Retirement withdrawal mechanics

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Topic Author
MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

Retirement withdrawal mechanics

Post by MathWizard »

This is really just a sanity check.

I am on the cusp of retirement, and am pondering how exactly to withdraw from the various retirement accounts.

I have estimated the amount that I should withdraw from tax deferred each year to manage RMDs and taxes, and estimated average expenses.

Some expenses are lumpy, mainly car expenses, home maintenance and unexpected expenses.

I could just withdraw according to my AA and save in a savings account for those expenses like I do now with my paycheck.

It seems like keeping the money in a Roth account would be preferable, since I would not have to pay taxes on any gains.

I may treat this money differently than my normal AA, since it has been "encumbered" as accumulating for a future expense . In that since, it would seem to make sense to keep it in fixed income, either bonds or Roth CDs.

Do people just
pull from retirement accounts like it was a checking or savings account , or do they
write themselves a monthly paycheck and save from that?

I want to keep money invested, but also want to make this as simple as possible.
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celia
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Location: SoCal

Re: Retirement withdrawal mechanics

Post by celia »

MathWizard wrote: Mon Jan 18, 2021 8:55 pm I may treat this money differently than my normal AA, since it has been "encumbered" as accumulating for a future expense . In that since, it would seem to make sense to keep it in fixed income, either bonds or Roth CDs.
If you are referring to a Roth IRA here, this does not make sense. The Roth holds your most valuable dollars since they will not be taxed any more (assuming you are over 59.5 and the account is over 5 years old). [i.e., the Roth is “unencumbered” by future taxes.]. It should hold the assets that are expected to grow the most (stock funds) so you can maximize your future growth that will be tax-free. Bonds or CDs should be in the pre-tax accounts: traditional/roller IRA, 401K, 457 to minimize future taxable RMDs.

Depending on your age and amount of money in Tax-deferred, you may want to do Roth conversions before RMDs start. In general, many of us find it is better to have level Taxable Income (and taxes) from the time we retire thru the rest of our lives than to have a few years of low income followed by higher income when RMDs start. (You can do Roth conversions in years your other incomes are lower.)

As far as how people here spend in retirement, I think most of them calculate their yearly shortfall (besides SS and pensions and LTCG) and take 1/12 of it each month from tax-deferred or in one lump sum and put it in taxable checking and savings. If you have an RMD to finish taking, also put that in taxable or give it to charity using a QCD (if over 70.5). Then convert up to your pre-determined amount that would keep you level over many years.

If you have a big expense, you can pay for that from taxable savings first, or Roth second.
Last edited by celia on Mon Jan 18, 2021 9:56 pm, edited 2 times in total.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
KlangFool
Posts: 31426
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirement withdrawal mechanics

Post by KlangFool »

OP,


I have a very simple solution. I keep 3 years of expenses in my emergency fund. My withdrawal and Roth conversion can be optimized for tax management independent of my actual expense need every year.


KlangFool
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RetiredAL
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Re: Retirement withdrawal mechanics

Post by RetiredAL »

MathWizard wrote: Mon Jan 18, 2021 8:55 pm This is really just a sanity check.

I am on the cusp of retirement, and am pondering how exactly to withdraw from the various retirement accounts.

I have estimated the amount that I should withdraw from tax deferred each year to manage RMDs and taxes, and estimated average expenses.

Some expenses are lumpy, mainly car expenses, home maintenance and unexpected expenses.

I could just withdraw according to my AA and save in a savings account for those expenses like I do now with my paycheck.

It seems like keeping the money in a Roth account would be preferable, since I would not have to pay taxes on any gains.

I may treat this money differently than my normal AA, since it has been "encumbered" as accumulating for a future expense . In that since, it would seem to make sense to keep it in fixed income, either bonds or Roth CDs.

Do people just
pull from retirement accounts like it was a checking or savings account , or do they
write themselves a monthly paycheck and save from that?

I want to keep money invested, but also want to make this as simple as possible.
My pension balance was used to fund a tIRA. I historically have had a regular monthly withdrawal from that IRA until CV19 hit, then I did single withdrawal for the rest of the 2020. Expenditures have been way down due to us staying home all the time, so I will not resume those monthly withdrawals for a few more months, but they will resume.

As you noted, I too have experienced some periodic lumps. $ for those lumps have come from my 401K funded tIRA.

Our Roth's will be our last dollars to spend, but that is an unlikely to happen. Between 20 years of Roths for DW and I, plus modest conversions, we are now fortunate to have about 1/3 our money in Roths.

We currently have very little in our taxable investment accounts. A large part of our initial taxable was used to fund our Roths over the years, then what was left was got used for the planned roof replacement 2years into retirement. When my RMD's start next year, our taxable will get near 50% of that RMD withdrawal amount.
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Wiggums
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Re: Retirement withdrawal mechanics

Post by Wiggums »

Congratulations on your upcoming retirement.

Agree with the previous responses.

Depending on your situation, You need a strategy for efficiently handling RMD‘s, Medicare premiums and When to start Social Security.

To you answer your question, we take our annual expenses out in advance plus we have an “emergency” fund In case the stock market does not cooperate for more than a year.

You need a strategy that works for you. We have great cash flow, but a lot in pre-tax, so we are working on Roth conversions.
"I started with nothing and I still have most of it left."
Topic Author
MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

Re: Retirement withdrawal mechanics

Post by MathWizard »

Wiggums wrote: Mon Jan 18, 2021 9:54 pm Congratulations on your upcoming retirement.

Agree with the previous responses.

Depending on your situation, You need a strategy for efficiently handling RMD‘s, Medicare premiums and When to start Social Security.

To you answer your question, we take our annual expenses out in advance plus we have an “emergency” fund In case the stock market does not cooperate for more than a year.

You need a strategy that works for you. We have great cash flow, but a lot in pre-tax, so we are working on Roth conversions.
Thanks. I too have about 25% of my retirement portfolio in Roth, and it was hard to get that much in .

I do have a plan for health ins., RMDs and I as the much higher earner will claim at 70.

I have both a program and spreadsheet which calculates RMDs, federal and state income tax. The results agree, and are about the same as i-orp.

I have found that making Roth conversions up to the top of the 12% then 15% early on allows us the highest discretionary spending.
A large part of this is that the taxes that my wife will pay after I pass would be large due both to RMDs and to the fact that she would be filing single. Family histories suggest that she will outlive me by as much as 15 years.

