Advice on taking a draw from Vanguard accounts

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Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Advice on taking a draw from Vanguard accounts

Post by Jackson12 »

We Have 2 Vanguard accounts, both allocated to retirement, and we haven’t touched them but simply contributed to then and let them grow . We’re 2 years away from retirement.

One account is invested more aggressively . It had a 6.5% return this year. The other account had a 6.3% return.

Both accounts have nearly equal balances at this point. They are currently sufficient to cover retirement expenses once we factor in an employer retirement plan ( not held at Vanguard) and social security.

We’re in our late 60s. We’d like to take a one time 3% draw from each account this year and, as I understand it, this is okay to do when returns are good. A draw would give us some extra breathing room for delaying social security until age 70. We’d also be able to fund an Able account this year for a special needs child ( a tax free account) ,

For what it’s worth. , Vanguard’s “portfolio watch” tool, which provides historical risk/return information on allocations ( for the years from 1926-2015) predicts there’d most likely be 7% longterm returns on the more conservative account and 9% on the other.

If I haven’t provided enough info, I’m eager to fill in any gaps. Is there any significant reason we shouldn’t take a draw? .
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dwickenh
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Location: Illinois

Re: Advice on taking a draw from Vanguard accounts

Post by dwickenh »

The percentage you want to draw is within reason for your ages. You don't mention if these accounts are tax sheltered or taxable accounts.
If tax sheltered, you will have to pay taxes on the withdrawals, so you may need to pull more than 3% to get the money needed.
If these are taxable accounts, make sure you pay attention to which funds have the least capital gains to pull the 3% from to reduce
taxes.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett
dbr
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Re: Advice on taking a draw from Vanguard accounts

Post by dbr »

Agree. Taking a withdrawal that size whether or not the account returns have been positive recently is fine. Doing it to delay Social Security is a no-brainer.
Rudedog
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Re: Advice on taking a draw from Vanguard accounts

Post by Rudedog »

Agree, just get a good idea of the income tax you will have to pay.
Topic Author
Jackson12
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Re: Advice on taking a draw from Vanguard accounts

Post by Jackson12 »

Thanks everyone. I will definitely take taxes into account. We've had an aversion to touching any of the portfolio before retirement - and we haven’t. So I’m glad consensus so far is that this one exception shouldn’t rock the retirement boat.
Quaestner
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Re: Advice on taking a draw from Vanguard accounts

Post by Quaestner »

Jackson12 wrote: Sun Jul 28, 2019 8:58 pm A draw would give us some extra breathing room for delaying social security until age 70.
This can be a great strategy! But don't automatically assume that the best option is for both of you to wait until 70. You might see what Mike Piper's https://opensocialsecurity.com/ says about optimal claiming times for your particular situation. I agree with others that a 3% draw is ok - you have good reasons for doing so.
Topic Author
Jackson12
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Joined: Tue Oct 06, 2015 9:44 pm

Re: Advice on taking a draw from Vanguard accounts

Post by Jackson12 »

Quaestner wrote: Mon Jul 29, 2019 12:02 pm
Jackson12 wrote: Sun Jul 28, 2019 8:58 pm A draw would give us some extra breathing room for delaying social security until age 70.
This can be a great strategy! But don't automatically assume that the best option is for both of you to wait until 70. You might see what Mike Piper's https://opensocialsecurity.com/ says about optimal claiming times for your particular situation. I agree with others that a 3% draw is ok - you have good reasons for doing so.
Thanks. I have used that site to help calculate optimal claiming strategies. The optimum results mirror our plans.
Wakefield1
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Re: Advice on taking a draw from Vanguard accounts

Post by Wakefield1 »

I personally have dividends (but not capital gain distributions) from some of my Vanguard taxable account mutual funds direct deposited into my Credit Union. I have the old mutual fund platform so establishing direct deposit on the new platform using the web interface may be different
As someone else said need to cover the tax liability.
I think this can also be done with IRAs (if you are old enough and not using the Required Minimum Distribution Service or in addition to the RMD) and having Vanguard to withhold a percentage for IRS tax. Don't know if State tax can be done that way.
Topic Author
Jackson12
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Joined: Tue Oct 06, 2015 9:44 pm

Re: Advice on taking a draw from Vanguard accounts

Post by Jackson12 »

Wakefield1 wrote: Mon Jul 29, 2019 12:56 pm I personally have dividends (but not capital gain distributions) from some of my Vanguard taxable account mutual funds direct deposited into my Credit Union. I have the old mutual fund platform so establishing direct deposit on the new platform using the web interface may be different
As someone else said need to cover the tax liability.
I think this can also be done with IRAs (if you are old enough and not using the Required Minimum Distribution Service or in addition to the RMD) and having Vanguard to withhold a percentage for IRS tax. Don't know if State tax can be done that way.
We do not have IRAs but do have Roth accounts and some TIA- Cref Traditional which is its on animal and has RMDs whenever one reaches 70. There are no RMDs at age 70 as long as one is still employed. At the point when RMDs are required, they must be at least 10% of the balance per year and the account must have that 10% withdrawal til, depleted.
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