Retirees: Monthly vs Quarterly vs Annual Distributions

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

I'm close to retirement and was initially planning just to do one distribution each year, in December, and perhaps modify that distribution downward if the year was particularly bad.

But then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.

What have you done, and why? Also, has anyone experimented with the different methods and come to any conclusions about which you prefer? I did a google search on this topic, but what I located was not very experiential or based upon research on the issue. Maybe I've missed something.

Thanks.
Last edited by namajones on Thu May 06, 2021 8:55 am, edited 1 time in total.
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by livesoft »

Random, as needed. We use credit cards to pay for everything, so we know when the bills have to be paid.
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
Sandtrap
Posts: 19591
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Sandtrap »

As needed.
What is not withdrawn is automatically reinvested, or reinvested when rebalancing.
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
RickBoglehead
Posts: 7877
Joined: Wed Feb 14, 2018 8:10 am
Location: In a house

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by RickBoglehead »

Since DCA is proven to be no better than lump sum, there is no reason to pull money from the market until it's needed. Of course, you'd want to have on hand whatever balance you feel comfortable with.

Our plan is to continue to have no more than 2 or 3 months expenses in cash, and then a few months in No Penalty CDs. Each year when we get our biggest infusion from interest/dividends/capital gains (in December), we'll ensure we still have a few months in No Penalty CDs and invest the rest.
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by dbr »

For maximum return the strategy is to have as much invested as possible as long as possible at as high a risk as possible. If you are worried about holding too much in cash then just divert to a little higher allocation to stocks otherwise to compensate. Very few retirees are all stocks and also worried about keeping too much cash in the bank and losing return on it.

Back to managing cash flow, I suspect some people find it helpful to have a monthly influx of cash. For me there is no choice because a significant fraction of our income is from pensions and Social Security, which are paid monthly whether wanted or not. It is also true that people with significant taxable holdings find that cashing rather than reinvesting the dividends is convenient, so that is typically a quarterly influx for most funds. After that withdrawals are random, aka as needed.

It will be useful to hear from people whose only or major source of cash flow is withdrawals from tax deferred accounts.

PS I take my tax deferred account RMD at year end and use withholding to pay the tax bill for the year.
User avatar
retired@50
Posts: 12830
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by retired@50 »

I use the quarterly dividends from my taxable account for spending. As it happens, they just about match my annual spending rate. I will obviously have to re-figure things when Social Security and RMDs start.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
User avatar
BolderBoy
Posts: 6755
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by BolderBoy »

namajones wrote: Thu May 06, 2021 8:47 amBut then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.
A bunch of years ago I asked the local hive about reverse DCA. The most scholarly response was that it is detrimental to DCA backwards and better to pull money out as needed to replenish the cash-on-hand supply.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
User avatar
Wiggums
Posts: 7051
Joined: Thu Jan 31, 2019 7:02 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Wiggums »

We transfer funds as needed.
"I started with nothing and I still have most of it left."
KlangFool
Posts: 31526
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
PaunchyPirate
Posts: 1164
Joined: Sun Nov 30, 2014 6:58 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by PaunchyPirate »

I pull out money when I need it. Currently, I'm spending from a savings account that had built up higher than necessary. After I deplete that some, I'll turn dividend reinvestment back off and spend from the dividends. I will augment, if needed, by selling something when I need it.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

Monthly, for several reasons.
a) you leave more money invested
b) it's easier to budget than taking out a big sum at once and plan out for the whole year (which often doesn't go as planned, anyway)
c) for percentage-based withdrawals, the fluctuation is smaller MoM than YoY, which can be massive after a year like 2008.
Broken Man 1999
Posts: 8626
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Broken Man 1999 »

A few days prior to end of month we know what our bills will come to for the following month.

We distribute from our TIRAs once a month, usually. DW's distribution is automatic, my distribution must be determined monthly, as my portion of the bills are lumpy.

The TIRA distributions cover the much of the month's expenses, on the third Wednesday of the month we have our SS benefits deposited and those $$$ finish off the bill paying. Whatever SS is left is used for the following month, requiring fewer distributions.