Good luck to you on your retirement as well.
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Wiggums
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Re: Retirement withdrawal mechanics

Post by Wiggums »

You are doing all the right things. Yes, the RMDs for a single taxpayer is a challenge, but I am not aware of any magic bullet.
"I started with nothing and I still have most of it left."
Topic Author
MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

Re: Retirement withdrawal mechanics

Post by MathWizard »

celia wrote: Mon Jan 18, 2021 9:32 pm
MathWizard wrote: Mon Jan 18, 2021 8:55 pm I may treat this money differently than my normal AA, since it has been "encumbered" as accumulating for a future expense . In that since, it would seem to make sense to keep it in fixed income, either bonds or Roth CDs.
If you are referring to a Roth IRA here, this does not make sense. The Roth holds your most valuable dollars since they will not be taxed any more (assuming you are over 59.5 and the account is over 5 years old). [i.e., the Roth is “unencumbered” by future taxes.]. It should hold the assets that are expected to grow the most (stock funds) so you can maximize your future growth that will be tax-free. Bonds or CDs should be in the pre-tax accounts: traditional/roller IRA, 401K, 457 to minimize future taxable RMDs.

Depending on your age and amount of money in Tax-deferred, you may want to do Roth conversions before RMDs start. In general, many of us find it is better to have level Taxable Income (and taxes) from the time we retire thru the rest of our lives than to have a few years of low income followed by higher income when RMDs start. (You can do Roth conversions in years your other incomes are lower.)

As far as how people here spend in retirement, I think most of them calculate their yearly shortfall (besides SS and pensions and LTCG) and take 1/12 of it each month from tax-deferred or in one lump sum and put it in taxable checking and savings. If you have an RMD to finish taking, also put that in taxable or give it to charity using a QCD (if over 70.5). Then convert up to your pre-determined amount that would keep you level over many years.

If you have a big expense, you can pay for that from taxable savings first, or Roth second.
I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.

After age 70 when I claim SS, I am trying both to stay within the 10% bracket and avoid more than 50% of SS benefits from being taxed.
I can't avoid that every year,but by doing so, I decreaee taxes and increase discretionary income.

I am already pulling as much as I can from tax deferred while avoiding high marginal tax rates.

As an example, consider that I have $105K as average expenses, with a lumpy $50K needed every 5 years.

In years1-4, I can take $105K from tax deferred each year and put $10K/yr in a savings account, and in the 5th year I pull 105K again, use $95K for normal expenses, and out the extra $10K with the $40K to pay the $50K expense in the 5th year.

Alternatively, I do Roth conversions of $10K each of the first 4 years and then withdraw that $40K from Roth on the 5th years to go with the extra $10K in the 5th year to pay the $50K lumpy expense.
In this matter case, I have kept the $10K per year invested, and in a Roth so that gains are not taxed .
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celia
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Re: Retirement withdrawal mechanics

Post by celia »

MathWizard wrote: Mon Jan 18, 2021 10:55 pm I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.
There currently is no 15% tax bracket, but I will pass on that for a moment. (You are probably thinking about 15% for LTCG when you are in the 22% tax bracket up to about $400K in Taxable Income.) Your comment about withdrawing $105K a year leads me to think you likely have over $1M in a tax-deferred IRA.
After age 70 when I claim SS, I am trying both to stay within the 10% bracket and avoid more than 50% of SS benefits from being taxed.
I also don't see only 50% of SS being taxed if you withdraw $105K which is taxed. That will push you up to 85% of your SS being taxed. But that is a "good problem" to have since it means you have above average income. But waiting for SS until age 70 is definitely good, for the larger survivor benefits.
Alternatively, I do Roth conversions of $10K each of the first 4 years and then withdraw that $40K from Roth on the 5th years to go with the extra $10K in the 5th year to pay the $50K lumpy expense.
Roth conversions of $10K a year won't make a dent in your tax-deferred accounts since they grow much more than that each year.

Let's step back and look at the bigger picture. You might only be considering from now until you are 70, when you should be making a plan up to when you are both 75 or so. Those RMDs will surprise you as the tax-deferred account will continue to grow between now and then.


Let's look at The Big Picture here, aka "Why You Need to Convert". Look at the history of your tax-deferred accounts to find the year-end closing value for at least the last 4 years. For each year, add back in any amounts that were withdrawn that year and subtract any contributions made that year. Subtract your 2019 value from 2020 to see how much growth you had in 2020. Subtract 2018 from 2019, etc. What's your average yearly growth? If you don't convert/ withdraw at least that much each year, your balance (and later RMDs) will continue to grow. What will it be when you (and your spouse) turn 72? Have you been estimating future RMDs based on your age 72 balance or your current balance? Just for a minute, assume you have to withdraw 4% of that age 72 value (to taxable) and pay taxes on it. What will that do to your tax bill compared to now? What tax bracket will you be in? If you are converting the same amount as your tax-deferred account grows each year, I say you are only "treading water". If you convert less than that, your account balance is continuing to grow. If you convert more than the growth, you are making progress on bringing the account balance down.

Let's look at this as percentages now. Change the dollar amount of recent years' growth to a percent of the account. In other words, what percentage rate did the account grow in recent years? And as long as the withdrawal percentage is more than the percentage of growth, you are bringing the account value down. But, don't forget, that your RMD is not based on a steady 4%. The withdrawal rate increases as you get older. Your RMD will be about:

4% at age 72
5% at age 78
6% at age 83
7% at age 86
8% at age 88
etc
This also contributes to your RMD value increasing, even if your assets in the tax-deferred account don't grow. On average, the tax-deferred account typically reaches its highest value in your late 80s.

Next, consider that if you are married, you likely file as MFJ. When one of you dies, the survivor will have to file as Single. The space in the Single tax brackets are half as big as for MFJ and the survivor will still have to take the same RMD as when married. That's another way your tax bracket will jump.

Then, consider your (non-spouse) heirs who are likely younger than you and may inherit while in their prime working years. They will have to empty out the tax-deferred accounts within 10 years and pay for the withdrawals as ordinary income on top of their own income.

Also we are currently at historically low tax rates. They are due to return to 2017 levels in 2026 unless Congress makes the current rates permanent. Or they could change them anyways.

So... to mitigate the impact of future RMDs on your taxes, I suggest you first estimate what your RMDs and taxes would be at age 72 and later. Then start converting like crazy to bring down the tax-deferred balances.

