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The Society of Actuaries looked at 292 different strategies for providing retirement income. Here's their recommendation.

https://www.soa.org/globalassets/assets/files/resources/rese...

Spend Safely in Retirement Strategy (SSiRS)

In summary, the SSiRS includes two key steps:

1. Optimize expected Social Security benefits through a careful delay strategy; in this case, many middle-income retirees may have all the guaranteed lifetime income they need.

2. Generate retirement income from savings using the IRS required minimum distribution (RMD) rules, coupled with a low-cost index fund, target date fund, or balanced fund.

</snip>


intercst
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84 pages. Thanks for the summary.
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No. of Recommendations: 2
84 pages. Thanks for the summary.

</snip>


It's just as important to study what not to do, so you can avoid it.

intercst
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Generate retirement income from savings using the IRS required minimum distribution (RMD) rules

Finally, someone realizes that safe withdrawals should be based on how much is left and not on how much you start with.
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What's the RMD per $100k?

I heard it was $3,500.
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What's the RMD per $100k?

https://www.schwab.com/ira/understand-iras/ira-calculators/r...

Many RMD calculators out there at your fingertips if you don't like this one.

IP
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What's the RMD per $100k?


See the following link for help:

https://www.fidelity.com/bin-public/060_www_fidelity_com/doc...

Regards,

ImAGolfer (retired '03)
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Thank you. The Schwab one was good. All my stock money is in Schwab account.

MoneySlob
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Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way.
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Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way.

Keeping in mind that, under current law, the tax rates will revert to the previous tax rates in 2026, it might be worthwhile to do conversions to fill up your current bracket even while you're still working. That said - if you are planning on using Traditional accounts between when you retire and when RMDs start (currently 72), that will also help reduce your account balance, decreasing the RMDs.

AJ
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Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way.

Won't do any good. Rolling over is income you have to pay tax on. One way or another you'll have to pay tax, all you get is deciding _when_ you pay the tax.
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"Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way."

Time to quit work!

Step 1 - stop contributing to 401K/IRA (maybe go for the match which might cover the extra taxes later)

Step 2 - get used to higher taxes. Clearly you will pay higher rates when RMD kicks in. Start conversion for Trad IRA to Roth now (to a point - you'll pay taxes at you current rate up to bracket limit).

Enjoy the fruits of your labor and savings discipline.
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Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way.

And that's today. If 72 is a ways off, don't forget to put your current TIRA/401K balance into a savings calculator at your anticipated rate of return, (I was super conservative and used avg rate of inflation), for the number of years until 72, and then run the RMD calculator on that balance. Then ask yourself what will happen if your spouse is no longer around to minimize your tax bracket, or what happens if you both get hit by a bus at the same time and your kids inherit? Lots of moving parts, but my base case of MFJ told me it was beyond time to do Roth conversions.

1st World issue. Happier having this problem than the reverse of not enough saved.

IP
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"Holy cow my RMD is like twice my annual income. I need to roll over to Roth once I quit work in a big way."

You may even decide, as I did, that you can reduce the impact of the 'tax bomb' by retiring sooner rather than later.
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No. of Recommendations: 7
Won't do any good. Rolling over is income you have to pay tax on. One way or another you'll have to pay tax, all you get is deciding _when_ you pay the tax.

So not true for everyone. Run your own numbers and make an educated guess, not a knee jerk reaction. Remember too that Roth conversions using taxable accounts to pay the taxes is like putting the amount you pay in taxes into a Roth account, for that money to grow tax free. The one caveat is it's a real bummer if you pay the taxes on the current amount and then lose money in the market.

How we ran the numbers:

1. Take your TIRA/401K balances and add together. Run through a savings calculator at a conservative rate of return. We used something like a 3% rate of return which we felt would way understate how much our balance would grow, since we were looking for a base case and our crystal ball is broken. Add in the amount you expect to put in annually to these accounts and plug in how many years until you turn 72 and have to take RMDs.

2. Use that calculated new balance and plug into RMD calculator.

3. Got SS and pensions? Figure out what your expected tax rate will be on those. In some ways you have little ability to impact what that dollar amount is for SS and pension, unless you cash in your pensions for lump sums as we did, making our need to convert even greater. We also delayed SS until 70 and FRA, which maxes out SS, in theory if nothing changes. This will be your base tax rate that you can do little about. Told us that we would be getting 85% of SS taxed no matter what.

4. Add your 85% SS if you are going to be taxed on it, pensions, RMDs on extrapolated balance of retirement accounts and any other expected income like dividends, capital gains, trust income if you have it. Look to see what tax bracket that will put you in. If you can convert at your current tax bracket, because it is lower than your future tax bracket, go for it. If you are currently married, see what the sudden loss of a spouse would do to your tax bracket. Have kids? What is their current income and how would having to pull everything out of the IRA in 10 years result in mass donations to the Feds?