My bill paying is pretty much automatic. What bills that aren't paid via pre-authorized credit card (with no service fees, of course) are paid by allowing funds to be pulled from my account by trusted entities.

I have one payee set up in Bill Pay that repeats each month for my yard guy.

The first year of retirement I pulled out my expected expenses for the year and had them in my settlement account ready to transfer to my credit union. I didn't like seeing all that cash goofing around and making me bupkis, so I started doing monthly distributions, as needed.

Any of our trades people are paid by check.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by ruralavalon »

namajones wrote: Thu May 06, 2021 8:47 am I'm close to retirement and was initially planning just to do one distribution each year, in December, and perhaps modify that distribution downward if the year was particularly bad.

But then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.

What have you done, and why? Also, has anyone experimented with the different methods and come to any conclusions about which you prefer? I did a google search on this topic, but what I located was not very experiential or based upon research on the issue. Maybe I've missed something.

Thanks.
We do monthly distributions. We have set up Required Minimum Distributions (RMDs) from my rollover IRA automatically every month proportionally from each fund in my rollover IRA, paid directly to our joint checking account. We withhold 12% for federal income tax.

Monthly withdrawal keeps our money invested longer, and makes budgeting very easy (most bills are monthly). I like simplicity, and having everything on autopilot. Social Security also deposited automatically to our joint checking account. Social Security and monthly RMDs cover our expenses, any excess is periodically added to our joint taxable account.

Before starting RMDs at age 70.5 we also did monthly withdrawals, then from our joint taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
GerryL
Posts: 3902
Joined: Fri Sep 20, 2013 11:40 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by GerryL »

I'm in the "as needed" camp, but so far I don't really need the RMD since my SS and some small income flows pretty much cover my expenses. And I keep plenty in cash to cover about 3 years worth of any gap.

So my choice so far has been to move the RMD amount to cash in my IRA early in the year. Then I execute the QCDs I have planned for the year. Just decided last week that I might as well invest a chunk of the remaining RMD into my taxable account. (This will increase my income, which includes quarterly dividends.) The rest will be taken out toward the end of the year, either to top up my cash stash or to reinvest, with state and federal taxes withheld.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

BolderBoy wrote: Thu May 06, 2021 10:14 am
namajones wrote: Thu May 06, 2021 8:47 amBut then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.
A bunch of years ago I asked the local hive about reverse DCA. The most scholarly response was that it is detrimental to DCA backwards and better to pull money out as needed to replenish the cash-on-hand supply.
Okay, thanks. The "as-needed" crowd seems to be the largest so far.

I suppose this ends, to some degree, when RMDs kick in.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
That makes sense. I'm going to have to start looking at the tax brackets.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

Marseille07 wrote: Thu May 06, 2021 10:37 am Monthly, for several reasons.
b) it's easier to budget than taking out a big sum at once and plan out for the whole year (which often doesn't go as planned, anyway)
c) for percentage-based withdrawals, the fluctuation is smaller MoM than YoY, which can be massive after a year like 2008.
Those were my thoughts this morning when I started this thread.

Actually, I was hoping that someone had studied or experienced (c). That was my instinct, but I did not find any studies on this topic.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

Broken Man 1999 wrote: Thu May 06, 2021 10:43 am The first year of retirement I pulled out my expected expenses for the year and had them in my settlement account ready to transfer to my credit union. I didn't like seeing all that cash goofing around and making me bupkis, so I started doing monthly distributions, as needed.
Yeah, that makes sense to me. For a monthly, though, I'd likely set myself a fixed amount (a "paycheck," if you will) just to keep me in a budgeting mindframe. Plus it's easier to set-it-and-forget-it w/ the retirement account.
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

as needed. Much of our expenses are on credit cards or direct debit. I've line up all the DDs for right around the first of the month. In the last week of the prior month, all the CCs close for the month so I know exactly what is due on CCs and DDs. If I don't have it covered with money in the bank or in-bound direct deposits, I sell something.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
User avatar
cheese_breath
Posts: 11786
Joined: Wed Sep 14, 2011 7:08 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by cheese_breath »