Many Bogleheads find that keeping their taxable income (and thus their taxes) level from now through the rest of their life is much better than having a few years of very low taxes followed by higher-than-necessary taxes for the rest of their lives. There's no use thinking about their past tax brackets since they are irrelevant at this point.

The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
FishAllDay
Posts: 10
Joined: Tue Jan 19, 2021 5:25 am

Re: Retirement withdrawal mechanics

Post by FishAllDay »

I wish that several years ago I had understood Celia’s points above. I became a Boglehead in 2009 and it really paid off. Unfortunately, I didn’t realize until a few month ago how fast RMDs would grow. Now I’m 70, social security is just kicking in, and I’m stuck with over 90% of my funds in tax deferred.

Celia is right. It’s too late now to keep my pre-tax accounts from growing — a great problem but a problem nonetheless.

But here’s what I wanted to say. Even so, it's worth while to convert as much as I can afford from tax-deferred to Roth. If I increase my Roth to 15% of the total over the next few years, and live 15 more years, the Roth will likely grow to over 35% of the total, and if my wife lives 10 years beyond that, between the big RMDs and compounding, the Roth will end up over 50% of the total, leaving a nice tax-free chunk to my heirs.

Image
Last edited by FishAllDay on Tue Jan 19, 2021 6:32 am, edited 1 time in total.
backpacker61
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Re: Retirement withdrawal mechanics

Post by backpacker61 »

MathWizard wrote: Mon Jan 18, 2021 8:55 pm I am on the cusp of retirement, and am pondering how exactly to withdraw from the various retirement accounts.
Congratulations on your pending retirement.

I like this guide that explains various approaches to the same problem pretty simply.

https://retirementplans.vanguard.com/we ... ngBroc.pdf
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
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retiredjg
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Re: Retirement withdrawal mechanics

Post by retiredjg »

I think your question is about lumpy expenses in retirement and where to hold the money for that. In my experience, it is not really necessary to hold money anywhere for lumpy expenses. If something comes up, you tap your portfolio and withdraw money in the way that leaves your AA more or less intact and in a way that causes the least tax damage that year.

For this reason, I've found it convenient to hold a small portion of my Roth IRA in bonds. If I were to need $10k right away and didn't want to add $10k to my taxable income that year, I could take it from Roth - some from stocks and some from bonds - without changing the AA. This is not so easy if your Roth IRA is 100% stocks.

Taking money for a lumpy expense is not very different from choosing what to convert for a Roth conversion. I just have not found a need to have money stashed away special for different things. When you need money, you look at your portfolio and your taxes that year and pick the best place to take it from.

However, I learned this by actually being retired. You have not had this opportunity yet.

It seems that early retirement is a little like early investing. Early investors think they need to have detailed plans and work hard and be very precise to have everything work right. After investing a few years, they can see that all of that was not really necessary. Retirement is much the same - you may start out micro-managing it and learn to loosen up as you become accustomed to how things work.
Topic Author
MathWizard
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Re: Retirement withdrawal mechanics

Post by MathWizard »

backpacker61 wrote: Tue Jan 19, 2021 6:44 am
MathWizard wrote: Mon Jan 18, 2021 8:55 pm I am on the cusp of retirement, and am pondering how exactly to withdraw from the various retirement accounts.
Congratulations on your pending retirement.

I like this guide that explains various approaches to the same problem pretty simply.

https://retirementplans.vanguard.com/we ... ngBroc.pdf
Thanks for the reference.
trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Retirement withdrawal mechanics

Post by trueblueky »

celia wrote: Tue Jan 19, 2021 1:35 am
MathWizard wrote: Mon Jan 18, 2021 10:55 pm I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.
There currently is no 15% tax bracket, but I will pass on that for a moment. (You are probably thinking about 15% for LTCG when you are in the 22% tax bracket up to about $400K in Taxable Income.)
I think the poster is saying do Roth conversions to the top of 12% now. Do Roth conversions to the top of 15% after tax rates revert in 2026.
Topic Author
MathWizard
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Re: Retirement withdrawal mechanics

Post by MathWizard »

celia wrote: Tue Jan 19, 2021 1:35 am
MathWizard wrote: Mon Jan 18, 2021 10:55 pm I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.
There currently is no 15% tax bracket, but I will pass on that for a moment. (You are probably thinking about 15% for LTCG when you are in the 22% tax bracket up to about $400K in Taxable Income.) Your comment about withdrawing $105K a year leads me to think you likely have over $1M in a tax-deferred IRA.
After age 70 when I claim SS, I am trying both to stay within the 10% bracket and avoid more than 50% of SS benefits from being taxed.
I also don't see only 50% of SS being taxed if you withdraw $105K which is taxed. That will push you up to 85% of your SS being taxed. But that is a "good problem" to have since it means you have above average income. But waiting for SS until age 70 is definitely good, for the larger survivor benefits.
Alternatively, I do Roth conversions of $10K each of the first 4 years and then withdraw that $40K from Roth on the 5th years to go with the extra $10K in the 5th year to pay the $50K lumpy expense.
Roth conversions of $10K a year won't make a dent in your tax-deferred accounts since they grow much more than that each year.

Let's step back and look at the bigger picture. You might only be considering from now until you are 70, when you should be making a plan up to when you are both 75 or so. Those RMDs will surprise you as the tax-deferred account will continue to grow between now and then.


Let's look at The Big Picture here, aka "Why You Need to Convert". Look at the history of your tax-deferred accounts to find the year-end closing value for at least the last 4 years. For each year, add back in any amounts that were withdrawn that year and subtract any contributions made that year. Subtract your 2019 value from 2020 to see how much growth you had in 2020. Subtract 2018 from 2019, etc. What's your average yearly growth? If you don't convert/ withdraw at least that much each year, your balance (and later RMDs) will continue to grow. What will it be when you (and your spouse) turn 72? Have you been estimating future RMDs based on your age 72 balance or your current balance? Just for a minute, assume you have to withdraw 4% of that age 72 value (to taxable) and pay taxes on it. What will that do to your tax bill compared to now? What tax bracket will you be in? If you are converting the same amount as your tax-deferred account grows each year, I say you are only "treading water". If you convert less than that, your account balance is continuing to grow. If you convert more than the growth, you are making progress on bringing the account balance down.

