Retirees: Monthly vs Quarterly vs Annual Distributions

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jebmke
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jebmke »

Marseille07 wrote: Fri May 07, 2021 1:09 pm
jebmke wrote: Fri May 07, 2021 1:03 pm That's essentially the same as my "let the allocation drift" alternative. It is still $100K of fixed income (zero duration). Purely a duration choice. I choose not to take the consequences of zero duration over the long haul. Historically that has been the correct decision. As I said, with current negative interest rates, the difference is negligible.

I'm at a stage now where I will never sell equity, ever -- unless it is a mega emergency -- in which case I have much bigger problems than my allocation.
We're comparing something different though. In the 2M example, 60/40 would have:
1.2M in equities
800K in bonds

My portfolio is:
1.9M in equities
100K in cash

So the tradeoff isn't just "bonds are better than cash historically." It is:
800K in bonds vs 700K extra in equities + 100K in cash. You see, cash is a drag but I don't have a lot of it and instead, having more equities.
Yes; that's a viable approach. in my case I had a unique situation decades ago and we put 80+% of our equity into small cap value and then leaned the other way (slightly less equity in total) compared to what I probably would have done had we had a conventional equity portfolio. The key, as you note, is to view the total and not the parts. The parts play together.
When you discover that you are riding a dead horse, the best strategy is to dismount.
KlangFool
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

marcopolo wrote: Fri May 07, 2021 1:22 pm
KlangFool wrote: Fri May 07, 2021 12:44 pm
marcopolo wrote: Fri May 07, 2021 11:53 am
KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
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WhiteMaxima
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by WhiteMaxima »

Always DCA
marcopolo
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by marcopolo »

KlangFool wrote: Fri May 07, 2021 1:28 pm
marcopolo wrote: Fri May 07, 2021 1:22 pm
KlangFool wrote: Fri May 07, 2021 12:44 pm
marcopolo wrote: Fri May 07, 2021 11:53 am
KlangFool wrote: Thu May 06, 2021 10:21 am OP,

Do you care about how much taxes that you are paying?

My answer is none of the above. I have 3 years of expense in CASH as my emergency fund/buffer. I do not need distribution for spending. I do not reinvest my dividend/distribution from my taxable account. Then, I do whatever makes the most sense from tax management point of view every year to refill my emergency fund/buffer.

KlangFool
So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KlangFool
Posts: 20884
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

marcopolo wrote: Fri May 07, 2021 1:38 pm
KlangFool wrote: Fri May 07, 2021 1:28 pm
marcopolo wrote: Fri May 07, 2021 1:22 pm
KlangFool wrote: Fri May 07, 2021 12:44 pm
marcopolo wrote: Fri May 07, 2021 11:53 am

So, that would be annually.
The fact that you funnel the withdrawal through your emergency fund does not really change that.
marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Good for you. May I know what is your annual expense? Around 50K? Less than 50K? 50K to 100K range?

KlangFool
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ruralavalon
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by ruralavalon »

namajones wrote: Fri May 07, 2021 10:43 am
Marseille07 wrote: Fri May 07, 2021 10:41 am

My approach is to flip it around by withdrawing monthly to maintain EF. For example, let's say my EF is 100K. If I'm below this mark, I withdraw monthly to replenish the EF, like 9K/mo or what have you.

This way, if I'm underspending then I don't withdraw anything, and because I don't need to.
To me, a decently large EF makes sense under all circumstances. If the market is down and you didn't want to withdraw (sell low), your EF allows you not to.
On the other hand there is the opportunity cost, specifically the lost returns because of always having the (for examp!e) $100k not invested in anything.

If retired why assume that the market will be down when the emergency occurs?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
KlangFool
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

ruralavalon wrote: Fri May 07, 2021 2:04 pm

If retired why assume that the market will be down when the emergency occurs?
ruralavalon,

For the simple reason that if the market is up when the emergency occurs, there is no problem to sell.

KlangFool
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marcopolo
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by marcopolo »

KlangFool wrote: Fri May 07, 2021 1:40 pm
marcopolo wrote: Fri May 07, 2021 1:38 pm
KlangFool wrote: Fri May 07, 2021 1:28 pm
marcopolo wrote: Fri May 07, 2021 1:22 pm
KlangFool wrote: Fri May 07, 2021 12:44 pm

marcopolo,

Not necessary true.

