Author Topic: Retiring before withdrawing from IRA  (Read 1237 times)

deek

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Retiring before withdrawing from IRA
« on: February 15, 2018, 10:01:22 AM »
Quick question -

When you retire early, what are you living off of since you can't pull out IRA $ until a certain age?
The dividends? Or more savings/general investments?

I am going to start reading the stock series soon, but I thought I could get some helpful info here first. Thanks!

frugalnacho

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Re: Retiring before withdrawing from IRA
« Reply #1 on: February 15, 2018, 10:26:05 AM »
I will have 5 years worth of living expenses in a taxable account and bank account.

Once I retired and my income drops to $0, I will start converting my IRA to roth.  This is a taxable event, but since I have $0 regular income I won't pay taxes (or very little taxes).  Once that conversion is 5 years old I can withdraw it from my roth account.  Do that every year and after 5 years my taxable account will be mostly spent, but I will have a new 5 year "seasoned" contribution to withdraw each year.  I'll keep doing that until I'm old enough to just take it directly out of my IRA.   It's called a roth conversion ladder.

LAGuy

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Re: Retiring before withdrawing from IRA
« Reply #2 on: February 15, 2018, 10:27:39 AM »

Mississippi Mudstache

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Re: Retiring before withdrawing from IRA
« Reply #3 on: February 15, 2018, 10:33:02 AM »
When you retire early, what are you living off of since you can't pull out IRA $ until a certain age?

Note that your original premise is false. The IRS won't tie you up and shoot you if you withdraw your IRA or 401(k) contributions early. They will charge a 10% tax. For many people, simply planning to pay the 10% early withdrawal tax is a perfectly legitimate strategy, depending on your current effective tax rate. Most people plan their way around the tax via the Roth conversion ladder or taxable accounts.

deek

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Re: Retiring before withdrawing from IRA
« Reply #4 on: February 16, 2018, 08:24:58 AM »
Looks like I need to read up on taxable accounts. I've done some research and it's still escaping me a little bit. Wish I was better with numbers/tax    -_-

TheWifeHalf

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Re: Retiring before withdrawing from IRA
« Reply #5 on: February 16, 2018, 12:40:57 PM »
I will have 5 years worth of living expenses in a taxable account and bank account.

Once I retired and my income drops to $0, I will start converting my IRA to roth.  This is a taxable event, but since I have $0 regular income I won't pay taxes (or very little taxes).  Once that conversion is 5 years old I can withdraw it from my roth account.  Do that every year and after 5 years my taxable account will be mostly spent, but I will have a new 5 year "seasoned" contribution to withdraw each year.  I'll keep doing that until I'm old enough to just take it directly out of my IRA.   It's called a roth conversion ladder.

This ^
(so glad I didn't have to type all that)