Let's look at this as percentages now. Change the dollar amount of recent years' growth to a percent of the account. In other words, what percentage rate did the account grow in recent years? And as long as the withdrawal percentage is more than the percentage of growth, you are bringing the account value down. But, don't forget, that your RMD is not based on a steady 4%. The withdrawal rate increases as you get older. Your RMD will be about:

4% at age 72
5% at age 78
6% at age 83
7% at age 86
8% at age 88
etc
This also contributes to your RMD value increasing, even if your assets in the tax-deferred account don't grow. On average, the tax-deferred account typically reaches its highest value in your late 80s.

Next, consider that if you are married, you likely file as MFJ. When one of you dies, the survivor will have to file as Single. The space in the Single tax brackets are half as big as for MFJ and the survivor will still have to take the same RMD as when married. That's another way your tax bracket will jump.

Then, consider your (non-spouse) heirs who are likely younger than you and may inherit while in their prime working years. They will have to empty out the tax-deferred accounts within 10 years and pay for the withdrawals as ordinary income on top of their own income.

Also we are currently at historically low tax rates. They are due to return to 2017 levels in 2026 unless Congress makes the current rates permanent. Or they could change them anyways.

So... to mitigate the impact of future RMDs on your taxes, I suggest you first estimate what your RMDs and taxes would be at age 72 and later. Then start converting like crazy to bring down the tax-deferred balances.

Many Bogleheads find that keeping their taxable income (and thus their taxes) level from now through the rest of their life is much better than having a few years of very low taxes followed by higher-than-necessary taxes for the rest of their lives. There's no use thinking about their past tax brackets since they are irrelevant at this point.

The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.
Thanks for the reply.

You are correct, my tax deferred is roughly 1.1 million, good deduction!

Your remarks helped to crystallize my thinking. My responses are below if you want,
but these really were for me to think about the plan from a high level. I was too much
into the details to look at the big picture.

Thanks for getting me to look at the big picture.

12 and 15% brackets:
Current law (post JOBS Act) has a 12% bracket through 2025. After that, the 12% bracket becomes a 15% bracket.
You mentioned this. This is what I meant by 12 and 15% brackets.

Planning length:
I do plan to 85 for me, 100 for my wife who will survive me. Estimates are based on a combination of
SSA mortality tables, and family history: lifespans of parents/grandparents, aunts and uncles.

Covert as fast as possible:
I'm planning to.
$105K from 63 to 67 puts me at the top of the 12% bracket
$105K at ages 68 and 69 and
$70K (plus SS) from ages 70-73 both put me at the top of the 15% bracket

Going into the 22% bracket hurts the plan rather than helps, overall.

By 74, I am down to $450K, so $30K withdrawals while I am alive, and $20K withdrawals
after that are sufficient to meet RMDs and to draw down tax deferred while less
than 50% of SS benefits are taxed from age 74 on.

My kids will likely inherit IRAs which are almost all ROTH.
Rajsx
Posts: 1014
Joined: Wed Mar 21, 2007 10:07 pm
Location: Florida

Re: Retirement withdrawal mechanics

Post by Rajsx »

celia wrote: Tue Jan 19, 2021 1:35 am
MathWizard wrote: Mon Jan 18, 2021 10:55 pm I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.
There currently is no 15% tax bracket, but I will pass on that for a moment. (You are probably thinking about 15% for LTCG when you are in the 22% tax bracket up to about $400K in Taxable Income.) Your comment about withdrawing $105K a year leads me to think you likely have over $1M in a tax-deferred IRA.
After age 70 when I claim SS, I am trying both to stay within the 10% bracket and avoid more than 50% of SS benefits from being taxed.
I also don't see only 50% of SS being taxed if you withdraw $105K which is taxed. That will push you up to 85% of your SS being taxed. But that is a "good problem" to have since it means you have above average income. But waiting for SS until age 70 is definitely good, for the larger survivor benefits.
Alternatively, I do Roth conversions of $10K each of the first 4 years and then withdraw that $40K from Roth on the 5th years to go with the extra $10K in the 5th year to pay the $50K lumpy expense.
Roth conversions of $10K a year won't make a dent in your tax-deferred accounts since they grow much more than that each year.

Let's step back and look at the bigger picture. You might only be considering from now until you are 70, when you should be making a plan up to when you are both 75 or so. Those RMDs will surprise you as the tax-deferred account will continue to grow between now and then.


Let's look at The Big Picture here, aka "Why You Need to Convert". Look at the history of your tax-deferred accounts to find the year-end closing value for at least the last 4 years. For each year, add back in any amounts that were withdrawn that year and subtract any contributions made that year. Subtract your 2019 value from 2020 to see how much growth you had in 2020. Subtract 2018 from 2019, etc. What's your average yearly growth? If you don't convert/ withdraw at least that much each year, your balance (and later RMDs) will continue to grow. What will it be when you (and your spouse) turn 72? Have you been estimating future RMDs based on your age 72 balance or your current balance? Just for a minute, assume you have to withdraw 4% of that age 72 value (to taxable) and pay taxes on it. What will that do to your tax bill compared to now? What tax bracket will you be in? If you are converting the same amount as your tax-deferred account grows each year, I say you are only "treading water". If you convert less than that, your account balance is continuing to grow. If you convert more than the growth, you are making progress on bringing the account balance down.

Let's look at this as percentages now. Change the dollar amount of recent years' growth to a percent of the account. In other words, what percentage rate did the account grow in recent years? And as long as the withdrawal percentage is more than the percentage of growth, you are bringing the account value down. But, don't forget, that your RMD is not based on a steady 4%. The withdrawal rate increases as you get older. Your RMD will be about:

4% at age 72
5% at age 78
6% at age 83
7% at age 86
8% at age 88
etc
This also contributes to your RMD value increasing, even if your assets in the tax-deferred account don't grow. On average, the tax-deferred account typically reaches its highest value in your late 80s.

Next, consider that if you are married, you likely file as MFJ. When one of you dies, the survivor will have to file as Single. The space in the Single tax brackets are half as big as for MFJ and the survivor will still have to take the same RMD as when married. That's another way your tax bracket will jump.

Then, consider your (non-spouse) heirs who are likely younger than you and may inherit while in their prime working years. They will have to empty out the tax-deferred accounts within 10 years and pay for the withdrawals as ordinary income on top of their own income.

Also we are currently at historically low tax rates. They are due to return to 2017 levels in 2026 unless Congress makes the current rates permanent. Or they could change them anyways.

