So, I've been thinking and reading more and more about withdrawal strategies in retirement. I had originally thought that tax advantaged and taxable accounts should be thought of separately if one is going to ER because of the access problems before 59.5 of the advantaged accounts. Now, after reading plenty, I am finally convinced that I am wrong about this. The key is you need a large taxable account to go with your tax advantaged account. If you have $1M and say 60/40 allocation with 400k in tax advantaged (all bond funds) and $600k in taxable stock funds If you need to sell bonds to generate your cash flow for the year because stocks have gone way down, you sell stocks (at a loss) in the taxable port to get the $$ you are withdrawing each year. Then in the advantaged you sell bonds and buy back into a stock fund (similar or exactly the same as the one you sold) to get your allocation back to where you want it, after taking your annual withdrawal. This is the same effect as just selling bonds as you bought back into the stock fund at the lower price. If you turn off Dividend ReInvestment on both accounts, you can effectively spend the dividends generated from both taxable and advantaged before you are 59.5 by using this method. So, up until now I have kept my tax advantaged portfolio at about 70/30 and my taxable portfolio closer to 60/40. My original thinking was that the increased risk on the advantaged side would pay off b/c I wouldn't need it for 16 years or so. Now, I'm considering this to be foolish, and that I should implement things as Bogleheads recommend, all bonds in advantaged accounts (reits as well), and the balance in muni funds and stock allocation in taxable. While working, rebalance with cash, if retired, withdraw as outlined above.
Do I FINALLY understand this methodology? In practice, does anyone here do something like this? I'm making some changes to my portfolio and am trying to nail down how I can access the WHOLE portfolio before 59.5. Again, it looks like the key here is that you need substantial taxable assets to make this work, likely 50% or more of total port value....
I also know I could use 72t, but this appears much more flexible....
Comments?
Do I FINALLY understand this methodology? In practice, does anyone here do something like this? I'm making some changes to my portfolio and am trying to nail down how I can access the WHOLE portfolio before 59.5. Again, it looks like the key here is that you need substantial taxable assets to make this work, likely 50% or more of total port value....
I also know I could use 72t, but this appears much more flexible....
Comments?