Bogleheads® retirement planning start-up kit

From Bogleheads
Jump to navigation Jump to search
Flag of the United States.svg.png This article contains details specific to United States (US) investors. Parts of it do not apply to non-US investors.

Below is a suggested list of topics for retirement planning.

Tip: Open links in a new browser tab. It will help you keep track of where you started from as you surf through these pages. Adding bookmarks will also work.

Preparing for retirement

The first step of preparing for retirement is to do some research. This article provides a list of resources, such as books and free online publications, to get started.

Creating a spending plan

Pre-retirement spending

Spending considerations post-retirement

The main article provides links to a number of more detailed wiki pages that cover various aspects of retirement spending.

Determining your retirement income sources

Matching strategy

There is more to retirement planning than managing stocks and bonds. Planning is needed to accommodate fixed income and to diversify across all of your income sources.

Social Security

Individual retirement plans

Main articles :Traditional IRA, Non-deductible Traditional IRA, Roth IRA, Charitable pooled income fund

Employer-provided plans

Plan details are addressed in separate wiki pages, just click on the provided link. IRS (Internal Revenue Service) and DOL (Department of Labor) references are also provided.

Tip: Use the Contents box (gray box near the top of the page) to see how the plans are structured.


Main articles: Fixed annuity, Variable annuity, Immediate fixed annuity, Immediate variable annuity,Charitable gift annuity

Taxable investments


Main articles: Pensions, Employer retirement plans overview

If your employer offers a choice between "all at once" (lump sum) or every year (annuity), see: Lump sum vs pension.

Reverse mortgages

Main article: Reverse mortgages

Withdrawal rates

Required minimum distributions (RMDs) from IRA's

Withdrawal rates and life expectancy

Main article: Life expectancy calculators

Asset allocation effect on withdrawal rates

Calculating withdrawals

When it comes time to start taking withdrawals from your retirement portfolio, there are several withdrawal methods you can use.

  • Constant dollar
  • Constant percentage
  • Variable percentage
  • Spending only the dividends
  • Alternative methods, such as glide path and 1/N

Asset allocation adjustments as you age

When you take money out of your portfolio, you should consider more than just the method of withdrawal. Consider your current asset allocation between stocks and bonds, and decide if your allocation will be changed during the withdrawal phase.

  • Constant-dollar (age in bonds)
  • Constant-percentage (age in bonds)

Taking Withdrawals

Determining the date to take withdrawals during each year

A retiree who turns 72 in a particular calendar year must take the first Required Minimum Distribution (RMD) prior to April 1 of the following year and as early as January 1 of the year he turns 72. This is the only year in which the April 1 extension is given. The RMD for the following year must be taken prior to the end of that following year and similarly subsequent year's withdrawals must be taken prior to year end.

If the retiree chooses to delay the first RMD until the following year he would then be taking two annual withdrawals in that following year and paying tax on both of those amounts. Most retirees would take their first withdrawal in the same year that they turn 72 so that only one year's tax is paid on the withdrawals.

It is recommended to take the RMD no later than the first half of December of any year just in case something unexpected comes along. It's even possible for the stock exchanges to be closed under certain conditions. Failing to take an RMD will result in a very high 50% tax penalty on the amount not withdrawn.[1]

The special first RMD year option is not limited to deferring the entire first RMD to the second year. A retiree can choose to defer any part of it. Other income and deductions in each year can vary such that avoiding higher marginal rates might be optimized by taking some portion of the first RMD in the first distribution year. It is also possible that SS taxation might result in a lower tax by not equalizing the RMD amounts. For example, if something like 75% of the retiree's SS will be included in AGI if he takes the RMDs each year in the usual fashion, but if he defers more of the first year it will result in no SS inclusion in year 1 and 85% in year two, deferring a larger amount might actually reduce the total tax over both years.

If you plan on doing any conversions (such as to a Roth IRA) in any RMD year, you must first satisfy the RMD before converting. Additionally, if you are considering a Qualified charitable distribution (QCD) after reaching 72 to the day, the QCD must be done first if you want it counted toward your RMD. The sequence of events therefore is QCD ==> RMD ==> Conversion.

Selecting accounts for taking withdrawals

Considering fund distributions

Considering tax implications of taking withdrawals

Processing withdrawals

Taxes in retirement

Taxes on investment gains vs. taxes on earned income

IRA taxation

No payroll taxes (Social Security, Medicare)

See also