As needed.
The surest way to know the future is when it becomes the past.
KlangFool
Posts: 31526
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

namajones wrote: Thu May 06, 2021 2:34 pm
KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
That makes sense. I'm going to have to start looking at the tax brackets.
namajones,

Do you need to use the ACA health insurance? The ACA health insurance premium subsidy could worth up to 10K per year. That could be a major consideration.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
solarcub
Posts: 253
Joined: Sat Feb 08, 2020 9:09 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by solarcub »

namajones wrote: Thu May 06, 2021 2:32 pm I suppose this ends, to some degree, when RMDs kick in.
Won't you just have the same question regarding how to schedule your RMDs?
GuyInFL
Posts: 865
Joined: Thu Aug 04, 2016 7:17 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by GuyInFL »

solarcub wrote: Thu May 06, 2021 3:31 pm
namajones wrote: Thu May 06, 2021 2:32 pm I suppose this ends, to some degree, when RMDs kick in.
Won't you just have the same question regarding how to schedule your RMDs?
With RMDs you can transfer in-kind or sell, transfer th funds and repurchase to rebalance. No requirement to take the funds out of the market.
AlwaysaQ
Posts: 624
Joined: Fri Apr 13, 2007 7:37 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by AlwaysaQ »

I do not automatically reinvest dividends in my taxable accounts but send the money to my checking account.

From my traditional IRA I make my QCDs and then take out the remaining RMD late in the year. A large portion goes to the IRS and the rest goes into my checking account. When my checking account gets too high I will move some to my online savings account.
User avatar
midareff
Posts: 7711
Joined: Mon Nov 29, 2010 9:43 am
Location: Biscayne Bay, South Florida

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by midareff »

namajones wrote: Thu May 06, 2021 8:47 am I'm close to retirement and was initially planning just to do one distribution each year, in December, and perhaps modify that distribution downward if the year was particularly bad.

But then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.

What have you done, and why? Also, has anyone experimented with the different methods and come to any conclusions about which you prefer? I did a google search on this topic, but what I located was not very experiential or based upon research on the issue. Maybe I've missed something.

Thanks.
Normally, I prefer the monthly income approach and have my RMD distributed to me monthly. I accumulate it until I have enough money to pay for a cruise and then book one or more. Pension and SS pay our monthly bills. This year I took it all in February as I needed the money for a project.
User avatar
Nestegg_User
Posts: 2112
Joined: Wed Aug 05, 2009 1:26 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Nestegg_User »

namajones wrote: Thu May 06, 2021 2:32 pm
BolderBoy wrote: Thu May 06, 2021 10:14 am
namajones wrote: Thu May 06, 2021 8:47 amBut then I thought, well, maybe a monthly actually makes more sense, in the same way that dollar cost averaging in the accumulation phase makes sense. Just put the process in reverse.
A bunch of years ago I asked the local hive about reverse DCA. The most scholarly response was that it is detrimental to DCA backwards and better to pull money out as needed to replenish the cash-on-hand supply.
Okay, thanks. The "as-needed" crowd seems to be the largest so far.

I suppose this ends, to some degree, when RMDs kick in.

Also an "as needed" currently
as for the RMD's.... I'm mid-60's, doing Roth conversions for current rollover IRA (and will rollover the last employer 401k (.600k) the next year after these conversions)... we will then start drawing on the rollover IRA for cash needs before RMDs (we still were using the CD ladder we established before retirement, might have just used that last rung, and have just started moving funds from (retirement) taxable account to checking this (6th) year. {just over a year away from SS start....already have pension}

(as far as your question of M-o-M vs Y-o-Y for dispersal, I would think it's the same as for contributions, but in reverse)
eldinerocheapo
Posts: 238
Joined: Thu Sep 29, 2016 1:36 pm
Location: Fla Gulf Coast

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by eldinerocheapo »

For 2021, I took a modest lump sum from Tira, with 12% withheld, and draw the proceeds monthly from my Ally savings account to meet expenses. When this amount is exhausted, I'll draw from savings, and a muni account to keep taxes down and fund Roth conversions.