A) With 3 years of expense in CASH, I do not have withdraw every year to refill the emergency fund.

B) I may withdraw nothing one year and withdraw more than one year in some other year.

C) And, the amount that I withdraw does not have to match one year of expense.

D) The amount and timing is totally flexible.

KlangFool
I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Good for you. May I know what is your annual expense? Around 50K? Less than 50K? 50K to 100K range?

KlangFool
We budget $120k in expenses.
The last year has been lower due to Covid restrictions.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KlangFool
Posts: 20884
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

marcopolo wrote: Fri May 07, 2021 2:18 pm
KlangFool wrote: Fri May 07, 2021 1:40 pm
marcopolo wrote: Fri May 07, 2021 1:38 pm
KlangFool wrote: Fri May 07, 2021 1:28 pm
marcopolo wrote: Fri May 07, 2021 1:22 pm

I guess I misunderstood when you said "every year to refill".
I get what you are doing.

It is too much idle cash for my taste, but I understand the idea of having an elastic buffer.
marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Good for you. May I know what is your annual expense? Around 50K? Less than 50K? 50K to 100K range?

KlangFool
We budget $120k in expenses.
The last year has been lower due to Covid restrictions.
Interesting! If you won't mind, could you please PMed me on how do you manage to get the ACA subsidies with this level of annual expense?

Thanks in advance.

KlangFool
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marcopolo
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by marcopolo »

KlangFool wrote: Fri May 07, 2021 2:30 pm
marcopolo wrote: Fri May 07, 2021 2:18 pm
KlangFool wrote: Fri May 07, 2021 1:40 pm
marcopolo wrote: Fri May 07, 2021 1:38 pm
KlangFool wrote: Fri May 07, 2021 1:28 pm

marcopolo,

IMHO, it is necessary. The ACA insurance premium subsidy is worth up to 10K per year. It pays for the opportunity costs of the 3 years of expense in CASH.

KlangFool
IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Good for you. May I know what is your annual expense? Around 50K? Less than 50K? 50K to 100K range?

KlangFool
We budget $120k in expenses.
The last year has been lower due to Covid restrictions.
Interesting! If you won't mind, could you please PMed me on how do you manage to get the ACA subsidies with this level of annual expense?

Thanks in advance.

KlangFool
It actually takes little or no effort. I would have to go out of my way to try to avoid getting that level of subsidies.

I had to go look up the exact details, both our premiums and our subsidy is a little lower than i thought. But, here are the details:

We live in Hawaii which has a higher FPL than the continental United States.
We still have one son in college, so a family of 3.

We estimate having a MAGI of $84k/yr.
Our premium is $1446/mo ($17,352/yr). Based on MAGI and and Second Lowest Cost Silver Plan (SLCSP), we get a Advance Premium Tax Credit (APTC) of $1429/mo ($17,148/yr). Our net cost is $17/mo ($204/yr.).

Our MAGI is achieved as follows:

Dividends: $35k
Sell Equities in Taxable account: $85k sold, resulting in ~$30k in Capital Gains
Roth Conversions ($20k) to get to target MAGI.

We could keep our MAGI around $65k to $70k, which we may do once son is no longer a dependent, but right now we get to Roth convert about $20k for free.

This can be quite different for other people where the FPL, SLCSP, and mix of assets are different.

Feel free to PM me if you want to discuss further details, but i figured others could benefit from seeing how the APTC can work.
Sorry to take a tangent on this thread.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KlangFool
Posts: 20884
Joined: Sat Oct 11, 2008 12:35 pm

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by KlangFool »

marcopolo wrote: Fri May 07, 2021 3:50 pm
KlangFool wrote: Fri May 07, 2021 2:30 pm
marcopolo wrote: Fri May 07, 2021 2:18 pm
KlangFool wrote: Fri May 07, 2021 1:40 pm
marcopolo wrote: Fri May 07, 2021 1:38 pm

IMHO, not necessary at all.
I am getting close to $20k in ACA subsidies.
I keep very little cash sitting around.
Good for you. May I know what is your annual expense? Around 50K? Less than 50K? 50K to 100K range?

KlangFool
We budget $120k in expenses.
The last year has been lower due to Covid restrictions.
Interesting! If you won't mind, could you please PMed me on how do you manage to get the ACA subsidies with this level of annual expense?

Thanks in advance.

