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Learning, Sharing, and Teaching => Investor Alley => Topic started by: meteor on February 19, 2014, 11:24:47 PM

Title: What are the rules of thumb for taking distribution in Early Retirement?
Post by: meteor on February 19, 2014, 11:24:47 PM
Are their any rules of thumb to taking distributions in Early retirement?  For example:

Should you cash out long term mutual funds first?
Buy and live off high dividend funds?
Dollar cost average my selling over the year and dump in an accessible Money Market?
Anything I should watch out for regarding unexpected tax hits?


(btw-I'm trying to stay in the 15% tax bracket and lower, I'm 55, have a Roth and Sep in the wings for the future.)
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: matchewed on February 20, 2014, 07:17:37 AM
I'd approach it like I'd approach anything in investment. Work on minimizing any fees and taxes that you will pay to get your distribution. Much like your investment plan you should outline how you intend to take your distributions. I think everyone will have different plans so rules of thumb will be hard to come by when it comes to specifics.
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: arebelspy on February 20, 2014, 07:20:40 AM
Rule 1: Don't run out of money.
Rule 2: See rule one.

I'd approach it like I'd approach anything in investment. Work on minimizing any fees and taxes that you will pay to get your distribution. Much like your investment plan you should outline how you intend to take your distributions. I think everyone will have different plans so rules of thumb will be hard to come by when it comes to specifics.

+1
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: foobar on February 20, 2014, 11:22:25 AM
And these days you need to figure out your ACA benefits, medicare copays, amount of SS that is taxable and so on. Depending on how you old you and how much you need to live on you might be switching around where you get your money from as you age.

I'd approach it like I'd approach anything in investment. Work on minimizing any fees and taxes that you will pay to get your distribution. Much like your investment plan you should outline how you intend to take your distributions. I think everyone will have different plans so rules of thumb will be hard to come by when it comes to specifics.
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: soccerluvof4 on February 20, 2014, 12:21:02 PM
Rule 3: see rule 1

+1
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: nicknageli on February 20, 2014, 12:30:42 PM
And these days you need to figure out your ACA benefits, medicare copays, amount of SS that is taxable and so on. Depending on how you old you and how much you need to live on you might be switching around where you get your money from as you age.

Good point about factoring in the ACA and Medicare, too.
Title: Re: What are the rules of thumb for taking distribution in Early Retirement?
Post by: GlassStash on February 20, 2014, 12:45:37 PM
In addition to all the sage comments made above, it is important to be cognizant of asset allocation as you withdraw funds. Just as when you were contributing, withdrawals will change your asset allocation and you may need to re-balance or withdraw strategically to keep an AA you are comfortable with.

You mention you have a Roth. I am not sure how much is in there, but if you have enough contributions to withdraw until 59.5 that would be my suggestion. This would minimize or eliminate any tax burden for those years, plus it's easy to do.

Congrats, btw.