Next year, I'll draw a fixed amount from the Tira monthly, and pay any overage from savings, a muni fund and Roth IRA, to again fund Roth conversions and remain in the 12% tax bracket.

I like the idea of drawing from several different sources before SS even kicks in for the both of us, as it will make adjustments and tweaks even easier.
"Dream, Dare, Do."
jpdion
Posts: 183
Joined: Thu Feb 13, 2014 11:52 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jpdion »

Retired six years. The foundation of our withdrawal strategy is monthly. But there is usually an annual withdrawal on top in January- February to take care of lumpy things - like Christmas bills, HOA fees, and sometimes income tax owed. If the market is way up, we'll skim a bit of the profit. I'd call it "flexibly disciplined."
User avatar
BolderBoy
Posts: 6755
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by BolderBoy »

AlwaysaQ wrote: Thu May 06, 2021 4:32 pm I do not automatically reinvest dividends in my taxable accounts but send the money to my checking account.

From my traditional IRA I make my QCDs and then take out the remaining RMD late in the year. A large portion goes to the IRS and the rest goes into my checking account. When my checking account gets too high I will move some to my online savings account.
This is what I already do and my plan for when RMDs start.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

jpdion wrote: Fri May 07, 2021 8:00 am Retired six years. The foundation of our withdrawal strategy is monthly. But there is usually an annual withdrawal on top in January- February to take care of lumpy things - like Christmas bills, HOA fees, and sometimes income tax owed. If the market is way up, we'll skim a bit of the profit. I'd call it "flexibly disciplined."
I like the skimming idea in addition to monthlies.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by dbr »

namajones wrote: Fri May 07, 2021 9:44 am
jpdion wrote: Fri May 07, 2021 8:00 am Retired six years. The foundation of our withdrawal strategy is monthly. But there is usually an annual withdrawal on top in January- February to take care of lumpy things - like Christmas bills, HOA fees, and sometimes income tax owed. If the market is way up, we'll skim a bit of the profit. I'd call it "flexibly disciplined."
I like the skimming idea in addition to monthlies.
Does this mean spending more when the market is up or does it mean shifting assets from stocks to cash when the market is up. Is that different from rebalancing?
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

namajones wrote: Fri May 07, 2021 9:44 am
jpdion wrote: Fri May 07, 2021 8:00 am Retired six years. The foundation of our withdrawal strategy is monthly. But there is usually an annual withdrawal on top in January- February to take care of lumpy things - like Christmas bills, HOA fees, and sometimes income tax owed. If the market is way up, we'll skim a bit of the profit. I'd call it "flexibly disciplined."
I like the skimming idea in addition to monthlies.
My approach is to flip it around by withdrawing monthly to maintain EF. For example, let's say my EF is 100K. If I'm below this mark, I withdraw monthly to replenish the EF, like 9K/mo or what have you.

This way, if I'm underspending then I don't withdraw anything, and because I don't need to.
Topic Author
namajones
Posts: 778
Joined: Sat Aug 08, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

Marseille07 wrote: Fri May 07, 2021 10:41 am

My approach is to flip it around by withdrawing monthly to maintain EF. For example, let's say my EF is 100K. If I'm below this mark, I withdraw monthly to replenish the EF, like 9K/mo or what have you.

This way, if I'm underspending then I don't withdraw anything, and because I don't need to.
To me, a decently large EF makes sense under all circumstances. If the market is down and you didn't want to withdraw (sell low), your EF allows you not to.
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

namajones wrote: Fri May 07, 2021 10:43 am To me, a decently large EF makes sense under all circumstances. If the market is down and you didn't want to withdraw (sell low), your EF allows you not to.
Many people have a reasonably balanced portfolio of equity and bonds. In that case, you would not be selling when the market is down, you'd be selling bonds to pay for expenses AND to buy equity to restore your portfolio allocation.