KlangFool
It actually takes little or no effort. I would have to go out of my way to try to avoid getting that level of subsidies.

I had to go look up the exact details, both our premiums and our subsidy is a little lower than i thought. But, here are the details:

We live in Hawaii which has a higher FPL than the continental United States.
We still have one son in college, so a family of 3.

We estimate having a MAGI of $84k/yr.
Our premium is $1446/mo ($17,352/yr). Based on MAGI and and Second Lowest Cost Silver Plan (SLCSP), we get a Advance Premium Tax Credit (APTC) of $1429/mo ($17,148/yr). Our net cost is $17/mo ($204/yr.).

Our MAGI is achieved as follows:

Dividends: $35k
Sell Equities in Taxable account: $85k sold, resulting in ~$30k in Capital Gains
Roth Conversions ($20k) to get to target MAGI.

We could keep our MAGI around $65k to $70k, which we may do once son is no longer a dependent, but right now we get to Roth convert about $20k for free.

This can be quite different for other people where the FPL, SLCSP, and mix of assets are different.

Feel free to PM me if you want to discuss further details, but i figured others could benefit from seeing how the APTC can work.
Sorry to take a tangent on this thread.
Thanks for the answer!

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
jpdion
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by jpdion »

dbr wrote: Fri May 07, 2021 10:28 am
namajones wrote: Fri May 07, 2021 9:44 am
jpdion wrote: Fri May 07, 2021 8:00 am Retired six years. The foundation of our withdrawal strategy is monthly. But there is usually an annual withdrawal on top in January- February to take care of lumpy things - like Christmas bills, HOA fees, and sometimes income tax owed. If the market is way up, we'll skim a bit of the profit. I'd call it "flexibly disciplined."
I like the skimming idea in addition to monthlies.
Does this mean spending more when the market is up or does it mean shifting assets from stocks to cash when the market is up. Is that different from rebalancing?
I guess it's mini-rebalancing - sometimes the skim goes into the money market fund inside our IRAs (where the monthly withdrawals are taken from); sometimes we take it out for travel or special projects. True rebalancing, for us, is when the allocations are out of whack by 5% or more.
DetroitRick
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Location: SE Michigan

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by DetroitRick »

Yes, I've played around with this over the years. My only conclusion is that annual distributions wouldn't work for me (and that is only one that I haven't tried). So, I've done monthly, quarterly and as-needed - without really having a preferred method. I suppose monthly is most convenient for me (in terms of checking account management), but barely. Looking at magnitude of those withdrawals, it makes little financial difference to me which I choose.

I do a rough monthly withdrawal plan to cover each year, primarily for the sake of tax planning and Affordable Care Act income management. In forming this plan, I try to push taxable impacts out to later in the year, which helps some of the income "unknowns" to become "knowns". So right now, I sort of use monthly distributions - but vary their origin from month to month (earlier in the year pulling from Roths and bank/brokerage cash, later in the year from Traditional IRA and Brokerage positions). This is, of course, not something that everyone needs to bother with - but it saves me tax dollars. And of course, I draw more as needed when things arise. Moving funds around is so fast and easy that I don't give it too much effort.

Underlying all this is the fact that our monthly expenses are typically fairly flat, and most expenses go on credit card and then get paid in "chunks". When exceptions happen, I just pull as needed. Same with big ticket items. When I look at asset allocation planning and rebalancing, I give rough consideration to where funds will be pulled for the next year or so (so that I keep within my desired allocation ranges as this rolls along). I think this just all comes down to convenience and personal preference.
Topic Author
namajones
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

ruralavalon wrote: Fri May 07, 2021 2:04 pm
On the other hand there is the opportunity cost, specifically the lost returns because of always having the (for examp!e) $100k not invested in anything.

If retired why assume that the market will be down when the emergency occurs?

No, no, I'm not going there. Not going to play that mental game to justify a higher equity allocation, and certainly not now, when markets are at valuation levels really never seen before.

https://www.multpl.com/s-p-500-pe-ratio

You know, at some point potential gains just don't mean as much as financial security, protecting one's assets.

Lost returns? Hah. I look at things another way: lost opportunities to lose your shirt. I'll take those losses any day.