So... to mitigate the impact of future RMDs on your taxes, I suggest you first estimate what your RMDs and taxes would be at age 72 and later. Then start converting like crazy to bring down the tax-deferred balances.

Many Bogleheads find that keeping their taxable income (and thus their taxes) level from now through the rest of their life is much better than having a few years of very low taxes followed by higher-than-necessary taxes for the rest of their lives. There's no use thinking about their past tax brackets since they are irrelevant at this point.

The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.

Great Post !!
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Re: Retirement withdrawal mechanics

Post by celia »

MathWizard wrote: Tue Jan 19, 2021 3:04 pm Covert as fast as possible:
I'm planning to.
$105K from 63 to 67 puts me at the top of the 12% bracket
$105K at ages 68 and 69 and
$70K (plus SS) from ages 70-73 both put me at the top of the 15% bracket

Going into the 22% bracket hurts the plan rather than helps, overall.

By 74, I am down to $450K, so $30K withdrawals while I am alive, and $20K withdrawals
after that are sufficient to meet RMDs and to draw down tax deferred while less
than 50% of SS benefits are taxed from age 74 on.

My kids will likely inherit IRAs which are almost all ROTH.
Wizard, You hid the best part until the very end! Congratulations on your great plan. :sharebeer
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Retirement withdrawal mechanics

Post by Jeepergeo »

celia wrote: Tue Jan 19, 2021 1:35 am
MathWizard wrote: Mon Jan 18, 2021 10:55 pm I will be doing Roth conversions up to the top of the 12 then 15% bracket early on.
There currently is no 15% tax bracket, but I will pass on that for a moment. (You are probably thinking about 15% for LTCG when you are in the 22% tax bracket up to about $400K in Taxable Income.) Your comment about withdrawing $105K a year leads me to think you likely have over $1M in a tax-deferred IRA.
After age 70 when I claim SS, I am trying both to stay within the 10% bracket and avoid more than 50% of SS benefits from being taxed.
I also don't see only 50% of SS being taxed if you withdraw $105K which is taxed. That will push you up to 85% of your SS being taxed. But that is a "good problem" to have since it means you have above average income. But waiting for SS until age 70 is definitely good, for the larger survivor benefits.
Alternatively, I do Roth conversions of $10K each of the first 4 years and then withdraw that $40K from Roth on the 5th years to go with the extra $10K in the 5th year to pay the $50K lumpy expense.
Roth conversions of $10K a year won't make a dent in your tax-deferred accounts since they grow much more than that each year.

Let's step back and look at the bigger picture. You might only be considering from now until you are 70, when you should be making a plan up to when you are both 75 or so. Those RMDs will surprise you as the tax-deferred account will continue to grow between now and then.


Let's look at The Big Picture here, aka "Why You Need to Convert". Look at the history of your tax-deferred accounts to find the year-end closing value for at least the last 4 years. For each year, add back in any amounts that were withdrawn that year and subtract any contributions made that year. Subtract your 2019 value from 2020 to see how much growth you had in 2020. Subtract 2018 from 2019, etc. What's your average yearly growth? If you don't convert/ withdraw at least that much each year, your balance (and later RMDs) will continue to grow. What will it be when you (and your spouse) turn 72? Have you been estimating future RMDs based on your age 72 balance or your current balance? Just for a minute, assume you have to withdraw 4% of that age 72 value (to taxable) and pay taxes on it. What will that do to your tax bill compared to now? What tax bracket will you be in? If you are converting the same amount as your tax-deferred account grows each year, I say you are only "treading water". If you convert less than that, your account balance is continuing to grow. If you convert more than the growth, you are making progress on bringing the account balance down.

Let's look at this as percentages now. Change the dollar amount of recent years' growth to a percent of the account. In other words, what percentage rate did the account grow in recent years? And as long as the withdrawal percentage is more than the percentage of growth, you are bringing the account value down. But, don't forget, that your RMD is not based on a steady 4%. The withdrawal rate increases as you get older. Your RMD will be about:

4% at age 72
5% at age 78
6% at age 83
7% at age 86
8% at age 88
etc
This also contributes to your RMD value increasing, even if your assets in the tax-deferred account don't grow. On average, the tax-deferred account typically reaches its highest value in your late 80s.

Next, consider that if you are married, you likely file as MFJ. When one of you dies, the survivor will have to file as Single. The space in the Single tax brackets are half as big as for MFJ and the survivor will still have to take the same RMD as when married. That's another way your tax bracket will jump.

Then, consider your (non-spouse) heirs who are likely younger than you and may inherit while in their prime working years. They will have to empty out the tax-deferred accounts within 10 years and pay for the withdrawals as ordinary income on top of their own income.

Also we are currently at historically low tax rates. They are due to return to 2017 levels in 2026 unless Congress makes the current rates permanent. Or they could change them anyways.

So... to mitigate the impact of future RMDs on your taxes, I suggest you first estimate what your RMDs and taxes would be at age 72 and later. Then start converting like crazy to bring down the tax-deferred balances.

Many Bogleheads find that keeping their taxable income (and thus their taxes) level from now through the rest of their life is much better than having a few years of very low taxes followed by higher-than-necessary taxes for the rest of their lives. There's no use thinking about their past tax brackets since they are irrelevant at this point.

The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.
Conceptually, I understand that last paragraph. I understand how that is good in a growing market. But doesn't that approach put the Roth more at risk if there were a general market down turn? Right now, my savings are divided as roughly as follows:

Cash, 10%
Taxable Brokerage, 5%
Roth, 25%
IRA, 401k, 457, taxable, 60%

All accounts except cash are invested to my AA of 60:40 Stocks:Bonds.

Age 62 and plan to retire before the end of this year.
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Re: Retirement withdrawal mechanics

Post by celia »

Jeepergeo wrote: Sun May 09, 2021 10:18 pm
celia wrote: Tue Jan 19, 2021 1:35 am The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.
Conceptually, I understand that last paragraph. I understand how that is good in a growing market. But doesn't that approach put the Roth more at risk if there were a general market down turn?
Yes, of course, but afterwards, when stocks start to grow again, the Roth will grow faster than the tax-deferred, just like before the downturn started.

AND, remember that during a large downturn, that is a great time to do extra Roth conversions. For example, if you had shares worth $100K that you were planning to convert, and they fell to $75K, if you then convert, the tax would be on $75K instead of on $100K. When the shares returned to their previous value in the Roth, that would be like you converted $25K for free.
Right now, my savings are divided as roughly as follows:

Cash, 10%
Taxable Brokerage, 5%
Roth, 25%
IRA, 401k, 457, taxable, 60%

All accounts except cash are invested to my AA of 60:40 Stocks:Bonds.

