How do you fund spending in retirement

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JoinToday
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How do you fund spending in retirement

Post by JoinToday »

There were 2 recent threads, one regarding how much you keep in your checking account and another regarding the funding of lumpy expenses, that got me thinking:

How do people fund their account for spending in retirement?

Do you add funds to your checking account (a) monthly, (b)quarterly, (c) yearly, (d) when the balance gets low, or (e) when bills are due? or (f) some combination of the above?

I currently keep $10K-$20K in my checking account (0% interest), with regular additions due to pension payments and transfers from Vanguard (when needed) so it always remains around that level. I keep a year worth of money in Vanguard short term investment grade bond fund VFSUX. But all that money is sitting earning little or no interest, and I want to improve this. I am thinking about
(1) reducing my checking account amount to something more appropriate ($5K - $10K = a month's expenses)
(2) have automatic monthly transfers from Vanguard for average monthly expenses
(3) have manual transfers from Vanguard for lumpy expenses
(4) review checking account balance once a month or once a quarter

How do you fund your account for spending in retirement?
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midareff
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Re: How do you fund spending in retirement

Post by midareff »

JoinToday wrote: Sun Apr 29, 2018 10:23 am There were 2 recent threads, one regarding how much you keep in your checking account and another regarding the funding of lumpy expenses, that got me thinking:

How do people fund their account for spending in retirement?

Do you add funds to your checking account (a) monthly, (b)quarterly, (c) yearly, (d) when the balance gets low, or (e) when bills are due? or (f) some combination of the above? I use Ally Bank and pension pays bank monthly, SS pays bank monthly, required RMD is drawn from IRA to bank monthly, dividends from taxable equity funds pay quarterly to bank, interest and draw from taxable account bonds pay monthly. Roth also distributes monthly to Ally.

I currently keep $10K-$20K in my checking account (0% interest), with regular additions due to pension payments and transfers from Vanguard (when needed) so it always remains around that level. I keep a year worth of money in Vanguard short term investment grade bond fund VFSUX. But all that money is sitting earning little or no interest, and I want to improve this. I am thinking about

I use Ally Bank online and income flows into checking (.10%), escrow (1.45%) and savings (1.45%) accounts, monthly. Escrow pays car and condo insurance, property tax and EFPTS IRS Quarterly payments, all as they come due through the year. After all monthly bills clear savings by about the 15th of the month all excess funds over base of $1K are swept to savings, currently 1.45%, and accrued for future travel. Some funds are swept there on the 1st of the month as well. Savings is used for future travel and there will be four international travels this year and at least that amount next year. It's the go-go years and the clock is ticking.

All the above except the after the bills are paid sweep are automatic recurring set annually. All bills and credit cards are on auto-pay. The only manual transfers I do are from cash back credit cards back to Ally Bank and for funds into a special account I use for cruise travel the day before the pay is due, but that's a preset auto transfer at Ally as well.

FWIW, I review everything, various bank account balances and transactions, credit card charges and payments, other auto payments, etc., much more frequently than monthly and automated portfolio transactions monthly.

Hope it helps.


(1) reducing my checking account amount to something more appropriate ($5K - $10K = a month's expenses)
(2) have automatic monthly transfers from Vanguard for average monthly expenses
(3) have manual transfers from Vanguard for lumpy expenses
(4) review checking account balance once a month or once a quarter

How do you fund your account for spending in retirement?
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Svensk Anga
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Re: How do you fund spending in retirement

Post by Svensk Anga »

I keep only $300 or so in checking, beyond the $1500 minimum requirements to make checking free, after paying the month's bills. Of course, this requires keeping the check register up to date and reconciling my balance with the credit Union's. I get the impression this is a dying art.

Dividends and bond fund interest flow to VG prime money market, as do proceeds from asset sales as needed. Funds flow to checking as needed for the month's bills or sometimes from checking to mm fund. Most spending is on credit cards. I get those bills late in the month and they are due around mid month. When I set up payments around month end, I determine what funds I need to move to cover and receive those via ACH in a couple days.

