Drawdown strategies – Galeno within a 403b?

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TeeMo
Posts: 18
Joined: Tue Sep 22, 2020 3:57 pm

Drawdown strategies – Galeno within a 403b?

Post by TeeMo »

I am hoping there might be some advice on the forum about the following.

In studying drawdown strategies I became interested in the so-called Galeno Strategy/Fixed Percentage withdrawal.

https://socialize.morningstar.com/NewSo ... nvId=31854
https://www.bogleheads.org/wiki/Withdrawal_methods

In a nutshell:
- set aside ~ 5 years of living expenses as cash in a CD ladder
- put the rest of one’s portfolio in stocks
- every January draw a year of money to spend from the CD ladder and pull 4% from the stock portfolio to replenish the CDs

Part of the appeal is that I was interested in having money leftover when I die to will for a particular purpose.

However, as I burrowed into the details of how I might do this I hit a snag. The money I can save now is going into my TIAA 403b and a separate 457b (invested in a indexing strategy as recommended in Bogleheads books). I really can’t save significant cash outside of my retirement plans, certainly not on the scale that would be needed to have holdings of 5 years of living expenses. So I turned to look at how I might do this within the portfolio. But there seems to be no way to take a chunk of your portfolio, convert it to cash and get any kind of interest rate close to what CDs are offering at banks. I'd have to move the cash to the TIAA money market and have it essentially lose value over time at the low interest rate.

Even when I retire, unless I am ok having my cash earn nothing in a money market, I would have to withdraw 5 years at once to set up the CD ladder and take a huge tax hit.

I would be eager to have any advice the forum could give. Can one set up Galeno with this kind of retirement profile?

(An aside, it was enormously frustrating talking with a TIAA money manager about this. They just keep trying to sell you fixed annuities. Sigh.)
jebmke
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Location: Delmarva Peninsula

Re: Drawdown strategies – Galeno within a 403b?

Post by jebmke »

Can you roll part to an IRA and invest in brokered CDs or treasuries?
When you discover that you are riding a dead horse, the best strategy is to dismount.
Topic Author
TeeMo
Posts: 18
Joined: Tue Sep 22, 2020 3:57 pm

Re: Drawdown strategies – Galeno within a 403b?

Post by TeeMo »

Thank you. Interesting. I will ask TIAA. I was unfamiliar with doing that during the accumulation phase and it would be good to do it ~ 5 years out from retirement.
Wrench
Posts: 672
Joined: Sun Apr 28, 2019 10:21 am

Re: Drawdown strategies – Galeno within a 403b?

Post by Wrench »

Does your 403B or 457 have a stable value fund investment option? Most do. If yours does, rather than CDs, you could put your 5 years of expenses into the stable value fund. The balance into stocks. Guaranteed returns from the stable value fund may even be better than that you could get from CDs (it depends on your particular plan). Then follow the same plan you outlined.

Wrench
Topic Author
TeeMo
Posts: 18
Joined: Tue Sep 22, 2020 3:57 pm

Re: Drawdown strategies – Galeno within a 403b?

Post by TeeMo »

Good suggestion. I took a look and the the only thing TIAA appears to offer as a "stable value" fund is a fixed annuity. With a CD ladder I was hoping to do the money managing myself and not hand over my money to TIAA for good by buying an annuity. Moreover it is only earning 0.87%.
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