Age 62 and plan to retire before the end of this year.
With the same AA in each account, all your accounts will go down the same percentage and return to the previous value at the same rate.

But that would be true for anyone, at any stage of life. If you were 10 years from retirement, and focusing on accumulating, the stock shares would go down regardless of what account they are in. This has nothing to do with Roth conversion. Rather, it is the basic principle of Tax-efficient Fund Placement, which says to put your fastest-growing asset in Roth to maximize future tax-free growth. Why would you want to keep some of those stock shares in tax-deferred and convert bond shares instead? That will just make the tax-deferred account grow more than if the stocks had been removed. Consequently, you will pay more in taxes when you do future withdrawals or conversions from that tax-deferred account.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Retirement withdrawal mechanics

Post by retiredjg »

Jeepergeo wrote: Sun May 09, 2021 10:18 pm Conceptually, I understand that last paragraph. I understand how that is good in a growing market. But doesn't that approach put the Roth more at risk if there were a general market down turn?
Yes, it does. And that is one reason to hold both stocks and bonds in Roth IRA. And knowing how investors react to downturns, many good advisors even suggest this approach to reduce panic.

Right now, my savings are divided as roughly as follows:

Cash, 10%
Taxable Brokerage, 5%
Roth, 25%
IRA, 401k, 457, taxable, 60%

All accounts except cash are invested to my AA of 60:40 Stocks:Bonds.

Age 62 and plan to retire before the end of this year.
The "guideline" to hold only stocks in Roth IRA is an opinion (widely held). It is not gospel. There are even some people who intentionally hold mostly bonds in Roth IRA.

Each investor gets to choose where on that continuum s/he wants to be.

If you like your current approach, stay there. If you like the idea of more stocks in Roth IRA, move that direction, as far or as little as you want. For example, you could allocate that Roth IRA of yours into 80% stocks/20% bonds or 75% stocks/25% bonds to get something like the "best of both worlds".
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Re: Retirement withdrawal mechanics

Post by David Jay »

Jeepergeo wrote: Sun May 09, 2021 10:18 pmAll accounts except cash are invested to my AA of 60:40 Stocks:Bonds.
Holding the same 60:40 in every account is less than optimal.

Different accounts have different tax treatment, so the usual recommendation is to hold your desired asset allocation (60:40) on your total portfolio but use different accounts for different portions of your allocation. Here is the wiki on tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement
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Re: Retirement withdrawal mechanics

Post by retiredjg »

David Jay wrote: Mon May 10, 2021 8:53 am
Jeepergeo wrote: Sun May 09, 2021 10:18 pmAll accounts except cash are invested to my AA of 60:40 Stocks:Bonds.
Holding the same 60:40 in every account is less than optimal.
I'll take the other side of the argument. :happy

I agree that holding 60:40 in every account is less than optimal financially. In a long term situation, all-stocks-in-Roth is expected to produce a little larger portfolio.

However, there is more to investing than expected return. When humans are running the show, you have to accept that human traits are an additional variable. For some people, all-stocks-in-Roth may not be emotionally optimal and that can affect the outcome.

Having said all that, I'm a believer that having an all stock (or mostly all stock) Roth IRA is the better financial choice. And it is what I do. But just because it is right for me does not mean it is "optimal" (in the larger sense of the word) for everybody.
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Re: Retirement withdrawal mechanics

Post by David Jay »

retiredjg wrote: Mon May 10, 2021 9:51 am
David Jay wrote: Mon May 10, 2021 8:53 am
Jeepergeo wrote: Sun May 09, 2021 10:18 pmAll accounts except cash are invested to my AA of 60:40 Stocks:Bonds.
Holding the same 60:40 in every account is less than optimal.
I'll take the other side of the argument. :happy

I agree that holding 60:40 in every account is less than optimal financially. In a long term situation, all-stocks-in-Roth is expected to produce a little larger portfolio.

However, there is more to investing than expected return. When humans are running the show, you have to accept that human traits are an additional variable. For some people, all-stocks-in-Roth may not be emotionally optimal and that can affect the outcome.

Having said all that, I'm a believer that having an all stock (or mostly all stock) Roth IRA is the better financial choice. And it is what I do. But just because it is right for me does not mean it is "optimal" (in the larger sense of the word) for everybody.
“Optimal” to me is a math term (i.e. the same meaning as your “financially optimal”), so we are in agreement except for language.

“Preferred” would be my language. I have a “one fund” portfolio across multiple account types which is not “optimal” (by my definition) but is preferred because it is a portfolio that my spouse can manage on her own in my absence.
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Re: Retirement withdrawal mechanics

Post by retiredjg »

David Jay wrote: Mon May 10, 2021 10:02 am “Optimal” to me is a math term (i.e. the same meaning as your “financially optimal”), so we are in agreement except for language.
I know. From my point of view, we are almost always in agreement. :D
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Re: Retirement withdrawal mechanics

Post by David Jay »

retiredjg wrote: Mon May 10, 2021 10:18 am
David Jay wrote: Mon May 10, 2021 10:02 am “Optimal” to me is a math term (i.e. the same meaning as your “financially optimal”), so we are in agreement except for language.
I know. From my point of view, we are almost always in agreement. :D
It’s pretty easy if one focuses on the “majors”.

I have advised my spouse in my “after I am gone” letter to consult Bogleheads with questions. If the long-term members agree, follow their advice. If they disagree, it probably doesn’t matter (i.e. it’s likely a minor issue).
Last edited by David Jay on Mon May 10, 2021 11:24 am, edited 1 time in total.
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Re: Retirement withdrawal mechanics

Post by retiredjg »

Probably good advice.
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Re: Retirement withdrawal mechanics

Post by ruralavalon »

Congratulations on your imminent retirement :D .

MathWizard wrote: Mon Jan 18, 2021 8:55 pm This is really just a sanity check.

I am on the cusp of retirement, and am pondering how exactly to withdraw from the various retirement accounts.

I have estimated the amount that I should withdraw from tax deferred each year to manage RMDs and taxes, and estimated average expenses.

Some expenses are lumpy, mainly car expenses, home maintenance and unexpected expenses.