I keep a few grand in an internet bank so that I can top up checking in case there is a SNAFU at VG. I bonds at treasury direct serve as another layer of backup.
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Re: How do you fund spending in retirement

Post by radiowave »

One thing to consider in retirement, if you get sick/hospitalized (or worse), who will be taking over your accounts and is the added complexity worth it in that regard?
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22twain
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Re: How do you fund spending in retirement

Post by 22twain »

I transfer money at the end of the month from my taxable investment account's money market fund to my checking account. It's normally the same amount each month, a bit more than necessary to keep the level of my checking account roughly constant under normal expenses. I keep a few months' worth in the checking account so if I miss a month it's not a problem. Some months when I don't spend much, I deliberately skip a "paycheck."

If something big comes up, I'll transfer more as necessary.

All my dividends go into the money market fund, and I sell shares when necessary. The overall balance in my taxable account is drifting downwards slowly, but that will stop after I start collecting Social Security and taking RMDs from my 403(b) in a few years.
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Re: How do you fund spending in retirement

Post by JoinToday »

radiowave wrote: Sun Apr 29, 2018 11:07 am One thing to consider in retirement, if you get sick/hospitalized (or worse), who will be taking over your accounts and is the added complexity worth it in that regard?
I am trying to balance the complexity factor with the added few hundred dollars in added interest. I am kind of lazy in this respect, and don't like the panic or surprises due to miscalculations. Our credit card bills are typically $3K-$5K a month, occasionally higher when we have vacation, etc. I can never see letting my balance get as low as Svensk -- I never balance my checkbook, but look at the dollar amounts of checks written -- typically 1 check per week or less on average
Svensk Anga wrote: Sun Apr 29, 2018 11:03 am I keep only $300 or so in checking, beyond the $1500 minimum requirements to make checking free, after paying the month's bills. Of course, this requires keeping the check register up to date and reconciling my balance with the credit Union's. I get the impression this is a dying art.
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Sheepdog
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Re: How do you fund spending in retirement

Post by Sheepdog »

I do not have a pension. Spending comes from Social Security and investments.
My expense funding varied as time went on (now in my 20th year.) I will put my approximate funding in 5 year increments.
All years add Social Security
I. 1st 5 years (1998-2003) disposed most of taxable investments for expenses and while converting 22% tIRA to Roth. Began selling off E bond inventory.
2. 2nd 5 years (2004-2008) completed selling E bonds. tIRA redemption and some Roth IRA redemption to stay at near 0 income tax.
3. 3rd 5 years (2009-2013) purchased fixed term SPIAs. Expense funding from them and tIRA.
4. 4th 5 years (2014-2018) funding expenses from SPIAs and tIRAs and SS exclusively and should continue in the foreseeable future..
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Re: How do you fund spending in retirement

Post by HongKonger »

No SS or pension.
10 yrs of expenses in various term deposits (in lieu of bonds) that spit out interest into a current account that I use as petty cash.
Portfolio spits out dividends into a different current account where my credit card is autopaid from in full from each month.
If I need a chunk of change I can pull from the term deposits at any time with no penalty.
5yrs in and so far so good.
HIinvestor
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Re: How do you fund spending in retirement

Post by HIinvestor »

H has his pension and RMDs from a retirement acct deposited directly into our checking account. That is generalkyball we need for our regular expenses.
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cfs
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Re: How do you fund spending in retirement

Post by cfs »

All covered by our pensions and social security with no need to withdraw from our investment portfolio. All bills in auto pay linked to checking. Credit card paid in full at end of month. No mortgage. A lot of cash in my wallet for weekly use. I see the whole investment portfolio as an emergency fund. Mentally and physically active. Retirement life is wonderful. Good luck y gracias por leer / cfs
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ubermax
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Re: How do you fund spending in retirement

Post by ubermax »

All inflows from SS , pension , and retirement accounts (RMDs) go into a savings account at local bank - each inflow is apportioned via spreadsheet into 16 expense buckets , 15 specific and 1 gets the leftover after the other 15 are filed , we call it our "discretionary" bucket ; unfortunately we're top heavy with tax deferred accounts and so we preach to our married children to think about accumulating assets that are better balanced between after-tax and tax deferred monies - of course who knows what the retirement savings opportunities and landscape will look like in the future.

