Skip to main content
Update
Non-financial boards have been closed.

Non-financial boards have been closed but will continue to be accessible in read-only form. If you're disappointed, we understand. Thank you for being an active participant in this community. We have more community features in development that we look forward to sharing soon.

Fool.com | The Motley Fool Community
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
The ladder can be in bonds (that mature in each year you might need them) or CDs....with the first years living money in a MMF or equivalent.....

The ladder has to contain the minimum mount above what you already get...if you get $5000/yr from somewhere esle, and need $30,000, then the ladder only has to contain $25,000/yr. If you are going to get SS, or get a small pension, then that counts. The ladder has to be above and beyond that.

let us assume your stocks are tax efficient - either index funds or individual stocks, not giving you taxable distributions each year. Maybe some dividends, and that counts as current income.

Also, the ladder can be based on after tax income.

If you had an 800,000 nest egg, and were planning on taking out 4%, that would be $32,000, but there would be some tax due, either cap gains, or on interest on bonds or CDs (which is why I usually use the CD interest or bond interest and dividends to live on).

Your aftertax income would be somewhat less.

When you are living on your ladder (ie, horrendous year in the market), and don't want to sell any stock that year, the ladder has to provide the after tax amount needed.

Let's just say, you had $28,500 after taxes.....and $5000 income from interest dividends...the ladder only need contain 28,500-5000....well, plus a little more to pay taxes on your interest income.....

Hope that helps....

Yes, and sooner or later, you will have to sell stocks either to rebalance, or to live on...or keep the ladder in place.....

not an easy thing to figure...
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.