdrawal in January and another in June. Feel like we're now at the point both from an expense budget and tax expectation standpoint that we can do so reliably.

 

[eyenitnoy]

I plan to stick with the 4% withdrawal rate practice when I retire in the next few weeks. I have enough cash in savings to cover a years worth of expenses so I have a couple of questions:

1) When do you withdraw from your portfolio (weekly, monthly, quarterly, annually)? Any tips/strategies?
2) Would you recommend that I keep a years worth of expenses in a savings account and start withdrawing now or drain the savings and then withdraw?

I'd keep two-three years expenses cash in reserve at all times.

I draw my entire year's allotted cash on the first business day of the year. I don't really think it matters, however, when you do it.

 

[eyenitnoy]

Almost ten years retired and just spending dividends, cap gain distributions from low basis mutual funds, and cash reserve.

No significant pension, must start Social Security within three years.

This is great, if you want to leave an inheritance.

I don't.
I actively try to spend down my principal.
The less I leave to undeserving heirs, the better.

 

[RetiredAt49]

This is great, if you want to leave an inheritance.



I don't.

I actively try to spend down my principal.

The less I leave to undeserving heirs, the better.

Exactly my thoughts! My wife and I want to pass away the minute we use our last dollar! However, it’s tricky because we never know when that’s going to happen and because we are only 49/51 we need our money to work for us for hopefully another 40 years