I estimate our tax liability for the upcoming year and estimated quarterlies are funded just like any other expense and like cfs we autopay bills from checking and try to pay off credit card debt each month .
Last edited by ubermax on Sun Apr 29, 2018 3:45 pm, edited 3 times in total.
jebmke
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Re: How do you fund spending in retirement

Post by jebmke »

Most of our spending is either charged to credit cards or direct debit. All the DDs come at the beginning of the month (except estimated tax payments). Just prior to that are the closing dates on the credit card statements. So, at the end of the month, I have a pretty good fix on what I need for the next month. At this point, I transfer what I need from my taxable assets at Vanguard to my checking account.
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Re: How do you fund spending in retirement

Post by Lieutenant.Columbo »

HongKonger wrote: Sun Apr 29, 2018 1:49 pmI can pull from the term deposits at any time with no penalty.
Ally Bank No Penalty CDs?
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Leif
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Re: How do you fund spending in retirement

Post by Leif »

I'll quote myself in one of the earlier threads you mentioned.
I target about $10k in checking. With that I don't need to monitor it too closely or constantly move funds from other accounts. When I get low I have some additional cash in a separate high yield account that takes about 1 week to ACH over. Most of my typical expenses are on autopilot so I can go off on vacation with few worries.

When I get to the point of having pension and social security coming in I expect my cash cushion can be greatly decreased and still feel comfortable.
So I just keep an eye on my balance for checking. My spending is lumpy enough that I can not just set it to automatic periodic transfer.
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Re: How do you fund spending in retirement

Post by Dandy »

I have Pension and Social Security sent to an online bank savings account earning a competitive interest rate. 2X per month I have money sent to my interest bearing checking account to pay bills. The timing of these automatic transfers better matches when bills arrive vs having a lot of money sitting in checking the first of the month.

It acts like having a bimonthly paycheck and earns a little interest. Also, banks tend to fuss with their checking accounts by changing terms etc. so if that happens I will just direct the online Savings Account to send the money to a different checking account.

I fund my Online Savings account with about 2-3 years worth of draw down since pension and Social security doesn't cover all my normal monthly expenses. I use taxable distributions from my Vanguard account when necessary.

So far it works well for me. If I need more money I can easily transfer more and then I know my expenses may be creeping up.
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Re: How do you fund spending in retirement

Post by Lieutenant.Columbo »

Dandy wrote: Sun Apr 29, 2018 4:41 pmI have Pension and Social Security
Dandy wrote: Sun Apr 29, 2018 4:41 pmI fund my Online Savings account with about 2-3 years worth of draw down since pension and Social security doesn't cover all my normal monthly expenses. I use taxable distributions from my Vanguard account when necessary
Dandy,
Off topic. If your non-Checking non-Savings money is not all in equities, would you mind explaining why? Thank you.
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Dandy
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Re: How do you fund spending in retirement

Post by Dandy »

Dandy,
Off topic. If your non-Checking non-Savings money is not all in equities, would you mind explaining why? Thank you.
My overall allocation is currently 43/57. I have the ability but not the need or desire to take more risk. Also, I generally follow Dr. Bernstein's idea of having 20 years of draw down (now geared to my spouse's future need as a widow i.e. lower pension), in "safe" products -- the rest is allocated about 67/33. My goal is asset preservation vs growth.

As I deplete my fixed income heavy TIRA my overall equity allocation should creep up unless I sell or gift some of my equity heavy taxable account. As I get further into retirement and if my assets grow modestly I might opt for a more aggressive approach. But it is doubtful it will more more than a modest increase.

Finally, this more conservative approach allows me the confidence to gift a large portion of my RMD to my children now, as opposed to have them wait hopefully a decade or two for their inheritance. We get to see them and my grandchildren enjoy life a bit more with a bit less stress. I've also upped my charity contributions.
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Re: How do you fund spending in retirement

Post by MikeG62 »

JoinToday wrote: Sun Apr 29, 2018 10:23 am
...How do you fund your account for spending in retirement?
Retired three years ago at 53 (no pension and no plans to draw SS until age 70). Cash flow for spending comes from a combination of dividends on ETF's held in taxable brokerage account (I shut off automatic reinvestment and have dividends transfer from Fidelity to my checking as they happen), interest on muni bonds (which also transfer from broker to checking account when paid) and, when necessary, supplemented through a monthly transfer from our online savings account.

