SS and RMD’s very simple formula

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hoops777
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SS and RMD’s very simple formula

Post by hoops777 »

I would imagine a lot of people here simply use their SS and RMD’s for living expenses and have no need for complicated withdrawal strategies.
It is a great and simple strategy if it works for you.
I have decided to use this and feel guilt free to spend every penny if we want.
We also have HSA’s which we will start draining.

All other accounts grow untouched unless there is an emergency.
K.I.S.S........so easy to say so difficult to do.
heyyou
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Re: SS and RMD’s very simple formula

Post by heyyou »

SS and RMD’s very simple formula
Me too, spending SS plus the RMD % applied to my entire portfolio's most recent end-of-year value,
not only to just the tIRA's end-of-year value, in addition to spending all annual interest and dividends which are easy to see on brokerage statements.

Sun and Webb at Boston's College's Center for Retirement Research developed the RMD portfolio spending method.
https://crr.bc.edu/wp-content/uploads/2 ... 19-508.pdf
In the paper's brief, the optimal method to which the others were compared, is not specified, but for academics it is spending as if each retiree already knew all of his/her future returns.

Note the RMD % numbers are available for people of every age since anyone can inherit a tIRA that is then to be drawn down with annual percentages based on his/her remaining longevity. In the above link, some of those age-based percentages are on page 7, buried in the appendix. Their retiree's annual withdrawal percentage rate finally tops 4% at age 73 (from 3.13 % at age 65), but the retiree has been steadily spending all interest and dividends in addition to those under 4% annual portfolio withdrawals.

I too am spending SS and RMD's (on the whole portfolio plus all my dividends and interest).
trueblueky
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Re: SS and RMD’s very simple formula

Post by trueblueky »

heyyou wrote: Fri Jan 01, 2021 1:32 am
SS and RMD’s very simple formula
Me too, spending SS plus the RMD % applied to my entire portfolio's most recent end-of-year value,
not only to just the tIRA's end-of-year value, in addition to spending all annual interest and dividends which are easy to see on brokerage statements.

Sun and Webb at Boston's College's Center for Retirement Research developed the RMD portfolio spending method.
https://crr.bc.edu/wp-content/uploads/2 ... 19-508.pdf
In the paper's brief, the optimal method to which the others were compared, is not specified, but for academics it is spending as if each retiree already knew all of his/her future returns.

Note the RMD % numbers are available for people of every age since anyone can inherit a tIRA that is then to be drawn down with annual percentages based on his/her remaining longevity. In the above link, some of those age-based percentages are on page 7, buried in the appendix. Their retiree's annual withdrawal percentage rate finally tops 4% at age 73 (from 3.13 % at age 65), but the retiree has been steadily spending all interest and dividends in addition to those under 4% annual portfolio withdrawals.

I too am spending SS and RMD's (on the whole portfolio plus all my dividends and interest).
Love to see this updated with 10-year distribution requirement on most IRAs inherited by non-spouse, age 72 rather than 70.5, and the promised new RMD tables.
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Strider
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Re: SS and RMD’s very simple formula

Post by Strider »

truebluesky: "Love to see this updated with 10-year distribution requirement on most IRAs inherited by non-spouse, age 72 rather than 70.5, and the promised new RMD tables." (emphasis mine)

Hasn't the IRS already adopted the revised RMD distribution tables in final form?

Strider
Last edited by Strider on Fri Jan 01, 2021 4:36 pm, edited 1 time in total.
trueblueky
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Re: SS and RMD’s very simple formula

Post by trueblueky »

Strider wrote: Fri Jan 01, 2021 12:56 pm truebluesky: "Love to see this updated with 10-year distribution requirement on most IRAs inherited by non-spouse, age 72 rather than 70.5, and the promised new RMD tables." (emphasis mine)

Hasn't the IRS already adopted the revised RMD distribution tables in final form?

Stridert
The final tables appeared in the Federal Register in November with an effective date of January 1, 2022.
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celia
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Re: SS and RMD’s very simple formula

Post by celia »

hoops777 wrote: Thu Dec 31, 2020 10:48 pm I would imagine a lot of people here simply use their SS and RMD’s for living expenses and have no need for complicated withdrawal strategies.
It is a great and simple strategy if it works for you.
I have decided to use this and feel guilt free to spend every penny if we want.
We also have HSA’s which we will start draining.