I could just withdraw according to my AA and save in a savings account for those expenses like I do now with my paycheck.

It seems like keeping the money in a Roth account would be preferable, since I would not have to pay taxes on any gains.

I may treat this money differently than my normal AA, since it has been "encumbered" as accumulating for a future expense . In that since, it would seem to make sense to keep it in fixed income, either bonds or Roth CDs.

Do people just
pull from retirement accounts like it was a checking or savings account , or do they
write themselves a monthly paycheck and save from that?

I want to keep money invested, but also want to make this as simple as possible.
You may be over thinking this.

In early retirement we withdrew money every month from our joint taxable account "as needed" to pay expenses.

Since age 70.5 we have taken Required Minimum Distributions (RMDs) automatically every month proportionally from every fund in my rollover IRA, paid directly to our joint checking account. Social Security benefits and RMDs have been enough to cover monthly expenses and more. Lumpy expenses, like real estate taxes and travel, are covered by those two sources. Any excess is periodically invested in our joint taxable account.

When we bought a new car a few years ago we withdrew from our joint taxable account.
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Re: Retirement withdrawal mechanics

Post by RetiredCSProf »

My retirement withdrawal process may not be applicable to your situation. I am 73 and single. I retired at age 64 (mass layoff at work). I have one adult child in college. (I file as HoH.) I have a pension and SS. I use withdrawals from my retirement accounts for income tax (withholding), QCDs, and for some discretionary income (mostly home maintenance).

At the time of my retirement, I held about $450K in tIRA and 403B, but nothing in Roth. I transferred my 403B to rollover IRAs and withdrew $12K in my first year of retirement. I have been converting to Roth, most years since retirement, except for a couple years where I had capital gains from the sale of real estate. At this point, I hold about $600K in tax-deferred and $400K in Roth. I have withdrawn RMDs three years (age 70, 71, and this year). (That is, my investment portfolio has doubled while in the de-accumulation phase.)

Pension, SS, and RMDs place me in the 24% marginal federal tax rate and 9.3% for state taxes (CA). Each year, I withdraw enough in RMDs and Roth conversions to stay within the 3rd IRMAA tier (top MAGI of $165K in 2020 applies to Medicare premiums in 2022 for single tax filers.) The IRMAA brackets are a guessing game because by the time you know the range, it's too late to adjust your MAGI. The penalty of stepping into the next tax bracket is not as extreme as the pain inflicted by slipping off an IRMAA cliff.

Given that 1/3 of my RMD goes to taxes and another 1/3 goes to taxes on the Roth conversion, there is little left over for savings.

I have considered various ways of managing my retirement portfolio: bucket approach, sliding asset allocation, and static asset allocation. The bucket approach basically says to keep 8-10 years of expenses (RMDs plus expected shortfall) in various forms of fixed income (e.g., one year in MM, one year in ultra short-term bonds, 2-4 years in short-term bonds and/or TIPS, 3 years in intermediate bonds, ...). This adds up to a 60/40 AA.
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Re: Retirement withdrawal mechanics

Post by Jeepergeo »

David Jay wrote: Mon May 10, 2021 8:53 am
Jeepergeo wrote: Sun May 09, 2021 10:18 pmAll accounts except cash are invested to my AA of 60:40 Stocks:Bonds.
Holding the same 60:40 in every account is less than optimal.

Different accounts have different tax treatment, so the usual recommendation is to hold your desired asset allocation (60:40) on your total portfolio but use different accounts for different portions of your allocation. Here is the wiki on tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you David Jay. That makes sense now.
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Re: Retirement withdrawal mechanics

Post by Jeepergeo »

retiredjg wrote: Mon May 10, 2021 9:51 am
David Jay wrote: Mon May 10, 2021 8:53 am
Jeepergeo wrote: Sun May 09, 2021 10:18 pmAll accounts except cash are invested to my AA of 60:40 Stocks:Bonds.
Holding the same 60:40 in every account is less than optimal.
I'll take the other side of the argument. :happy

I agree that holding 60:40 in every account is less than optimal financially. In a long term situation, all-stocks-in-Roth is expected to produce a little larger portfolio.

However, there is more to investing than expected return. When humans are running the show, you have to accept that human traits are an additional variable. For some people, all-stocks-in-Roth may not be emotionally optimal and that can affect the outcome.

Having said all that, I'm a believer that having an all stock (or mostly all stock) Roth IRA is the better financial choice. And it is what I do. But just because it is right for me does not mean it is "optimal" (in the larger sense of the word) for everybody.
Thank you retiredjg. I appreciate the perspective.

I've been in the savings mode for ~40 years, the investing mode for ~30 years, and the retirement-targeted investing mode for ~20 years.

My early savings education came from my grandfather, who was self taught, and inspirational. Life has since taught me that grandpa was likely too conservative in investing his savings, and accomplished most of what he did via lots of sacrifice so he could save more, and he got to where he ended with relatively low boosts from investment returns.

Boggleheads has been a great eye-opener for me and I appreciate the entire range of discussion on this forum.

I will look into shifting how my 60:40 target is reached based on the advice received. It seems to make sense and does not seem too complicated to implement.

Again, thanks.
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Re: Retirement withdrawal mechanics

Post by Jeepergeo »

celia wrote: Mon May 10, 2021 4:05 am
Jeepergeo wrote: Sun May 09, 2021 10:18 pm
celia wrote: Tue Jan 19, 2021 1:35 am The Roths should only hold stock funds to maximize your future tax-free growth while tax-deferred should hold your bond funds, to slow down the growth there.
Conceptually, I understand that last paragraph. I understand how that is good in a growing market. But doesn't that approach put the Roth more at risk if there were a general market down turn?
Yes, of course, but afterwards, when stocks start to grow again, the Roth will grow faster than the tax-deferred, just like before the downturn started.

AND, remember that during a large downturn, that is a great time to do extra Roth conversions. For example, if you had shares worth $100K that you were planning to convert, and they fell to $75K, if you then convert, the tax would be on $75K instead of on $100K. When the shares returned to their previous value in the Roth, that would be like you converted $25K for free.
Right now, my savings are divided as roughly as follows:

Cash, 10%
Taxable Brokerage, 5%
Roth, 25%
IRA, 401k, 457, taxable, 60%

All accounts except cash are invested to my AA of 60:40 Stocks:Bonds.

Age 62 and plan to retire before the end of this year.
With the same AA in each account, all your accounts will go down the same percentage and return to the previous value at the same rate.