We try and put as much spending on credit cards as possible (pretty much anything that can be charged gets charged) and this has most expenses paid at or near the end of the month (which simplifies cash flow management, in addition to generating credit card rewards).
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mark4269
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Re: How do you fund spending in retirement

Post by mark4269 »

Curious about how withdrawals from IRA are made, given allocation. Supposing retiree has 50%/30%/20% in US stock index/bond index/international stock index, and follows 4% rule, does retiree withdraw proportionally from the three funds or disproportionally?
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Re: How do you fund spending in retirement

Post by HongKonger »

Lieutenant.Columbo wrote: Sun Apr 29, 2018 4:09 pm
HongKonger wrote: Sun Apr 29, 2018 1:49 pmI can pull from the term deposits at any time with no penalty.
Ally Bank No Penalty CDs?
No - I'm not in the US and don't have CDs - these are 'term deposits' ranging from 6 months to 3 years in different currencies held at a regular bank.
galectin
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Re: How do you fund spending in retirement

Post by galectin »

mark4269 wrote: Mon Apr 30, 2018 9:04 am Curious about how withdrawals from IRA are made, given allocation. Supposing retiree has 50%/30%/20% in US stock index/bond index/international stock index, and follows 4% rule, does retiree withdraw proportionally from the three funds or disproportionally?
I just started withdrawals from a 3-fund portfolio with 50:50 stocks:bonds that is spread across five accounts (2 tax-deferred IRAs, 2 Roths, and a taxable acct.) between me and the DW. I checked our asset allocation and took the amount from stocks, which is slightly higher than 50%, bringing us back toward 50:50. For simplicity, I plan to only take the withdrawals from my individual IRA, rather than proportionally from both.
b4real
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Re: How do you fund spending in retirement

Post by b4real »

A monthly transfer from Vanguard taxable to USAA covers what our income streams don’t. Most spending is on a 2.5% cashback credit card, and most bills are auto paid via checking, CC, or billpay. The checking account shows scheduled transactions and balances 30 days into the future making management easy. If more or less is needed from Vanguard, the transfer is adjusted. When our 2nd SS starts at 70 in a couple of years income streams will cover spending except for large unexpected expenses. Vanguard taxable has about 2 years in MM and several years in the short term treasury fund. When RMDs start at 70 they will go to total stock fund and the allocation will gradulally drift higher from the current 30s/70fi.
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Toons
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Re: How do you fund spending in retirement

Post by Toons »

Pension
Social Security.
Capital Gains and dividends from holdings,
I use Capital One 360 checking and their Moneymarket account for cash needs.
Both Interest bearing accounts.

FYI..
https://www.capitalone.com/bank/checkin ... g-account/





:happy
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JohnFiscal
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Re: How do you fund spending in retirement

Post by JohnFiscal »

One of the personal finance tools I learned that I needed, and then developed, many years ago was to be able to project cash flow. I have long used Microsoft Excel as my tool of choice for keeping track of finances, first beginning with a check register around 1992.

As part of my planning I realized I could populate the check register far in advance of the actual transactions, in lieu of actual budgeting. Budgeting makes sure that you have enough money, but watching your cash flow makes sure that you have enough money when you need it.

For the past many years I have set this up at the beginning of each year; entering the planned transactions in my checking account, paying attention to transfers to savings to accrue for various expenses, etc.

As I now approach retirement and find myself in a different position with respect to cash flow (the same position that the OP finds himself in) I have to rethink the paradigm a bit. But it is certain that being aware of, and planning for, cash flow will be as important now as it was in my much younger days starting out and living paycheck to paycheck.

So, that is my suggestion. In addition to writing a budget (and perhaps even more important than the budget) determine some tool for projecting your cash flow for the next period of time, so you can determine when replenishment is needed, how large expenses will be handled, etc. In my own system (in Excel) I even have a graph of the year ahead so I can watch for tight points. I don't know how Quicken does this these days, or the sunset edition of Microsoft Money, if either will let you set up this advance treatment. Perhaps some of the new on-line budgeting apps do this.