All other accounts grow untouched unless there is an emergency.
Sure, It's simple to just spend all your SS and RMDs each year. But you need to realize that your tax-deferred balance usually peeks in your late 80s while the percentage to be withdrawn keeps increasing. Your balance will then go down and thus your RMD starts to decrease. If you're not sure you have 'enough' in taxable and Roth to tide you over an additional 10+ years, you may want to start saving part of your RMDs that have been withdrawn each year.

RMD means you have to withdraw some money and pay taxes on it. It DOES NOT mean you have to spend all of it.
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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hoops777
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Re: SS and RMD’s very simple formula

Post by hoops777 »

celia wrote: Fri Jan 01, 2021 1:56 pm
hoops777 wrote: Thu Dec 31, 2020 10:48 pm I would imagine a lot of people here simply use their SS and RMD’s for living expenses and have no need for complicated withdrawal strategies.
It is a great and simple strategy if it works for you.
I have decided to use this and feel guilt free to spend every penny if we want.
We also have HSA’s which we will start draining.

All other accounts grow untouched unless there is an emergency.
Sure, It's simple to just spend all your SS and RMDs each year. But you need to realize that your tax-deferred balance usually peeks in your late 80s while the percentage to be withdrawn keeps increasing. Your balance will then go down and thus your RMD starts to decrease. If you're not sure you have 'enough' in taxable and Roth to tide you over an additional 10+ years, you may want to start saving part of your RMDs that have been withdrawn each year.

RMD means you have to withdraw some money and pay taxes on it. It DOES NOT mean you have to spend all of it.
I understand what RMD’s are. I do not see any problem when using an RMD calculator. Eventually the balance starts going down while the pct taken keeps increasing. I see no problem with those numbers for anyone if they use common sense.
As I stated it is a great,simple method if the numbers work for you. I have a Roth, IBonds and a taxable account . In my case, I can freely spend my RMDs without any worry.
K.I.S.S........so easy to say so difficult to do.
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Bogle7
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Re: SS and RMD’s very simple formula

Post by Bogle7 »

RMDs and HSAs
No apostrophes
Old fart who does three index funds, baby.
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GerryL
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Re: SS and RMD’s very simple formula

Post by GerryL »

hoops777 wrote: Thu Dec 31, 2020 10:48 pm I would imagine a lot of people here simply use their SS and RMD’s for living expenses and have no need for complicated withdrawal strategies.
It is a great and simple strategy if it works for you.
I have decided to use this and feel guilt free to spend every penny if we want.
We also have HSA’s which we will start draining.

All other accounts grow untouched unless there is an emergency.
Yeah, that's pretty much where I am. I realized fairly early on that I did not need a "withdrawal strategy," and that knowledge has made retirement finance almost relaxing. My financial game is working to keep my income down to a level that does not trigger IRMAA.

My RMD is now larger than my SS, which more than covers basic living expenses. But I still don't spend the whole RMD. Nothing I want for now, but I do intend to up my spending game on travel.
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hoops777
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Re: SS and RMD’s very simple formula

Post by hoops777 »

Bogle7 wrote: Fri Jan 01, 2021 9:45 pm RMDs and HSAs
No apostrophes
:oops:
K.I.S.S........so easy to say so difficult to do.
RudyS
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Re: SS and RMD’s very simple formula

Post by RudyS »

Bogle7 wrote: Fri Jan 01, 2021 9:45 pm RMDs and HSAs
No apostrophes
Correct. But one could make a career out of providing that correction to all the "guilty" parties. :wink:
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TomatoTomahto
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Re: SS and RMD’s very simple formula

Post by TomatoTomahto »

RudyS wrote: Sat Jan 02, 2021 1:47 pm
Bogle7 wrote: Fri Jan 01, 2021 9:45 pm RMDs and HSAs
No apostrophes
Correct. But one could make a career out of providing that correction to all the "guilty" parties. :wink:
I would point that out to iOS developers, who force me to “un-correct” their Grocer’s Apostrophes all the time.
I get the FI part but not the RE part of FIRE.
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Bogle7
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Re: SS and RMD’s very simple formula

Post by Bogle7 »

RudyS wrote: Sat Jan 02, 2021 1:47 pm
Bogle7 wrote: Fri Jan 01, 2021 9:45 pm RMDs and HSAs
No apostrophes
Correct. But one could make a career out of providing that correction to all the "guilty" parties.
Which is why we have: The Committee to Save the Apostrophe from Abuse.
Old fart who does three index funds, baby.
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