I was blessed to leave employment at age 52 with enough cash to cover me until I reach 59.5. I reach that age in Feb. 2016 so I have 8 months or so to decide. I currently pay myself 1,450 biweekly which is 37,770 annually, all after-tax dollars. I have given myself a 50 biweekly raise each year which equates to 3.5% to 4%. Next March, I will need to begin drawing all my income from my retirement annuities and my IRA's. I am looking for ideas on which accounts I should draw from in my 60's, 70's, and beyond. So, I need to net at least 39,000 in '16 and keep up with inflation thereafter.
I had been planning on using the 4% rule which I think can still work in my situation. Ideas? Should I consider a 10-year payout of distributions, should I use IRA's in combination? Interest only plus some other funds? Use Roth? Open for suggestion except for going back to work. Thanks.
I recommend that you edit out the specific amounts in your accounts - not necessary for an intelligent discussion on strategy.
You don't say how close you are or even if you are entitled to Social Security (SS) or if you have a spouse that could increase your SS payments. Two SS payments can make a big dent in your income needs even if taken at 62 without the need to sacrifice your retirement principal to live on.
Sizable IRA/Roth accounts at a brokerage account can produce a very decent income using preferred stock ETF's WITHOUT touching the principal. Just be aware that that preferred stocks have market risk which means that their price can fluctuate. However, let's say that you purchase a large amount at a given price and it produces 5-6%. If the ETF price declines and you do not have to sell it (Don't panic!), that level of income can be pretty consistent even in a down market. You then just wait it out for even a few years while taking a good income to live on (Don't panic!). And if you have some extra IRA funds to invest in the ETF(s) during the decline, a down price can bring a very significant return on the new invested amount and it serves to dollar cost avergae down your break-even price in case you do need to access the principal.
Depending on your vintages for your investments, it may or may not produce a good return. If you do not want to to hold, a 10-year TPA (Transfer Payout Annuity) may help increase the funds for re-investment into higher paying accounts. I do caution you to investigate and understand whether you want to use those TPA funds to convert to an IRA due to the new varying expense ratio's for IRA's and retirement accounts.
Look at the returns and consistency of various accounts. In particular, increasing investments in the fairly stable Real Estate Account (REA) can bring low volatility and excellent returns. Just be aware that the REA can be subject to market fluctuation also.
Of course, don't overlook asking for a sit-down with TC advisors before committing to a withdrawal strategy. GOOD LUCK!!! :-)))
PS: I am in no way associated with TC or any other investment firm.
I retired a little over two years ago at 62.5. I had several accounts with pre- and post-tax savings. I did not want to start taking Social Security until age 66, and I also had the issue of health insurance until Medicare kicked in. My background is in finance so I thought I had a pretty good plan in place. Just to be sure I spoke with a wealth management advisor. They ran the numbers with several different possible ways of me withdrawing funds. (this is all done free of charge). the good news was my plan was pretty close to where I wanted to be. they did have a few recommendations for some minor rebalancing. Even thought it did not change my plan, it did feel good to have someone else running the numbers, and double checking my numbers. Considering you are looking at a plan that my need to run 30 or 40 years, a lot of things can change during that time. I recently had my advisor rerun my information using my current actuals. I plan on doing this even couple of years, just to make sure everything is on track.
Thanks for sharing your specific numbers - I like that you share actual numbers of your retirement account. Great job retiring at 52. It seems like you are single if you only spend $37K a year. Your portfolio seems pretty conservative with most of the portfolio, but that's good for the 4% rule. You should be earning 4% and the rest seems to be doing fine. I don't see any problem you drawing 4% or even 5% with $1.2 million and I assume you are single. Will you collect social security at age 62 ? If so, you need to even get more out of your retirement, or you may pay a hefty tax later when you get to your 70s. $37K is just survival mode I presume. I suggest you spend some more - travel, get a new car, or enjoy life. Don't be too thrifty. You can not take your money when you are lying 6 feet underground.
Thanks to all who have commented back to me. Some discussions warrant just putting percentages out there like splitting up investment allocations. I chose to put numbers out there as I need real conversation without beating around the bush, and being totally anonymous makes it feasible. I am taking pieces of advice from all 3 of you. I am meeting with an advisor and plan to continue that practice as the years go on. Lastly, I am enjoying my lifestyle with plenty of travel with no debt. If I can do 50,000 or more to live it up a bit I will.
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