I s'pose that in the end you want to minimize the cash kept in a checking account, with more cash kept available in higher paying accounts. And then a higher level of other securities getting even higher returns (hopefully). Figuring out the optimal strategy is probably a good academic exercise.
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Re: How do you fund spending in retirement

Post by JoinToday »

JohnFiscal wrote: Mon Apr 30, 2018 1:02 pm One of the personal finance tools I learned that I needed, and then developed, many years ago was to be able to project cash flow. I have long used Microsoft Excel as my tool of choice for keeping track of finances, first beginning with a check register around 1992.

As part of my planning I realized I could populate the check register far in advance of the actual transactions, in lieu of actual budgeting. Budgeting makes sure that you have enough money, but watching your cash flow makes sure that you have enough money when you need it.

For the past many years I have set this up at the beginning of each year; entering the planned transactions in my checking account, paying attention to transfers to savings to accrue for various expenses, etc.

As I now approach retirement and find myself in a different position with respect to cash flow (the same position that the OP finds himself in) I have to rethink the paradigm a bit. But it is certain that being aware of, and planning for, cash flow will be as important now as it was in my much younger days starting out and living paycheck to paycheck.

So, that is my suggestion. In addition to writing a budget (and perhaps even more important than the budget) determine some tool for projecting your cash flow for the next period of time, so you can determine when replenishment is needed, how large expenses will be handled, etc. In my own system (in Excel) I even have a graph of the year ahead so I can watch for tight points. I don't know how Quicken does this these days, or the sunset edition of Microsoft Money, if either will let you set up this advance treatment. Perhaps some of the new on-line budgeting apps do this.

I s'pose that in the end you want to minimize the cash kept in a checking account, with more cash kept available in higher paying accounts. And then a higher level of other securities getting even higher returns (hopefully). Figuring out the optimal strategy is probably a good academic exercise.
This post spurred me to start looking at cash flow more closely; this was the real question I had that I perhaps didn't articulate well enough. I didn't recognize it as a cash flow problem.

I do an excel file at the end of the year where I download all checking account transactions, sort and categorize the outflow to give me a picture of where my money went during the year. I started to try & do a cash flow by day of the month, and realized that the bulk of my money goes to (1) credit cards, (2) Property taxes (once a year), (3) insurance (once a year each for house, auto, and umbrella. The rest of my money is spent in relatively low dollar amounts.

So: I switched my credit card payments and due dates to all be around the 7th or 10th of the month. Plan will be to review bills due at the end of the month, transfer money once a month from VG to my checking account, and either schedule payments (for property tax and insurance) or autopay for credit cards. I may just setup an automatic monthly transfer for my average expenses, plus yearly transfers for insurance and property taxes.

Thanks for all the input, it really helped me with my plans a lot.
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Re: How do you fund spending in retirement

Post by jebmke »

JoinToday wrote: Tue May 01, 2018 5:36 pm I switched my credit card payments and due dates to all be around the 7th or 10th of the month.
This is similar to what I did. I arranged all the direct debits to hit at the beginning of the month. The credit cards close at the end and the payments are due ~ the 20th. By the last week of the month I typically know what 90% of our outflow will be. Tax payments are a bit lumpy at different times but 100% predictable.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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JoinToday
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Re: How do you fund spending in retirement

Post by JoinToday »

jebmke wrote: Tue May 01, 2018 5:40 pm
JoinToday wrote: Tue May 01, 2018 5:36 pm I switched my credit card payments and due dates to all be around the 7th or 10th of the month.
This is similar to what I did. I arranged all the direct debits to hit at the beginning of the month. The credit cards close at the end and the payments are due ~ the 20th. By the last week of the month I typically know what 90% of our outflow will be. Tax payments are a bit lumpy at different times but 100% predictable.
I must be getting slower in my (barely) old age (60-ish yrs old). The solution of putting all my credit card bills lumped together didn't readily occur to me. I didn't recognize the spending as a tax flow issue. Part of the problem is my credit cards were paid automatically at the end of the month, and sometimes it happened on the 1st, and sometimes the last day of the previous month. So my monthly cash flow ended up being pretty lumpy -- it would be huge one month, and abnormally low the next.
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