Best way for withdrawl at retirement

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gordon t 2
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Best way for withdrawl at retirement

Post by gordon t 2 »

I am looking for the best way to withdraw funds during retirement. All my money is in tax preferred accounts. I am currently invested in Van. TSM, Van. Total Int., Van. Total Bond and Van. IPS. Iam thinking of using a TR account instead. But ,I have read recently that it is better to withdraw from several accounts, as opposed to one. That way, you can withdraw from the one that has done best, as opposed to taking from one on a pro rata basis. Whay do you think?
InvestingMom
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My mom

Post by InvestingMom »

I am helping my mom and have been asking the same sorts of questions.

What is a TR account by the way?

Anyway, my mom has a money market fund in her IRA and we have chosen to keep that account funded with approx 2 years of her cash needs. It is a bit conservative, but then again she is not as conservative as she should be with her bond/equity allocation. Therefore we will just take the distributions out of the money market account and rebalance annually.

If you don't want to use a money market then I suppose what you have suggested will keep you closer to your asset allocation, but personally I think it would be too difficult and would instead just take it out of one or two accounts and rebalance annually. On the other hand if Vanguard can do this automatically (say in the same percentage as your asset allocation plan) then this might keep you a bit closer to your plan.

BTW-Will you continue to reinvest your dividends and interest and then rebalance periodically or if not then what? I have decided to have her dividends and interest deposited into her money market account (for those who will "attack" this because I am not reinvesting, I realize that the dividends and interest will not compound but you have to understand that we are in a distribution period now ;-)
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bob90245
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Post by bob90245 »

Which T. Rowe Price (TR) fund account are you thinking about? Holding diversified funds both before and during retirement makes good sense to me. However, I can understand that those who prefer a single fund like the simplicity.
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CABob
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Post by CABob »

I'm guessing that TR referred to a Target Retirement fund which the OP is considering rather than the 4 fund portfolio that was described.
In response to the withdrawal question, I think either portfolio will work, but, in the case of the 4 fund portfolio you would need to keep the portfolio in balance with your desired asset allocation. Admitedly, with a TR fund you don't realy have to worry about rebalancing since it will always be the same. With the 4 fund you should probably keep it in balance using the withdrawals but it is likely that some fund to fund transfers may be required. It depends on how much of a nuisance you consider this to be.

Bob
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DA
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Re: Best way for withdrawl at retirement

Post by DA »

gordon t 2 wrote: But ,I have read recently that it is better to withdraw from several accounts, as opposed to one. That way, you can withdraw from the one that has done best, as opposed to taking from one on a pro rata basis. Whay do you think?
Gordon, you've got it right. If you're making regular withdrawals from a TR (Target Retirement) fund you'll wind up, at various times, selling stocks or bonds when one or the other is "down". With separate stock and bond funds you can withdraw from the ones that are doing well and leave undisturbed the investments that are temporarily depressed in price.

Good luck!

Dan
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bob90245
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Post by bob90245 »

CABob wrote:... in the case of the 4 fund portfolio you would need to keep the portfolio in balance with your desired asset allocation.
New research by several authors is questioning the conventional wisdom of needing to keep a retirement portfolio in balance with a target asset allocation. Here are two papers on this subject:

Dynamic Rebalancing

Is Rebalancing a Portfolio During Retirement Necessary? (pdf)
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BigFoot48
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Re: Best way for withdrawl at retirement

Post by BigFoot48 »

gordon t 2 wrote:But ,I have read recently that it is better to withdraw from several accounts, as opposed to one. That way, you can withdraw from the one that has done best, as opposed to taking from one on a pro rata basis. Whay do you think?
Are you withdrawing before 59.5?
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
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joe8d
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Post by joe8d »

If you're making regular withdrawals from a TR (Target Retirement) fund you'll wind up, at various times, selling stocks or bonds when one or the other is "down".
Actually,the TR funds are in a constant state of rebalancing internally to keep the underlying component funds in line with the designated percentages as per the TR Funds "Glide Path".Withdrawals, therefore would not be an issue in that regard.
All the Best, | Joe
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gordon t 2
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Post by gordon t 2 »

InvestingMom, bob90245, CABob, DA, BigFoot48, joe8d


Thanks for your input, comments, referenced sites and suggestions relating to withdrawls at time of retirement. By the way, the TR that I was referring to was a Target Retirement fund at Vanguard. I will not be withdrawing until after 65.

I thought that with 4 individual funds as opposed to 1 Target Retirement fund, I could withdraw more efficiently. If my equity funds were down, I could withdraw from my bond funds and vice versa, as opposed to withdrawing from 1 Target Retirement fund where I would be withdrawing from all assets on a pro rata basis, whether they were up or down. Thanks.


gordon t 2
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Taylor Larimore
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Withdrawal strategy

Post by Taylor Larimore »

I have read recently that it is better to withdraw from several accounts, as opposed to one. That way, you can withdraw from the one that has done best, as opposed to taking from one on a pro rata basis. What do you think?
Assuming you are satisfied with the funds and their allocation inside a Target Fund, you don't need to worry about rebalancing at all--it's done for you automatically. Also, the Target Fund gradually changes allocations as we age.

I think the appropriate Target Retirement Fund, for investors without a taxable account, is nearly ideal--especially for older investors.

Best wishes.
Taylor
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gordon t 2
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Post by gordon t 2 »

Thanks again for your input. It is greatly appreciated.
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Mel Lindauer
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Re: Withdrawal strategy

Post by Mel Lindauer »

Taylor Larimore wrote:
I have read recently that it is better to withdraw from several accounts, as opposed to one. That way, you can withdraw from the one that has done best, as opposed to taking from one on a pro rata basis. What do you think?
Assuming you are satisfied with the funds and their allocation inside a Target Fund, you don't need to worry about rebalancing at all--it's done for you automatically. Also, the Target Fund gradually changes allocations as we age.

I think the appropriate Target Retirement Fund, for investors without a taxable account, is nearly ideal--especially for older investors.

Best wishes.
Taylor
I agree with Taylor's comments. I think the TR funds make an excellent set-it-and-forget it portfolio for retired folks. Simple and automatic is good!

Regards,

Mel
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