People have different approaches to emergency funds. We ditched ours decades before we retired.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

jebmke wrote: Fri May 07, 2021 10:46 am
namajones wrote: Fri May 07, 2021 10:43 am To me, a decently large EF makes sense under all circumstances. If the market is down and you didn't want to withdraw (sell low), your EF allows you not to.
Many people have a reasonably balanced portfolio of equity and bonds. In that case, you would not be selling when the market is down, you'd be selling bonds to pay for expenses AND to buy equity to restore your portfolio allocation.

People have different approaches to emergency funds. We ditched ours decades before we retired.
Right, though in this case I'd argue your bonds are your EF...and probably a huge amount. When I mentioned EF of 100K in cash, I don't carry bonds anywhere.

It's OK to slash equities even during downturns, you just have to be able to control the cuts.
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

My entire portfolio is my EF. But yes, if you have little or no bonds, the EF is the bonds. Cash is just a zero duration bond in that regard. But I hold zero cash except what is needed to pay for next month's bills.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

jebmke wrote: Fri May 07, 2021 10:56 am My entire portfolio is my EF. But yes, if you have little or no bonds, the EF is the bonds. Cash is just a zero duration bond in that regard. But I hold zero cash except what is needed to pay for next month's bills.
I guess I'd be curious how you protect your equities portion. Let's say you're 60/40 at 2M, then you have:

1.2M in equities
800K in bonds

Suppose some 100K emergency arises. You spend down bonds and rebalance:

1.14M in equities
760K in bonds

Now your equities took a 5% hit. This is quite high in terms of withdrawal rate.
User avatar
Sheepdog
Posts: 5783
Joined: Tue Feb 27, 2007 2:05 pm
Location: Indiana, retired 1998 at age 65

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Sheepdog »

I have a distribution goal each year.....a percent of investments to withdraw from our balanced portfolio. Some years I don't need as much and others I may need more (buying that new car....taking that cruise.....major remodeling,...etc.) MY goal is to maintain an annual withdrawal average of 4.5% of my year ends balance. Some years I have withdrawn only 3.1% (like in 2009) and because of that I can withdraw more in another year (like 7.52% in 2011) . My average annual withdrawal for my 22 years retired was close to the plan (4.57%).
So, I take out as much as I want (within reason) when I want, but just watch my balance. It has been a very comfortable simple exercise.....and my investments have grown.
Woof Woof
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

Marseille07 wrote: Fri May 07, 2021 11:22 am
jebmke wrote: Fri May 07, 2021 10:56 am My entire portfolio is my EF. But yes, if you have little or no bonds, the EF is the bonds. Cash is just a zero duration bond in that regard. But I hold zero cash except what is needed to pay for next month's bills.
I guess I'd be curious how you protect your equities portion. Let's say you're 60/40 at 2M, then you have:

1.2M in equities
800K in bonds

Suppose some 100K emergency arises. You spend down bonds and rebalance:

1.14M in equities
760K in bonds

Now your equities took a 5% hit. This is quite high in terms of withdrawal rate.
Dividing $800K of fixed income into $700K of bonds and $100K of cash is just mental accounting. It simply reduces the average duration of the fixed income account unless I boosted the $700K duration to offset - which one could do but why bother is my view.

If an extremely rare $100K "emergency" hit, I would take the equity hit or perhaps allow the allocation to drift. Either way, over the long haul cash would have been a drag on returns. With rates today, that is less of an issue but people were talking about the bottom on rates many years ago and sitting in cash all those years would have been a hit.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by marcopolo »

KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
Once in a while you get shown the light, in the strangest of places if you look at it right.
littlebird
Posts: 1868
Joined: Sat Apr 10, 2010 6:05 pm
Location: Valley of the Sun, AZ

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by littlebird »

Obtained an annuity to relieve myself of this sleep-depriver as I approached late 70’s.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

jebmke wrote: Fri May 07, 2021 11:38 am Dividing $800K of fixed income into $700K of bonds and $100K of cash is just mental accounting. It simply reduces the average duration of the fixed income account unless I boosted the $700K duration to offset - which one could do but why bother is my view.

