How to view AA buckets if you plan to retire early?

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a_teacher
Posts: 29
Joined: Mon Jan 29, 2018 2:07 pm

How to view AA buckets if you plan to retire early?

Post by a_teacher » Wed May 16, 2018 3:33 pm

If you plan to retire early, and will need to access different plans at different times, should you look at the buckets separately or altogether? For example, withdraw from Roth IRA first, 457 next, her 403b next (at 55), his 401k at 59.5. Or would you still view them as one bucket?

retiredjg
Posts: 32411
Joined: Thu Jan 10, 2008 12:56 pm

Re: How to view AA buckets if you plan to retire early?

Post by retiredjg » Wed May 16, 2018 3:42 pm

You can do either one. Or both.

You can choose to have an overall asset allocation of ____ while having different buckets be at different allocations. As you use up bucket 1, you make adjustments in the other buckets to get your overall allocation back to _____.

Or you can set up bucket #1 at ____ and bucket #1 at ____ and bucket #3 at ____, etc.

I'd probably try the first option first and see if I like it. That seems most flexible to me.

If possible, I'd change the order - use the 457 first and Roth IRA last. It is possible you may have to use both at the same time.

Are you sure Her 403b actually has the mechanism to use it at 55? The law allows it, but it is not required that they do so and not all plans offer it.

dbr
Posts: 26601
Joined: Sun Mar 04, 2007 9:50 am

Re: How to view AA buckets if you plan to retire early?

Post by dbr » Wed May 16, 2018 4:18 pm

Like it or not and however you view it, you have one asset allocation and you might as well know what it is and decide what it should be. Naturally it can be that withdrawals should be preferred first from one plan and then another, but the overall asset allocation has to be attended to.

Many buckets schemes have as a result that the asset allocation is variable in time. If you have a reason to do that and a plan, then it all works out. If the asset allocation is wandering around without rhyme or reason, that is probably not a good idea.

a_teacher
Posts: 29
Joined: Mon Jan 29, 2018 2:07 pm

Re: How to view AA buckets if you plan to retire early?

Post by a_teacher » Wed May 16, 2018 5:28 pm

retiredjg wrote:
Wed May 16, 2018 3:42 pm
You can do either one. Or both.

You can choose to have an overall asset allocation of ____ while having different buckets be at different allocations. As you use up bucket 1, you make adjustments in the other buckets to get your overall allocation back to _____.

Or you can set up bucket #1 at ____ and bucket #1 at ____ and bucket #3 at ____, etc.

I'd probably try the first option first and see if I like it. That seems most flexible to me.

If possible, I'd change the order - use the 457 first and Roth IRA last. It is possible you may have to use both at the same time.

Are you sure Her 403b actually has the mechanism to use it at 55? The law allows it, but it is not required that they do so and not all plans offer it.
Thanks retiredjg!

a_teacher
Posts: 29
Joined: Mon Jan 29, 2018 2:07 pm

Re: How to view AA buckets if you plan to retire early?

Post by a_teacher » Wed May 16, 2018 5:29 pm

dbr wrote:
Wed May 16, 2018 4:18 pm
Like it or not and however you view it, you have one asset allocation and you might as well know what it is and decide what it should be. Naturally it can be that withdrawals should be preferred first from one plan and then another, but the overall asset allocation has to be attended to.

Many buckets schemes have as a result that the asset allocation is variable in time. If you have a reason to do that and a plan, then it all works out. If the asset allocation is wandering around without rhyme or reason, that is probably not a good idea.
Thanks dbr!

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