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Subject:  Re: Another IRA withdrawal question Date:  1/9/2000  3:50 PM
Author:  Chipsboss Number:  17587 of 90139

I planned to leave my IRA untouched throughout my 60's and take only minimal required withdrawals starting at age 70. This was based on the idea of leaving the tax-sheltered account to work for me as long as possible. To my surprise, however, in running the numbers it turns out to be to my advantage to take out a little each year in my 60's. The amount is around 2% a year in the first five years, and around 1% a year in the second five years when social security comes in. This is not a huge effect; it comes to an extra 2.5% left in the account at the end of a 35-year planning period. Apparently, it's all an income-tax maneuver, where it's worth my while to pay a little extra income tax in my 60's to cut down on some vastly greater income tax bills when the mandatory IRA withdrawals set in.

You need to run the numbers for your own particular situation, of course, to see if my results apply in any way to you. (If you have to have the IRA withdrawals, with no attractive alternative source of funds, my analysis is irrelevant.) The only convenient way I know of to do this is to write a spread sheet that has your important financial information and assumptions, and then to use the spread sheet optimization routine find the ten best withdrawals from your IRA for your 60's. This ten-dimensional optimization problem is easily solved by, for example, Solver in Excel. You shouldn't have to guess these ten numbers, although, of course, as your actual investment results come in over the years, you will want to revise the remaining withdrawal plans.


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