OT: Optimal withdrawal from retirement funds

[fkelly]

Good points here and I'd also recommend Bogleheads.

Annual RMD time is also a good time to review your overall asset allocation. First, your RMD will to some extent affect that. But second, we all need a reminder to periodically update that. With the market going up and up and up it's very easy to get over-weighted in stocks versus safer assets and you will eventually pay for letting that happen.

[JasonF]

Here's the generally-accepted hierarchy of income sources. How much you can take is something that is hotly debated, and something that I've spent a lot of time researching (personally and for my business). It's a source of endless fascination to me to read the research.

1) Required Minimum Distributions from tax-deferred Accounts

2) Taxable account dividends, capital gains distributions, rental income

3) Guaranteed payments (Social Security, pension, SPIA)

4) 457 money (if you have it)

5) Taxable assets with high basis

6, 7, 8) Taxable assets with low basis, additional tax-deferred withdrawals, and tax-free withdrawals (i.e., Roth)

Most folks will have to take additional IRA/401k funds over and above the RMD amount. But if you have funds not held in an IRA that you can use to pay the taxes, consider Roth conversions shortly after you're retired when income is low.

Regarding how much to take, read some of Michael Kitces' pieces on the 4% rule (where many retirees end up amassing a nest egg that's far in excess with what they started out with taking just 4%) as well as Wade Pfau's work (where the 4% rule may be too aggressive a draw).

Congrats on your retirement!

[dumbod]

Originally Posted by jischr

As mentioned above, think a about taxes. Taxes for the next couple years are as low as they will likely ever be. Consider moving as much taxed defered money to a taxed acccount without jumping from the 24% to the 32% bracket. If you have zero annual income that would be around $300K a year for a married filing jointly. Most moves are made in November when you have a good idea what your annual income for the year will be.

Be really careful before making a decision based on the idea that tax rates will go up in the future. The general rule of thumb is to defer tax payments for as long as possible. I put together an admittedly quick-and-dirty model that suggested that future tax rates would have to go up approximately 30% before it would make sense to pay taxes now instead of 5 years from now.

I’m not saying that paying now is a bad idea but it isn’t a slam dunk either. It requires a fair amount of analysis based on your particular situation. I would certainly consult a ‘pro’ before I embarked on that strategy.