Where do you actually get your money in retirement?

[rrs26ja]

My 2 cents

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.

 

[Mike999]

I fired at 50 with 4-5 years funding in brokerage account(vanguard). Each year I would put a year of expenses into the vanguard MM account. Transfer to checking account as needed. That helped me keep on track with where we were vs budget(family of 5). Well, almost 57 now and still about 2 years left, all in MM now.

Early years I was generating my AGI from the brokerage account, selling to fund the MM and dividends.


We now also have inherited IRA and Roth distributing RMDs maybe 15% of our annual budget.

These inherited accounts offer great flexibility in that you can withdraw more than the RMD. Last year I started excess distributions of taxable inherited IRA (about 40% of budget) to slow down our depletion of the brokerage. I’m also trying to keep AGI in a good place for ACA subsidy until Medicare.

Long term we will distribute from our IRAs within Vanguard to our Mm account our annual budget.

Our taxable IRAs are the core of our retirement and we will distribute our budget from them to our MM account. It does help to have all of our accounts at Vanguard with a Chase checking that is linked.

Hope that helps

 

[SumDay]

I got my inspiration from this guy's retirement blog post. Almost 4 years in, and it working well for us.

https://www.theretirementmanifesto.com/how-to-build-a-retirement-paycheck/

 

[Which Roger]

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?

DW and I do cash on demand. Get the spending money as needed throughout the year, then do one final transaction at the end of the year to get our income where we want it for tax purposes, etc.

 

[Tracer]

73, divorced, retired at 58, no pension. My monthly income as follows:

-Two SPIA annuities (No COLA) purchased with an inheritance
-Social Security
-RMD's from two IRA's (Fidelity says should carry me till I'm 100, God willing.

All totaled approximately $65,000/yr. Fine for me who is single, owns home, car and everything else debt free.

I also have about $77,000 in a taxable brokerage account, about $100,000 in high yield savings accounts which I occasionally have to draw from in higher bill months and about $100,000 in a Roth IRA which I have yet to touch.

 

[jkern]

Rent from 3 condos and Social Security cover my standard of living. My IRA is an emergency reserve or any additional spending if I so desire.

 

[Iggysmom]

Not reinvesting dividends from taxable and ira, and hoping for some rental income. (We have rental properties, which theoretically generate a fair bit of income, but repairs can cut into that at any time.) Plus, found $20 on the sidewalk this morning!

 

[SecondCor521]

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?

Either way works, there are advantages to both. Personally I'm a cash on demand style. But a few advantages I see to the other approach are:

1. Simplicity. It can be one transaction in January then done for the year.

2. Budget tracking. If one resets the checking balance to one projected/planned year of expenses in January, then one can track the annual budget by how much is left in checking in, say, September.

3. Forced spending. For someone who might not be spending enough, moving money into checking based on a target spend amount could perhaps motivate someone to spend it all. Some people have suggested a rule that whatever is left unspent gets given away at the end of the year. Others might just note the leftover balance as feedback to try to spend more next year.

If I were to switch, I wouldn't do it for either of the first two reasons. The third reason would be somewhat compelling to me.

Note also that there are two different things at play: how frequently to do distributions, and whether to follow a push or a pull model. I started a thread on the latter a while ago.

 

[davidfin]

A different view

Retired nearly 10 years ago. Just reached FRA (not yet applied). FIRST 7 years used accumulated savings plus mInimal LTCG to fund cash needs. Always mindful to maximize ACA subsidy to greatest extent possible.
Now drawing more from brokerage acct while also funding Roth. Occasionally (once), for large $ amount purchases (RV), I’ve utilized a HELOC established prior to retirement rather than take larger LTCG. I believe long term this is both tax advantaged and for most years, market returns swamped interest expenses. Anyone else used or use this strategy?