I will say this, though: The next time the market is down by 50+ percent and people are saying the next Great Depression is near, job losses are skyrocketing, people are selling left and right to avoid foreclosure, and then foreclosures are mounting anyway, I'll think about about deploying some of that EF again in the markets to increase my exposure to equities.
Last edited by namajones on Sat May 08, 2021 10:23 am, edited 2 times in total.
dbr
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by dbr »

namajones wrote: Sat May 08, 2021 10:13 am
ruralavalon wrote: Fri May 07, 2021 2:04 pm
On the other hand there is the opportunity cost, specifically the lost returns because of always having the (for examp!e) $100k not invested in anything.

If retired why assume that the market will be down when the emergency occurs?

No, no, I'm not going there. Not going to play that mental game to justify a higher equity allocation, and certainly not now, when markets are at valuation levels really never seen before.

https://www.multpl.com/s-p-500-pe-ratio

You know, at some point potential gains just don't mean as much as financial security, protecting one's assets.

Lost returns? Hah. I look at things another way: lost opportunities to lose your shirt. I'll take those losses any day.
It's better to understand the systematic implications of the expected return and expected risk of the portfolio one has chosen than to cite one or two assume scenarios to one side or the other. There is both danger and opportunity to the investor in both return and risk. The real issue is matching those properties to what one wants. That is why Swedroe's scheme of need, ability, and willingness is a good framework for thinking through what one is trying to do and what consequences one's particular plan will have.
Topic Author
namajones
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

dbr wrote: Sat May 08, 2021 10:19 am There is both danger and opportunity to the investor in both return and risk. The real issue is matching those properties to what one wants. That is why Swedroe's scheme of need, ability, and willingness is a good framework for thinking through what one is trying to do and what consequences one's particular plan will have.
Exactly. There is no "opportunity" in taking on more equity risk when one has enough and the emphasis is on preserving assets. Beyond a certain point, more money will not make you happier. Knowing that the next 50% market "correction" will not cause you to lose any sleep at night, however, very likely will make you happier.
Topic Author
namajones
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

DetroitRick wrote: Sat May 08, 2021 9:56 am Yes, I've played around with this over the years. My only conclusion is that annual distributions wouldn't work for me (and that is only one that I haven't tried). So, I've done monthly, quarterly and as-needed - without really having a preferred method. I suppose monthly is most convenient for me (in terms of checking account management), but barely. Looking at magnitude of those withdrawals, it makes little financial difference to me which I choose.

I do a rough monthly withdrawal plan to cover each year, primarily for the sake of tax planning and Affordable Care Act income management. In forming this plan, I try to push taxable impacts out to later in the year, which helps some of the income "unknowns" to become "knowns". So right now, I sort of use monthly distributions - but vary their origin from month to month (earlier in the year pulling from Roths and bank/brokerage cash, later in the year from Traditional IRA and Brokerage positions). This is, of course, not something that everyone needs to bother with - but it saves me tax dollars. And of course, I draw more as needed when things arise. Moving funds around is so fast and easy that I don't give it too much effort.

Underlying all this is the fact that our monthly expenses are typically fairly flat, and most expenses go on credit card and then get paid in "chunks". When exceptions happen, I just pull as needed. Same with big ticket items. When I look at asset allocation planning and rebalancing, I give rough consideration to where funds will be pulled for the next year or so (so that I keep within my desired allocation ranges as this rolls along). I think this just all comes down to convenience and personal preference.
Thanks for sharing your experience with this.
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ruralavalon
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by ruralavalon »

namajones wrote: Sat May 08, 2021 10:13 am
ruralavalon wrote: Fri May 07, 2021 2:04 pm
On the other hand there is the opportunity cost, specifically the lost returns because of always having the (for examp!e) $100k not invested in anything.

If retired why assume that the market will be down when the emergency occurs?

No, no, I'm not going there. Not going to play that mental game to justify a higher equity allocation, and certainly not now, when markets are at valuation levels really never seen before.

https://www.multpl.com/s-p-500-pe-ratio

You know, at some point potential gains just don't mean as much as financial security, protecting one's assets.

Lost returns? Hah. I look at things another way: lost opportunities to lose your shirt. I'll take those losses any day.

I will say this, though: The next time the market is down by 50+ percent and people are saying the next Great Depression is near, job losses are skyrocketing, people are selling left and right to avoid foreclosure, and then foreclosures are mounting anyway, I'll think about about deploying some of that EF again in the markets to increase my exposure to equities.
I didn not suggest a higher equity allocation. I just suggested that holding $100k cash is not wise.