But that would be true for anyone, at any stage of life. If you were 10 years from retirement, and focusing on accumulating, the stock shares would go down regardless of what account they are in. This has nothing to do with Roth conversion. Rather, it is the basic principle of Tax-efficient Fund Placement, which says to put your fastest-growing asset in Roth to maximize future tax-free growth. Why would you want to keep some of those stock shares in tax-deferred and convert bond shares instead? That will just make the tax-deferred account grow more than if the stocks had been removed. Consequently, you will pay more in taxes when you do future withdrawals or conversions from that tax-deferred account.
celia, thank you. Your explanation has taken me beyond "conceptual understand" to "understanding". I will be studying the link provided and also referred to by others this weekend and likely making some shifts next week. Thank you.
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Re: Retirement withdrawal mechanics

Post by celia »

Jeepergeo wrote: Fri May 14, 2021 12:39 pm
celia wrote: Mon May 10, 2021 4:05 am With the same AA in each account, all your accounts will go down the same percentage and return to the previous value at the same rate.

But that would be true for anyone, at any stage of life. If you were 10 years from retirement, and focusing on accumulating, the stock shares would go down regardless of what account they are in. This has nothing to do with Roth conversion. Rather, it is the basic principle of Tax-efficient Fund Placement, which says to put your fastest-growing asset in Roth to maximize future tax-free growth. Why would you want to keep some of those stock shares in tax-deferred and convert bond shares instead? That will just make the tax-deferred account grow more than if the stocks had been removed. Consequently, you will pay more in taxes when you do future withdrawals or conversions from that tax-deferred account.
celia, thank you. Your explanation has taken me beyond "conceptual understand" to "understanding". I will be studying the link provided and also referred to by others this weekend and likely making some shifts next week. Thank you.
To simplify things, here's a short refresher and summary of the wiki page:

Remember that while referring to each account as "taxable", "tax-deferred", or "Roth", each of these has different tax characteristics, and are thus good for different things:

* The taxable account is subject to capital gains when something is sold and usually receive yearly dividends or distributions, all of which might be taxed more favorably than regular income, or not.
* The tax-deferred accounts did not have contributions taxed when the money went in, but every dollar will be taxed when it comes out (except for "basis", which is another topic). Most retirement plans fall in this category as well as the traditional IRA.
* The Roth accounts had their contributions taxed when the money went in, but every dollar will be able to be withdrawn tax-free (once the account has been open 5 years and the owner is over 59.5). A few employer plans fall in this group as well as your Roth IRA.

Once this is understood, it is easier to understand Tax-efficient Fund Placement. Simply, that means you want to put the assets that are expected to grow the fastest (stock funds/stock ETFs) in Roth accounts to maximize your future tax-free growth. All your bond funds should go into a tax-deferred account (along with other things) since the interest from bonds doesn't have any favorable tax characteristics. That will also slow down the growth of those accounts that will require future RMDs that will be taxed later on using future tax rates. Your Taxable accounts should hold the rest of your stock funds and any foreign stock funds, both of which have some tax benefits when the capital gains and dividends are taxed as "long term". International funds that pay foreign taxes may also give the owner a Foreign Tax Credit only if they are held in taxable.

There. That is a one-paragraph summary of the wiki page. Of course, getting the correct Asset Allocation needs to come first and it applies to your overall investments. After that, WHERE each asset is held will make a difference in your taxes.

You can make changes in tax-deferred and Roth without tax consequences in the current year, but anything sold in taxable will realize a capital gain or loss that will be reported on your 2021 return.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Retirement withdrawal mechanics

Post by Rajsx »

I am following this helpful thread
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Re: Retirement withdrawal mechanics

Post by ColoRetiredGirl »

Rajsx wrote: Tue Jun 22, 2021 12:34 pm I am following this helpful thread
Me too! :sharebeer
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Re: Retirement withdrawal mechanics

Post by ColoRetiredGirl »

Rajsx wrote: Tue Jun 22, 2021 12:34 pm I am following this helpful thread
Me too! :sharebeer
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Re: Retirement withdrawal mechanics

Post by VanGar+Goyle »

I have a very simple solution. I keep 3 years of expenses in my emergency fund. My withdrawal and Roth conversion can be optimized for tax management independent of my actual expense need every year.
I agree that keeping 3 years of expenses is basic, but would we want to account for other income like pensions, annuities, Social Security, dividends, and capital gains? If more expenses are covered by income, then less withdrawals are needed, unless expenses and emergencies are lumpy, like buying a new house or space travel. :happy
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Re: Retirement withdrawal mechanics

Post by 4nursebee »

We transfer money monthly from retirement funds to checking account.
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Re: Retirement withdrawal mechanics

Post by buystoys »

We withdraw from DH's IRA once a year as a rebalance exercise. We're trying to bring his IRA down as much as possible over the next few years to reduce RMDs. When we have it to a certain point, we will start withdrawing from my IRA. So far, this plan hasn't really worked like I wanted it to due to the market increases. We'll stay the course, though.
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Re: Retirement withdrawal mechanics

Post by rotorhead »

Bumping so I can find this thread again easily.
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Re: Retirement withdrawal mechanics

Post by ruralavalon »

rotorhead wrote: Thu Jun 24, 2021 11:52 am Bumping so I can find this thread again easily.
You can bookmark a thread.

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Re: Retirement withdrawal mechanics

Post by rotorhead »

Thanks ruralavalon, for the tip. I have a long list of Boglehead "bookmarks", and have found bumping a thread if I don't have a cogent comment to make, makes it easier for me to come back to it quickly if need be. I'll take a look at the wrench tab.

Something about "old dogs and new tricks".
Chuckles960
Posts: 917
Joined: Thu May 13, 2021 12:09 pm

Re: Retirement withdrawal mechanics

Post by Chuckles960 »

rotorhead wrote: Sat Jun 26, 2021 6:25 pm Thanks ruralavalon, for the tip. I have a long list of Boglehead "bookmarks", and have found bumping a thread if I don't have a cogent comment to make, makes it easier for me to come back to it quickly if need be....
It's an inconsiderate thing to do, because it makes other people think a substantive post has been added to the thread.
rotorhead
Posts: 576
Joined: Wed Mar 17, 2010 3:59 pm
Location: Florida

Re: Retirement withdrawal mechanics

Post by rotorhead »

I guess I have been properly admonished. Bad boy!
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