Author Topic: Taking your "salary" from your retirement portfolio  (Read 2807 times)

blue_green_sparks

  • Pencil Stache
  • ****
  • Posts: 523
  • FIRE'd 2018
Taking your "salary" from your retirement portfolio
« on: June 25, 2024, 08:21:01 AM »
I have been withdrawing quarterly to replenish the bill-paying checking account. I am curious; at what frequency do you all withdraw from retirement accounts? I typically also withdraw a portion of our cash-to-live-on from a non-qualified brokerage account so that I can control our annual income to the dollar, independent of our cash requirement.

I plan on starting regular Roth conversions this year to at least get to the top of the current tax bracket. I guess a Roth IRA could be used as a bill paying holding tank that earns tax free. 

Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 2235
  • Age: 51
  • Location: Houston TX
  • Devour your prey raptors!
    • Living Universe Foundation
Re: Taking your "salary" from your retirement portfolio
« Reply #1 on: June 25, 2024, 09:15:56 AM »
I have a monthly automated withdrawal.

reeshau

  • Magnum Stache
  • ******
  • Posts: 2814
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Taking your "salary" from your retirement portfolio
« Reply #2 on: June 25, 2024, 11:12:38 AM »
I withdraw irregularly, as I invest in individual stocks, and timing depends in part on what I have to sell.  But I try to keep 12 months' spending in cash.

I would leave the Roth alone.  Enjoy your 0% LTCG until you are withdrawing from your trad IRA.  Then use the Roth to tune your income vs. that. I am definitely enjoying the balance of pre-59 1/2, even more than I thought!

deborah

  • Senior Mustachian
  • ********
  • Posts: 15998
  • Age: 14
  • Location: Australia or another awesome area
Re: Taking your "salary" from your retirement portfolio
« Reply #3 on: June 25, 2024, 11:45:46 AM »
I divide my expenses between living expenses and optional expenses. My living expenses salary is withdrawn every two weeks. Optional expenses are withdrawn whenever I need them, up to a yearly limit. This means that if I ever need to reduce my expenses, I just reduce the yearly limit without changing the way I live.

Ron Scott

  • Handlebar Stache
  • *****
  • Posts: 1354
Re: Taking your "salary" from your retirement portfolio
« Reply #4 on: June 25, 2024, 03:20:56 PM »
About quarterly, give or take.

spartana

  • Pencil Stache
  • ****
  • Posts: 594
  • FIREd at 36
Re: Taking your "salary" from your retirement portfolio
« Reply #5 on: June 25, 2024, 04:13:23 PM »
Monthly automated withdrawals into a money market acct.  Pay bills and all expenses from there and keep a set amount in to use as an EF and for big purchases.  I have very low expenses so usually have excess $$ in the MM acct at the end of the year. Can Reinvest that, leave it in (what I usually do) or spend it all on something fancy (almost never).

Loren Ver

  • CM*MW 2023 Attendees
  • Handlebar Stache
  • *
  • Posts: 1253
  • Location: Midwest USA
  • I Retired. Yah!
Re: Taking your "salary" from your retirement portfolio
« Reply #6 on: June 27, 2024, 08:22:46 AM »
A little randomly, but no less than every other month so that if medicaid asks, then we have more than the minimum for two consecutive months.  We got caught once without and it was a mess.  We are on an ACA plan and wish to keep it. 

Loren

lhamo

  • Magnum Stache
  • ******
  • Posts: 3293
  • Location: Seattle
Re: Taking your "salary" from your retirement portfolio
« Reply #7 on: June 27, 2024, 10:14:36 AM »
A little randomly, but no less than every other month so that if medicaid asks, then we have more than the minimum for two consecutive months.  We got caught once without and it was a mess.  We are on an ACA plan and wish to keep it. 

Loren

I am currently living off non-retirement investments (four more years to that long-awaited 59.5 point!) and do the exact opposite -- I am carefully cashing out LTCG to generate enough income to live on/fund my house renovations while staying below the income thresholds that would kick me off Medicaid (and push me into a higher tax bracket).  I have learned over the years (and just verified with my Healthcare Navigator the other day) that as long as you don't have two consecutive months of income over the monthly limit, you will be allowed to stay on Medicaid even if your annual income exceeds the annual threshold.  Key is to have that income be irregular/relatively unpredictable. 

The other reason I am deliberately keeping taxable income low is that it will affect my DD's financial aid if I increase it too much this year.  Starting in 2025 that won't be an issue any more and I may start experimenting with low-cost ACA plans so that I can realize more income/do more Roth converting.

Woodshark

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: Taking your "salary" from your retirement portfolio
« Reply #8 on: June 27, 2024, 03:47:04 PM »
I keep over 12 months of withdrawls in a money market fund with an auto transfer of $X into our checking account every month. When it gets low I sell funds to bring it back up.