If an extremely rare $100K "emergency" hit, I would take the equity hit or perhaps allow the allocation to drift. Either way, over the long haul cash would have been a drag on returns. With rates today, that is less of an issue but people were talking about the bottom on rates many years ago and sitting in cash all those years would have been a hit.
I think this is where our approaches differ. I never take the equity hit of 5%. In the example I outlined above, I have:

1.9M in equities
100K in cash

100K emergency comes, I spend down EF then replenish back up via 3% withdrawal rate, like 5K/mo. I also use a percentage-based withdrawal method, so I'm keeping the damage constant at all times with respect to my equities AA.
RCL
Posts: 768
Joined: Sat Jul 05, 2014 2:48 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by RCL »

Sheepdog wrote: Fri May 07, 2021 11:31 am ....... MY goal is to maintain an annual withdrawal average of 4.5% of my year ends balance.
Does that percentage include what you have to take out for RMD's?
User avatar
Sheepdog
Posts: 5783
Joined: Tue Feb 27, 2007 2:05 pm
Location: Indiana, retired 1998 at age 65

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Sheepdog »

RCL wrote: Fri May 07, 2021 12:06 pm
Sheepdog wrote: Fri May 07, 2021 11:31 am ....... MY goal is to maintain an annual withdrawal average of 4.5% of my year ends balance.
Does that percentage include what you have to take out for RMD's?
What you may take out to meet your Required Minimum Distribution does not necessarily mean that it has to be spent. You can reinvest your RMD into your taxable account so it could remain a part of your investment portfolio.

For me, I don't count my RMD as part of my annual distribution as such. However, when I spend it or donate it, that then becomes part of my annual distribution.

Jim
Last edited by Sheepdog on Fri May 07, 2021 12:44 pm, edited 1 time in total.
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
KlangFool
Posts: 31526
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

marcopolo wrote: Fri May 07, 2021 11:53 am
KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
User avatar
Toons
Posts: 14467
Joined: Fri Nov 21, 2008 9:20 am
Location: Hills of Tennessee

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Toons »

Dividends ,Capgains are taken in cash
Whenever they occur in taxable accounts
Iras for the most part reinvested
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

Marseille07 wrote: Fri May 07, 2021 12:05 pm 100K emergency comes, I spend down EF then replenish back up via 3% withdrawal rate, like 5K/mo. I also use a percentage-based withdrawal method, so I'm keeping the damage constant at all times with respect to my equities AA.
That's essentially the same as my "let the allocation drift" alternative. It is still $100K of fixed income (zero duration). Purely a duration choice. I choose not to take the consequences of zero duration over the long haul. Historically that has been the correct decision. As I said, with current negative interest rates, the difference is negligible.

I'm at a stage now where I will never sell equity, ever -- unless it is a mega emergency -- in which case I have much bigger problems than my allocation.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Dottie57
Posts: 12379
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Dottie57 »

KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
+1

Then from cash I pay my monthly amount and put into checking. My spending is controlled by what is in checking account.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

jebmke wrote: Fri May 07, 2021 1:03 pm That's essentially the same as my "let the allocation drift" alternative. It is still $100K of fixed income (zero duration). Purely a duration choice. I choose not to take the consequences of zero duration over the long haul. Historically that has been the correct decision. As I said, with current negative interest rates, the difference is negligible.

I'm at a stage now where I will never sell equity, ever -- unless it is a mega emergency -- in which case I have much bigger problems than my allocation.
We're comparing something different though. In the 2M example, 60/40 would have:
1.2M in equities
800K in bonds

My portfolio is:
1.9M in equities
100K in cash

So the tradeoff isn't just "bonds are better than cash historically." It is:
800K in bonds vs 700K extra in equities + 100K in cash. You see, cash is a drag but I don't have a lot of it and instead, having more equities.
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by marcopolo »

KlangFool wrote: Fri May 07, 2021 12:44 pm
marcopolo wrote: Fri May 07, 2021 11:53 am
KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Post Reply