We've had a couple discussions on the topic of the most tax efficient ways to draw from assets in retirement. Here's an article that has a few points that we didn't cover here:http://www.kiplinger.com/article/retirement/T037-C032-S014-w...
An interesting article but it doesn't make a lot of sense unless you retire early.I didn't get around to retiring until I was 68. I only retired then because my employer had plans to change their retirement benefits that would have a negative impact were I to delay retirement.In addition to retiring early, the article assumes that you are in the 15% marginal tax bracket for the recommended withdrawal strategies to work. I was already in the 25% marginal tax bracket before I retired. I dropped to the 10% marginal tax bracket in my first full year of retirement but jumped back to the 25% marginal tax bracket when I started my RMD withdrawals the following year.Also, one's "guaranteed" sources of income such as Social Security and possible pension have an impact. My wife's and my Social Security income covers all our normal living expenses. So, there hasn't been a need to withdraw money from savings. For the time being, all the RMD withdrawals are put in a taxable investment account where they are invested.To prevent income taxes from rising dramatically, the investments in my taxable account tend to be those that don't generate much taxable income: Berkshire-Hathaway, municipal bonds, oil & gas MLP, etc.
An interesting article but it doesn't make a lot of sense unless you retire early.There are many aspects that apply to people who retire "on time" (at whatever age social security calls full benefits for lack of a better term). At age 65 or 67 or whatever, there are several years before RMDs kick in at 70.5. That's time to make use of the ideas presented to reduce the likelihood that those RMDs will kick other things into taxable territory. Also, if you *do* have several levers to adjust (Regular IRA, Roth, taxable account), why NOT try to keep most of your income in the 15% bracket instead of easily hitting 15% with room to spare for a couple years, then overflowing into the 25% bracket (or higher) in later years? Even if you plan things out and your results aren't perfect, they'll probably be better than the "don't do any planning and hope for the best" method.
Even if you plan things out and your results aren't perfect, they'll probably be better than the "don't do any planning and hope for the best" method.I discovered that in 2014 when I was 69. My goal that year was to pay no Federal or state income taxes before I had to start RMD withdrawals. The last year that I paid no Federal or state income taxes was 1958 when I was 13.I did achieve my goal on state income taxes but, unfortunately, I did have to pay $134.00 in Federal income taxes. :(The best laid schemes o' mice an' men gang aft a-gley.
Thanks for posting this. I have to make some decisions re: rollover from 403(b) to a rollover IRA, which now sits in cash while I figure out my investment strategy. This article makes a lot of sense. I have just retired (age 67), and this is very applicable to my situation.
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