Loren Ver

  • CM*MW 2023 Attendees
  • Handlebar Stache
  • *
  • Posts: 1253
  • Location: Midwest USA
  • I Retired. Yah!
Re: Taking your "salary" from your retirement portfolio
« Reply #9 on: June 28, 2024, 09:34:15 AM »
@lhamo It's it nice how we can both use the same process to our advantage?  Go team!

markus

  • 5 O'Clock Shadow
  • *
  • Posts: 57
Re: Taking your "salary" from your retirement portfolio
« Reply #10 on: June 29, 2024, 05:10:15 AM »
Quote
I keep over 12 months of withdrawls in a money market fund with an auto transfer of $X into our checking account every month. When it gets low I sell funds to bring it back up.

My wife and I have been FIRE'd for just over nine months now, and we're following this simple method what Woodshark describes above. I do know what our "monthly paycheck" should be according to our budget and spending, but I only pull in money from our money market when it's needed, and I'm also re-tracking our budget anew now that we're not working in order to see how our new setup compares with what I expected it to be.

Specifically, we first take any and all dividends from our taxable accounts straight into our checking, and so far this accounts for about 2/3rds of our expenses. After that I pull in money from our money market as mentioned. Our money market contains an estimated one year's worth of funds, then in addition to that we have two more years' expenses in CDs. When this first year money market is depleted, we'll rotate in the first CD (and then if I still feel good about the two years' CD plan, I'll open another CD using funds from selling bonds. Bonds will be replenished by selling stocks so long as they are making gains).

But for this first year we don't want to sell any assets because this is our first year using the ACA for medical coverage, and we're on track to receive subsidies. If we can maintain that arrangement going forward then great! Should we need to sell off some stock to keep this whole arrangement purring along and thus lose some of those subsidies, then that's what we'll do; I expected to pay full freight for ACA in our pre-FIRE budget estimates anyway, so the current situation is just a nice surprise.

GilesMM

  • Handlebar Stache
  • *****
  • Posts: 1808
  • Location: PNW
Re: Taking your "salary" from your retirement portfolio
« Reply #11 on: June 29, 2024, 06:54:52 AM »
Quite erratic and lumpy.  Relatively few withdrawals since 2020.  We have sold real estate for one reason or another every year so far and i just hold some proceeds in my checking account.  Then I had some unexpected consulting income last year. This year the state did a massive surprise tax rebate to everyone.  We also abruptly moved houses in Feb and had large gains on the house we bought in 2020.  If things calm down I will travel to Latin America and attempt to claim a pension lump sum on some work there years ago.  If we can get taxable income under control, hope to do Roth conversions for a decade or so but SS is already going to get in the way as we have to claim early for max NPV (due to non-working spouse).

Mr. Green

  • Magnum Stache
  • ******
  • Posts: 4643
  • Age: 40
  • Location: Wilmington, NC
Re: Taking your "salary" from your retirement portfolio
« Reply #12 on: June 29, 2024, 05:58:07 PM »
Monthly. Frequent enough to remover any hesitation if the market was in freefall.

John Doe

  • 5 O'Clock Shadow
  • *
  • Posts: 82
Re: Taking your "salary" from your retirement portfolio
« Reply #13 on: July 01, 2024, 07:03:54 PM »
Annually.   Beginning of January, we sweep the cash that accumulated during the year from dividends and that is sufficient to cover our costs for the year.   

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1718
Re: Taking your "salary" from your retirement portfolio
« Reply #14 on: July 03, 2024, 10:53:12 PM »
I don't.  But I'm very interested and learning, and have started accumulating dividends instead of reinvesting.

The latest endeavor is simulating VPW on a monthly basis.

 https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

Shamantha

  • Stubble
  • **
  • Posts: 159
Re: Taking your "salary" from your retirement portfolio
« Reply #15 on: July 04, 2024, 03:35:45 AM »
The first year I drew down from my savings, in two or three chunks a month (trying to make each chunk last a bit longer than planned). Now in the second year I will draw down from investments, with a quarterly sale, which I then transfer to my savings account and still transfer in two or three chunks a month.

I am a bit hestitant to "pay" myself a fixed sum each month, as that would mean if I do not use it, it is just sitting there not getting interest. Even for small amounts that bugs me. So that's a Mustachian People Problem I guess 😄

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 2162
Re: Taking your "salary" from your retirement portfolio
« Reply #16 on: July 10, 2024, 07:03:15 AM »
So I'll respond as the ultra conservative financial guy.  Before retiring, I saved about $350k in cash.  I was worried about having the cash available.  As I retired, I started doing the math on Medicare IRMAA, future RMDs and social security.  Our majority of savings are in traditional IRA accounts which is bad because of two things.  One, as I take money from them, I pay regular income tax.  Second, at RMD time, I have to take money out.  Regardless, these two things add to IRS labeled income, or MAGI if you want to get technical.  You're probably thinking "who cares?".  Well, not only do these push us up brackets but if you've saved too much like we have, they, alone are enough to push us over the IRMAA Medicare penalty limit. 