 

[folly]

move money to pay bills

For convenience I moved all 401K and IRA to two different brokerage companies. At each I have a brokerage account and a cash management (checking) account.
One is a full service local investment/brokerage company. I can walk into the office or call and talk to the same person, they advise me on moving money around, investing, etc. They take a 1% every month of total amount of our money. No fees on trades, everything covered by 1%. There is a relationship with the people here. I know them, I trust them.
Second account is an online account with a large investment company. I make all the investments and decisions. I pay fees when selling stocks. The second one is the least expensives. If you call in you talk to a different person every time. It is all up to me. There is no advice, you are on your own here. I use the advice from the full service account to help make investment decisions on the second account. I will at some point, when I feel to old to manage my money, put everything into the full service brokerage company.

Every year I move money from a traditional IRA to the roth IRA. Pay taxes on that amount. I do this with a phone call or via logging into the web site and following the web instructions. The goal is to move money to the Roth yet stay in a low enough tax bracket to qualify for marketplace insurance. I usually run some tax calculators and guess how much to move. There are better ways in determining amount to be taxed.

When I need money, I sell stock, proceeds go to cash management account, write check or use bill pay to pay bills. I take from taxable brokerage account first. Then when that is depleted will pull money from Roth.

 

[Surewhitey]

Not there yet, but I really like the plan of drawdown based on this site. Comes up with a very tax-friendly plan to start with.

https://www.i-orp.com/Plans/extended.html

 

[Out-to-Lunch]

They take a 1% every month of total amount of our money. No fees on trades, everything covered by 1%.

1% per month? Are you sure? That seems very high.

 

[EastWest Gal]

I got my inspiration from this guy's retirement blog post. Almost 4 years in, and it working well for us.

https://www.theretirementmanifesto.com/how-to-build-a-retirement-paycheck/

He recommends keeping 3 years of expenses in cash, which to me is overkill.


There are risks to investing:
Volatility risk
Liquidity risk
Market risk
...and others.

But keeping too much cash exposes one to inflation risk. We have ignored inflation risk for years as inflation has been unusually low, but we cannot ignore it now.

His system also ignores the cash that various investments generate. About half of our living expenses are paid by dividends. So do we really need to keep 3 years in cash at all times? Our WR has dropped from 3.3% to 2.4%, not because we are spending less, but because the recent market gains have increased the denominator in the calculation.

I think flexibility is the key. When inflation is low, one can keep excess cash around, but when inflation ramps up, that might be a bad idea.

 

[mickeyd]

Been retired for about 20 years. All that I take from my stash is the RMD. I generally just transfer the $ from IRA into existing taxable accounts (TSM, STB or MMF).
My distribution plan is working.

 

[mickeyd]

I love it when a plan comes together.

 

[pb4uski]

He recommends keeping 3 years of expenses in cash, which to me is overkill. ...

+1... rather than 1-3 years of spending, I would frame it as spending less pensions less SS less interest and dividends from taxable accounts. In our case, currently that would only be about 70% of our spending... and once I start SS and DW get a bump for SS spousal benefits it will only be about 15% of our spending.

 

[disneysteve]

+1... rather than 1-3 years of spending, I would frame it as spending less pensions less SS less interest and dividends from taxable accounts.

That's part of the fine tuning of planning that I'm diving into now. My thought was to have 2 years of spending in cash, but then I realized that for 2021, our taxable accounts kicked out 46K of income. That was atypically high but even if we can reasonably expect 30K, I'll also have a 20K inherited IRA RMD, and sometime soon I'll gain control of the inherited estate account which will likely throw off another 10-15K/yr. So if our investments will pretty reliably generate 60K/yr, that greatly reduces what we really need to hold in cash to represent a total of 2 years of spending.

 

[Markola]

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?

A couple of years ago, I dove into Portfolio Visualizer to answer the question of whether annual, quarterly or monthly withdrawals are best. Intuitively, it seems like leaving the most money invested throughout the year would be optimal. I was surprised at how little difference the different scenarios made but YMMV.