Withdrawal Strategies

[Koolau]

IRMAA isn't really that big of a deal.
In 2004 medicare will be $175/mo. The first IRMAA tier is an extra $70, for $245.

The last year before we went on Medicare our post-retirement employer- subsidized health insurance was $1000/mo. Each.

Of course I'd rather keep the extra $70, but $70 on a $258,000 income is not exactly deadly.

Keep in mind that $70 is really $840. I guess "big deal" is in the eye of the beholder. And the "big deal" to me is that at the inflection, it only takes one more dollar to cost you the $840. As always, YMMV.

 

[dknighd]

I've seen some random posts on this, but I'm curious about what withdrawal strategies you are using and whether there are some rational strategies with longterm benefit.
I built up a cash warchest in our IRA,403b to get us through the 7 years until I take SS (in 2025, I think). Most of that is gone.

I think what I have been doing, to describe it too kindly, is seat of the pants. I withdraw from core stock funds when they shoot up (Usually about 1/2 of the yearly gain), stick the proceeds in cash or bond funds. When the market drops over-much (in my view) like in 2022 or most particularly 2019, I plunk some of that money back in stock funds. The rest funds withdrawals, although I'm cash-poor now. Once I start taking SS in 2025, the problem largely goes away, and when DW takes it in 2029, the problem is more going to be what to do with everything, so I'll probably hang out on the BTD forum for tips.

The easiest answer is when rebalancing, to use the excess % money (largely) to fund withdrawals, but I'm pretty much square on target, although the run-up since October has resulted in stock funds being a little rich. So any withdrawal strategies out there beyond the obvious rebalancing one, to use as a secondary strategy? I probably should phrase this better, but I think most of you will know what I'm asking.

My interim plan is to look at fund increases and draw from the gains this year. Fidelity Contrafund, for example, is up 30% YTD, which is a bit ludicrous. The S&P indexes have also shot up, although not to that extent.

As an example of the problem, my Fidelity Floating Rate fund is up 11% YTD, so I could fund 5-7% of our yearly withdrawal just by withdrawing this year's gains from it. But since I don't think the Fed will reduce rates quickly, that 9% yield is pretty tasty, so I'm tempted to withdraw beyond yearly gains from some other bond funds and wait on it until 2025 or so. Trying to finegrain withdrawals like this, though, is probably a mistake and a time-suck.

This is the disease of overthinking, and a classic First World "problem."

Some might consider it overthinking, or a first world problem. But I consider it careful planning given what we know, or do not know.


I fully plan to have most of my cash like bucket to be spent when I collect SS at 70. SS plus annuities should be enough to keep us "comfortable enough". Any excess balance subject to RMD will be mostly for discretionary spending.


I feel comfortable taking 6% of my balance every year for now. When SS kicks in it will replace some of that "income".


I think it is a good idea to have a plan. That plan might have to change as is things change. Who knows what may happen. But I still think having a plan is a good idea.

 

[reneeh63]

My one critique on Early Retirement is that a lot of post assume that you are really well prepared for retirement. And taking just dividends or less than 2%. This was not my experience, although the blog helped me immensely in preparing.

So if you are withdrawing 2% or less, you probably aren't helping me or many here. If you are withdrawing 5% or more, you are probably in the position where you may help.
I'm not criticizing the below 3% people, just suggesting that you may want to consider your advice. If you are withdrawing 2-3%, you aren't very helpful to me, in my experience, although some of you are.

Supposedly, this is an Early Retirement Forum, just to remind you. I'm 65 so now I am an old fart and as problematic as old farts are. This sounded way too snarky and it wasn't meant to be.
What is your advice for people withdrawing 5-7% before SS? I don't care if you are withdrawing 2%--what would YOU do? That was the question. Perhaps the response is not to retire, but that was not my experience.
Navigating the period before SS is, I think, much neglected here, even though most of you have done it. That was the point of my original post. In a year, it won't matter since I'll take SS; I should have asked this 5 years ago.

I plan to retire at 62 (so just a tiny bit early, ha!) with a pension. For those years from 62-70 rather than take SS I'll be withdrawing between 4 - 5.5% each year...but immediately after starting SS that WR goes down to 1%. So I'm not worried at all and not lowering my lifestyle at 62 or raising it at 70.