There are investments to consider other than equities. "Rising rates don’t negate benefits of bonds." link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
namajones
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by namajones »

ruralavalon wrote: Sat May 08, 2021 10:33 am
I didn't suggest a higher equity allocation. I just suggested that holding $100k cash is not wise.
I see.

Well, yes, clearly there should be an effort to do something both reasonably safe and reasonably remunerative with the EF, even if that means holding it in CDs and high-yield savings accounts. I was personally lucky to buy a bunch of CDs when yields were up around 2.9 and 3 percent. That was just luck, though, as the view then was that yields were going to continue to move higher.

It's really tough these days, of course, to find much return in anything other than risk assets. The old "cash is king" phrase starts cropping up repeatedly just as most people have been pushed to lower their cash cushions to nothing.
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ruralavalon
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by ruralavalon »

namajones wrote: Sat May 08, 2021 10:39 am
ruralavalon wrote: Sat May 08, 2021 10:33 am
I didn't suggest a higher equity allocation. I just suggested that holding $100k cash is not wise.
I see.

Well, yes, clearly there should be an effort to do something both reasonably safe and reasonably remunerative with the EF, even if that means holding it in CDs and high-yield savings accounts. I was personally lucky to buy a bunch of CDs when yields were up around 2.9 and 3 percent. That was just luck, though, as the view then was that yields were going to continue to move higher.

It's really tough these days, of course, to find much return in anything other than risk assets. The old "cash is king" phrase starts cropping up repeatedly just as most people have been pushed to lower their cash cushions to nothing.
In fact most people in the U.S. currently have a cash cushion much higher than what is usual. The U.S. savings rate is much higher than usual link, and the average checking account balance is also way up.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
bigskyguy
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by bigskyguy »

First year for us with RMD. Our accounts from Schwab do the calculation for us, pretty nice. We've decided to take a single annual distribution from our IRAs, and have them deposited in our Schwab taxable brokerage. We then withdraw as necessary to pay bills.

We built a retirement budget years ago based upon our historical spending. Just so happens that SS plus our RMD are substantively higher than our budgeted expenses. Our intent is to keep this process in place going forward. Not sure what we'll do if the taxable brokerage account becomes sizable.

One thing I did recently is give myself a small dollar amount (12K) to "play the market." Keeps me satisfied, inquisitive, and helps prevent me from messing with our cash flow retirement portfolio. We'll see how it works.
Dandy
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Dandy »

When I initially started to withdraw in retirement I put a year's worth of drawdown needs in an online savings account and then 2X a month I automatically transferred money to our checking account. It was like my old twice a month pay.

Now that pensions and SS income almost equals our normal needs I have all that income sent to our online savings and do the same thing.

Banks often change the rules/fees/minimums etc. on their checking accounts. If that happens I just redirect the automatic 2X a month to our new checking account. Don't have to bother former company or social security to change where they send money. Also most of our bills occur later in the month so we earn a little on the savings account (used to be more).
Rajsx
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Location: Florida

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Rajsx »

I understand the mechanics & logistics in getting the monthly retirement check. My problem is which type of account to draw our spending money from.

I am 65, entering retirement and will start withdrawing next month from the retirement savings, as Social Security will start at 70. Our planned spend rate is less than 3% from our 7 figure Portfolio with Asset Allocation of 60/40 & we will die rich.

Our Stash -
4% - Emergency Fund in Cash for 2 yrs expenses
69% - Taxable Funds mostly in Stock Funds + Muni Fund
22% -Tax Deferred 22% are All Bond Funds
5% - Tax free Roths .
Thanks to our frugality and the favorable Market, we have 45 times our yearly spend.

I am unable to decide, which of the following ways to get the monthly check from -

A) Spend from cash for the remaining year & kick the decision down to 2022

B) Fidelity suggests to spend proportionately from each of the account types to keep the taxes stable going forward.

C) Traditionally it has been first Taxable, then Tax Deferred & finally Roth

D) First draw from Tax Deferred Bonds, in addition to Roth Conversions, then go to Taxable as Taxable & Roths will be better to leave behind.

E) Draw from whichever accounts are gaining at the time, i.e.. either Stock vs Bond Funds.