So, of course we are doing Roth conversions now.  Oh, and don't forget that in 2026, the tax rates go up again.  So what are we doing with all this "income" pushing us towards higher taxes and IRMAA penalties?

1) converting cash to taxable account, buying BRK/b because it doesn't pay dividends.
2) Roth converting up to where income is just under IRMAA (I'm on Medicare now, so if you're not, that limit does not exist)
3) In taxable accounts, sell all dividend producing ETFs like VTI and SCHB and convert them to BRK/b.  In tax advantaged, dividends don't matter
4) and this is important: Make a spread sheet to keep track of ALL income.  I really don't want to go $1 over the IRMAA limit and spend an extra $100 a month on Medicare. 
5) If you sell tradelines, you're getting a 1099.  Don't forget this.  Keep track as this is income.

Ron Scott

  • Handlebar Stache
  • *****
  • Posts: 1354
Re: Taking your "salary" from your retirement portfolio
« Reply #17 on: July 10, 2024, 07:33:36 AM »
So I'll respond as the ultra conservative financial guy.  Before retiring, I saved about $350k in cash.  I was worried about having the cash available.  As I retired, I started doing the math on Medicare IRMAA, future RMDs and social security.  Our majority of savings are in traditional IRA accounts which is bad because of two things.  One, as I take money from them, I pay regular income tax.  Second, at RMD time, I have to take money out.  Regardless, these two things add to IRS labeled income, or MAGI if you want to get technical.  You're probably thinking "who cares?".  Well, not only do these push us up brackets but if you've saved too much like we have, they, alone are enough to push us over the IRMAA Medicare penalty limit. 

So, of course we are doing Roth conversions now.  Oh, and don't forget that in 2026, the tax rates go up again.  So what are we doing with all this "income" pushing us towards higher taxes and IRMAA penalties?

1) converting cash to taxable account, buying BRK/b because it doesn't pay dividends.
2) Roth converting up to where income is just under IRMAA (I'm on Medicare now, so if you're not, that limit does not exist)
3) In taxable accounts, sell all dividend producing ETFs like VTI and SCHB and convert them to BRK/b.  In tax advantaged, dividends don't matter
4) and this is important: Make a spread sheet to keep track of ALL income.  I really don't want to go $1 over the IRMAA limit and spend an extra $100 a month on Medicare. 
5) If you sell tradelines, you're getting a 1099.  Don't forget this.  Keep track as this is income.

Do you ever wonder if letting your interest in reducing taxes drive your investment strategy might result in both lower taxes and lower net worth.

reeshau

  • Magnum Stache
  • ******
  • Posts: 2814
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Taking your "salary" from your retirement portfolio
« Reply #18 on: July 10, 2024, 04:21:07 PM »
So I'll respond as the ultra conservative financial guy.  Before retiring, I saved about $350k in cash.  I was worried about having the cash available.  As I retired, I started doing the math on Medicare IRMAA, future RMDs and social security.  Our majority of savings are in traditional IRA accounts which is bad because of two things.  One, as I take money from them, I pay regular income tax.  Second, at RMD time, I have to take money out.  Regardless, these two things add to IRS labeled income, or MAGI if you want to get technical.  You're probably thinking "who cares?".  Well, not only do these push us up brackets but if you've saved too much like we have, they, alone are enough to push us over the IRMAA Medicare penalty limit. 

So, of course we are doing Roth conversions now.  Oh, and don't forget that in 2026, the tax rates go up again.  So what are we doing with all this "income" pushing us towards higher taxes and IRMAA penalties?

1) converting cash to taxable account, buying BRK/b because it doesn't pay dividends.
2) Roth converting up to where income is just under IRMAA (I'm on Medicare now, so if you're not, that limit does not exist)
3) In taxable accounts, sell all dividend producing ETFs like VTI and SCHB and convert them to BRK/b.  In tax advantaged, dividends don't matter
4) and this is important: Make a spread sheet to keep track of ALL income.  I really don't want to go $1 over the IRMAA limit and spend an extra $100 a month on Medicare. 
5) If you sell tradelines, you're getting a 1099.  Don't forget this.  Keep track as this is income.

Do you ever wonder if letting your interest in reducing taxes drive your investment strategy might result in both lower taxes and lower net worth.

Be aware of taxes, but don't let the tax tail wag the investment dog.

skp

  • Stubble
  • **
  • Posts: 248
  • Location: oh
Re: Taking your "salary" from your retirement portfolio
« Reply #19 on: July 11, 2024, 06:12:26 AM »
Like John Doe and others. Annual withdrawal to money market. Monthly transfers to checking of set amount of money.  If we overspend that it comes out of “savings”.

 

Wow, a phone plan for fifteen bucks!