We are 50 years old and are retiring this year. Our pension is a combined $100K per year and we have 1.5 Million combined in our 401K,Roths,Etc plans. My plan is to transfer all of the 401K money to Vanguard IRAs and take 72T distributions. Because of our young age this will not deplete the total by 59 1/2. Afterwards I plan to take 10% of the balance each year and place any money not spent into a money market account. If the market is down I would take less than 10% and supplement with the funds from the left over cash in the money market. I would like to end with a zero balance around 85-90 years old. Is this a sound plan or am I way off base?
Thu Aug 08, 2013 5:07 pm
oldguy Senior Member
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quote: I would like to end with a zero balance around 85-90 years old. Is this a sound plan or am I way off base?
Well, I did the opposite, I avoided plans that dissipate my principal, mine plan is to grow our portfolio in-perpetuity - ie, if I live to be 100 there will be more money in the account than there is now.
But that all depends on your individual situation - heirs, no heirs, heirs that you hate, etc. In any case I wouldn't cut it so close, lots of people live well into their 90's these days - and they often spend a few years in Assisted Living at a cost of about $40,000/yr, $60k by the time you get there.
Is the $100k/yr pension for life? If so, why even break into the IRAs? (The 72T is a convuluted bureucratic nightmare and it will only net $60k/yr tops). It might be better to take a one-time lump sum. pay the tax/penalty, and buy whatever it is that you want.
Stealhead - Tongass? Yahutat?
Thu Aug 08, 2013 5:39 pm
akstealhead New Poster
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Actually I would leave the Roth alone due to the tax free growth until at least 59 1/2. I have no heirs and really don't care about leaving anything behind. I do plan to be generous while I am alive. The Stealhead fishing is something I hope to do after retirement.
Thu Aug 08, 2013 5:51 pm
blixet Preferred Member
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I guess technically, if you took 10% of the balance each year the answer would be no. You will never get to a zero balance although your withdrawal could be awfully small at some point.
A lot would depend on the returns experienced, especially the sequence of returns. And whether or not this is a viable withdrawal scheme would also depend on your annual expense experience over your retired lifespan.
Information is more valuable sold than used – Fischer Black
Thu Aug 08, 2013 6:01 pm
oldguy Senior Member
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quote: Actually I would leave the Roth alone due to the tax free growth until at least 59 1/2.
Or - the Roth might be your source of pre-59 1/2 money? Everything else is going to be taxed at the full ordinary rate no matter what/when you take it - and it is on top of $100,000/yr so it will always be at your highest marginal rate. You just need a way to avoid the 10% penalty.
Do you get SS pensions later?
Watch out for the grizzlies!
Thu Aug 08, 2013 6:03 pm
smk Preferred Member
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If your pensions are not inflation adjusted, you need an inflation hedge. Consider TIPS, series I savings bonds, full inflation adjusted life annuities, etc. you may be able to put such an annuity in your roth. also, planning to spend down your full wealth by a particular date is a bad idea. what happens if you outlive the date?
you should try esplanner. lay out your liabilities and see the best way to match them. they also have a social security planner, which can be critical.
quote: Everything else is going to be taxed at the full ordinary rate no matter what/when you take it - and it is on top of $100,000/yr so it will always be at your highest marginal rate.
not if their pensions go belly up and stop paying or go to the pbgc and get reduced...happened to me...