F) Tax Efficient year by year, probably meaning from taxable (15%) rather than Tax Deferred(22 - 24%), we usually top the 22% MFJ but last year we were in 24% & will be paying IRMAA Medicare Premium Penalty 2 years from now.

I will appreciate any help/guidance in withdrawing our living expenses, thanks in advance.

Oh boy , the accumulation years were much clear & simpler than when compared to the Withdrawal years
We do not stop laughing because we grow old, we grow old because we stop laughing !!
sixtyforty
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Location: USA

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by sixtyforty »

Automated monthly withdrawal. For one off expenses (travel etc) , I withdraw as needed.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
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ruralavalon
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Location: Illinois

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by ruralavalon »

Congratulations on your recent retirement :) .


Rajsx wrote: Sat May 08, 2021 7:57 pm I understand the mechanics & logistics in getting the monthly retirement check. My problem is which type of account to draw our spending money from.

I am 65, entering retirement and will start withdrawing next month from the retirement savings, as Social Security will start at 70. Our planned spend rate is less than 3% from our 7 figure Portfolio with Asset Allocation of 60/40 & we will die rich.

Our Stash -
4% - Emergency Fund in Cash for 2 yrs expenses
69% - Taxable Funds mostly in Stock Funds + Muni Fund
22% -Tax Deferred 22% are All Bond Funds
5% - Tax free Roths .
Thanks to our frugality and the favorable Market, we have 45 times our yearly spend.

I am unable to decide, which of the following ways to get the monthly check from -

A) Spend from cash for the remaining year & kick the decision down to 2022

B) Fidelity suggests to spend proportionately from each of the account types to keep the taxes stable going forward.

C) Traditionally it has been first Taxable, then Tax Deferred & finally Roth

D) First draw from Tax Deferred Bonds, in addition to Roth Conversions, then go to Taxable as Taxable & Roths will be better to leave behind.

E) Draw from whichever accounts are gaining at the time, i.e.. either Stock vs Bond Funds.

F) Tax Efficient year by year, probably meaning from taxable (15%) rather than Tax Deferred(22 - 24%), we usually top the 22% MFJ but last year we were in 24% & will be paying IRMAA Medicare Premium Penalty 2 years from now.

I will appreciate any help/guidance in withdrawing our living expenses, thanks in advance.

Oh boy , the accumulation years were much clear & simpler than when compared to the Withdrawal years
My suggestion for living expenses is from (1) the 2 yrs cash, then (2) taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Marseille07
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Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Marseille07 »

ruralavalon wrote: Fri May 07, 2021 2:04 pm
namajones wrote: Fri May 07, 2021 10:43 am
Marseille07 wrote: Fri May 07, 2021 10:41 am

My approach is to flip it around by withdrawing monthly to maintain EF. For example, let's say my EF is 100K. If I'm below this mark, I withdraw monthly to replenish the EF, like 9K/mo or what have you.

This way, if I'm underspending then I don't withdraw anything, and because I don't need to.
To me, a decently large EF makes sense under all circumstances. If the market is down and you didn't want to withdraw (sell low), your EF allows you not to.
On the other hand there is the opportunity cost, specifically the lost returns because of always having the (for examp!e) $100k not invested in anything.

If retired why assume that the market will be down when the emergency occurs?
I don't get why folks jump up and down on 100K of cash when they hold a lot more in bonds. Let's say a 2M portfolio:

60/40: 1.2M equities, 800K bonds
95/5(cash): 1.9M equities, 100K cash

So the "opportunity cost" here is really 800K bonds vs 700K equities + 100K cash. I'd argue the bond camp carries more opportunity cost than I.
Last edited by Marseille07 on Sun May 09, 2021 2:26 pm, edited 1 time in total.
Rajsx
Posts: 625
Joined: Wed Mar 21, 2007 10:07 pm
Location: Florida

Re: Retirees: Monthly vs Quarterly vs Annual Distributions

Post by Rajsx »

ruralavalon wrote: Sun May 09, 2021 12:28 pm Congratulations on your recent retirement :) .

I will appreciate any help/guidance in withdrawing our living expenses, thanks in advance.

Oh boy , the accumulation years were much clear & simpler than when compared to the Withdrawal years
My suggestion for living expenses is from (1) the 2 yrs cash, then (2) taxable account.
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Thanks Avalon for the Feedback.
We do not stop laughing because we grow old, we grow old because we stop laughing !!
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