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I have seen varying opinions on the recommended way of withdrawals from a 401K when a person reaches the age of 70 and 1/2. The premise for this person is that he has company pensions/social security/army pension/government pension equal to 60% (about $90,000) of his needs (total needs are estimated at $150,000/yearly, before taxes); of the $90,000, about 55% (or $50,000 is the sum of social security, army and government pensions) is inflation adjusted; thus the person can take a fairly aggressive investment stance. Other premise is that this person at the time of retirement is fully retired at age 70 and 1/2, not working, and would "need" $150,000 per year (before taxes) in the first year (after 70 and 1/2 age). Thus, in his first year, he would need to withdraw $60,000 ($60K plus $90K from pensions, etc, to equal $150K). The current age of this person is 64 and he now has about $650,000 in 401K, expecting it to grow to $1,000,000 at 70 and 1/2. Also: this person does not want to run out of money before age 100.

Three strategies that I have read about are:

(1) At one time Peter Lynch in "Worth" advocated keeping the 401K always 100% in equities (i.e. all in an index fund or some other equity mix with no bonds) and withdrawing from the 401K at a rate no greater than 7% of the total remaining balance each year. Thus, if you had $1,000,000 at the start point (at 70 and 1/2 years of age) in the 401K, you would withdraw $60,000 (less than 7% of $1,000,000) in the first year (at a monthly withdrawal rate of $5,000), then inflation-adjust the withdrawal rate (i.e. $60,000 times 1.03 [for a 3% inflation rate] for the second year, etc.) in future years.
(My observation: this seems like an efficient way to go; a type of reverse dollar averaging.)

(2) Others have said to sell at age 70 and 1/2 (i.e. cash out) the projected next 5 years of needs (say about $350,000 of the $1,000,000) and put it into "cash" instruments (laddered CDs, laddered treasuries, Money market funds, etc.) from which one would withdraw the $60,000 in the first year (then adjust for inflation in future years). (My comment: requires one to "market-time" the sale of equities near the age of 70 and 1/2 to get the cash at the optimum time and to avoid selling 40% of the total equity portfolio at a low Dow Jones average point.)

(3) Still others have advocated, at time of retirement, establishing a mix of equities and bonds somehow tied to your age and investment philosophy (I have seen using an index of 140 [for aggressive investors] minus your age which would then equal the % in equities; thus, at age 70, this would mean 140 minus 70 which would spawn a mix of 70% in equities and 30% in bonds). Then, one would withdraw at the maximum of 7% rate each year adjusting the equities/bond mix as your age goes higher. (My comment: requires a constant re-jiggering of the mix and a certain amount of "market timing" to do the re-jiggering at the "right" time.)

Would anyone have any sage advice or comments on each of these strategies? Would you suggest any other withdrawal strategy which might protect the capital base while affording an opportunity for it to grow at say 10-12% per year?

Also, would you have any comments on the suggested mix of equities, i.e. index versus others?

Thx for your advice.
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