Taking your "salary" from your retirement portfolio

[blue_green_sparks]

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]

I have a monthly automated withdrawal.

[reeshau]

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]

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 My living expenses salary is withdrawn every two weeks. Optional expenses are withdrawn whenever I need them, up to a yearly limit.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]

About quarterly, give or take.

[spartana]

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]

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]

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]

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]

@lhamo It's it nice how we can both use the same process to our advantage?  Go team!

[markus]

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]

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).

[MrGreen]

Monthly. Frequent enough to remover any hesitation if the market was in freefall.

[John Doe]

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]

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]

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]

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]

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]

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]

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”.

[Trudie]

Monthly to bill paying account.

[Greystache]

Does anyone consider market performance when making withdrawals? Let's say your portfolio is divided between a total stock fund and a total bond fund. If the stock fund is way up and the bond fund is down, do you withdraw money from the stock fund only or do you withdraw from both stock and bond funds?

[reeshau]

Does anyone consider market performance when making withdrawals? Let's say your portfolio is divided between a total stock fund and a total bond fund. If the stock fund is way up and the bond fund is down, do you withdraw money from the stock fund only or do you withdraw from both stock and bond funds?

Buy low and sell high.

But seriously, yes, you can use your withdrawal as a way to bring your assets back toward your target allocation.  Although, it depends how often you are withdrawing--adjusting allocation too often would just be chasing your tail.

[bacchi]

Does anyone consider market performance when making withdrawals? Let's say your portfolio is divided between a total stock fund and a total bond fund. If the stock fund is way up and the bond fund is down, do you withdraw money from the stock fund only or do you withdraw from both stock and bond funds?

I always withdraw from bonds. Stocks are sold into bonds during annual rebalancing if the market was strong that year.

[MoseyingAlong]

Does anyone consider market performance when making withdrawals? Let's say your portfolio is divided between a total stock fund and a total bond fund. If the stock fund is way up and the bond fund is down, do you withdraw money from the stock fund only or do you withdraw from both stock and bond funds?

I use and highly recommend a US Treasury/CD ladder 5-10 years long. I have 6 years right now. So that's a non-callable CD or US Treasury (something basically risk-free) that matures late each year for the next 6 years. The size of the rung is based on my projected spending.

Towards the end of each year, I rebalance and ensure I have enough in the money market to cover the next year. Monthly withdrawals are set up for the basic amount needed. Extra or larger withdrawals are done as needed. This maximizes the amount in the money market which pays more interest than my bank account.

When I annually rebalance my overall portfolio, if stocks are up, I take some out of the stock bucket and rebuild or extend my bond ladder. If stocks are down, I use the funds from the bond that matured and leave the stock portion alone.

Why individual CDs/US Treasuries and not a bond fund?
Because this way I know exactly how much will be available in cash at the maturity date. And I know how long my ladder is. It's reassuring to me to know that I have the next 6 years covered by instruments back by the US government/FDIC. i.e I don't care if the stock market has a rough 6-months or 2 years, I'm set for the next 6 years. And I don't care what fellow fund holders do. If they panic and sell a bond fund, it forces the manager to sell bonds probably before their time and potentially at a loss which will negatively impact the value of a bond fund holding. That doesn't happen with my non-callable bond ladder.

The bond ladder is stable, safe and can be extremely tax efficient.

[Much Fishing to Do]

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.

That is pretty sweet.  My taxable acct dividends & fund year end automatic LTCG distributions plus my S.S. would be about enough I think for spending, but I'm still at least a decade from the SS.

[doneby35]

For anyone using Vanguard and doing monthly automatic withdrawals + focusing on selling the least appreciated shares first to maximize IRA conversions, are you using minTax instead of specID? I don’t believe specID can be automated.
https://investor.vanguard.com/investor-resources-education/taxes/cost-basis-minimum-tax

[GilesMM]

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.

That is pretty sweet.  My taxable acct dividends & fund year end automatic LTCG distributions plus my S.S. would be about enough I think for spending, but I'm still at least a decade from the SS.

That may be our goal as well - live on dividends plus SS (at age 62) and keep the pile growing. But then what to do with it?

[Missy B]

I've set up my stash as dividend primary, so I won't be doing sell-withdrawals. I have cash income monthly, which is lumpy. Of the quarterly, 3 month cycle 2 of the 3 months are larger and one is smaller, half that of the other 2. That probably won't change a lot, since I do my investments based on return and not the month I get paid :)

[jimmyshutter]

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.

That is pretty sweet.  My taxable acct dividends & fund year end automatic LTCG distributions plus my S.S. would be about enough I think for spending, but I'm still at least a decade from the SS.

That may be our goal as well - live on dividends plus SS (at age 62) and keep the pile growing. But then what to do with it?

I thought the same. I could live barebones on interest/dividends and small pension until SS kicks in. But then I think, I saved all this money over the years why not start spending it?

[flyingaway]

If withdrawing is just to move money from one account to another, it is easy.
But if it involves selling stocks or bonds (funds), that is more complicated.

[Ron Scott]

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.

Kinda like this but sweep a few times a year, as int/div are paid. Don’t sell underlying assets.

[flyingaway]

I don't know what to say. But if you only spend interests and dividends, not the capital gains of the underlying assets or the assets,  you will have a lot of money left. It is not a bad thing,  but I don't know if that is what the OP was talking about.

[mistymoney]

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.

This seems like a good idea to me! I think @Sandi_k mentioned planning to employ a similar strategy. A few dollars of interest in the roth account is a nice bonus.

I was kind of toying with doing something annually at the end of the year - if I can manage to get that lined up to make good tax sense.

So live all year off what I did the previous december, and at the end of the year to determine the max I can take from pretax to roth to stay in targeted tax bracket. And then hopefully have a little bit of extra interest to add to the roth during that year - and then if spending over that allotment in any given year, dip into the existing roth moneys?