For us we also looked at what the current Trump taxes were and the 2017 tax rates they would revert to in 2025 if not done sooner by change in gov't. Told us that converting up through the 24% tax bracket was super smart, even given the 3.8%NIIT on over $250K MFJ in income.

Run those numbers.

IP,
not a professional so subject to errors and omissions
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You may even decide, as I did, that you can reduce the impact of the 'tax bomb' by retiring sooner rather than later

This.


All day, this.

Heck, if my RMD was 80% of my current income, I would retire tomorrow. Once I discount for all the savings, expenses and taxes I incur related to work, 80% would probably still be higher than my take home pay.
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That said - if you are planning on using Traditional accounts between when you retire and when RMDs start (currently 72), that will also help reduce your account balance, decreasing the RMDs.

Assuming your return on your investments inside the account are not higher than your withdrawals.

PSU
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Engr27 writes,

<<Generate retirement income from savings using the IRS required minimum distribution (RMD) rules>>

Finally, someone realizes that safe withdrawals should be based on how much is left and not on how much you start with.

</snip>


An RMD-style "percent of assets" withdrawal is fine if you have enough "slop" in your annual budget to survive cuts in income (like a 50% stock market decline.) Those who are retiring "closer to the bone" should stick with the classic "inflation-adjusted SWR" where the annual withdrawal rises with inflation no matter what. Of course, that means you need to start with a larger pot of money.

intercst
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Main Author: Dr. Wade Pfau

I have never liked this guy. He always seems to be pro managed retirement funds, at 1%.

V
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Volucris writes,

Main Author: Dr. Wade Pfau

I have never liked this guy. He always seems to be pro managed retirement funds, at 1%.

</snip>


He seems to have reformed himself for this Society of Actuaries article -- he is recommending low-fee index funds.

But his previous work showing that 3% is the new "4% rule", and "the 4% rule is now 2%" quickly evaporated once you read the footnotes in the research paper. Of course, the 4% rule is only 2% if your paying a combined 2% per year in fees and expenses to the mutual fund manager and financial advisor.

intercst
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I’m almost 57. I’m putting everything into a Roth 401K now but there were decades that those didn’t exist. 30 years of near maxing it out. Times two. DH and I are both engineers so high tax bracket right now. I am eagerly awaiting a layoff in 6 months and hopefully nobody drops another job in my lap (which actually happened last time.). Is that weird? It would be hard to say no to $$ but the kids are out of college now. Husband wants us to go till 60 but...

I don’t suppose it’s possible to file separately and throw just myself into a lower tax bracket? Something tells me no.

I know. First world problems.

Man it was nice out today. Crisp fall weather. Beautiful. Thinking of pumpkins and holidays.
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"You may even decide, as I did, that you can reduce the impact of the 'tax bomb' by retiring sooner rather than later

This.

All day, this.


Amen.

There was a guy in our department 63 years old. Moto announced a VSP (Voluntary Separation Plan) and offered an early-retirement payout based on how long you had been with the company. Bill had been there long enough to get 2 years of salary. Everybody expected him to take it and quit, but he didn't. Everybody said to him, "Bill, you are going to work for 2 years FOR FREE??!! Why??"

His reason, he still had a kid in college and didn't want to lose his paycheck.

Yeah, none of us could figure it out, why he couldn't see it. To him, 24 monthly paychecks was a totally different and better thing that 24 months of pay all in one check.

People are strange.
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An RMD-style "percent of assets" withdrawal is fine if you have enough "slop" in your annual budget to survive cuts in income (like a 50% stock market decline.) Those who are retiring "closer to the bone" should stick with the classic "inflation-adjusted SWR" where the annual withdrawal rises with inflation no matter what.

I know SWRs have been debated ad nauseum here, but when that 50% stock market decline finally happens no recent retiree is going to respond by taking an annual withdrawal of 8% of what their starting balance was (it was only 4% when they retired)
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An IRS-like RMD-style "percent of assets" withdrawal is fine if you have enough "slop" in your annual budget to survive cuts in income (like a 50% stock market decline.)

Which is approximately nobody.

That's why there have been many, many, many papers & studies & articles about variable withdrawal methods, wherein the withdrawals are more-or-less constant or slowly decreasing/increasing. So you don't get your income cut in half in some years and doubled in some years.

People sometimes forget the reason the IRS has the RMD, It's not for _your_ benefit, it's so that you have to pay taxes to the IRS. The IRS could care less about your income jumping up and down from one year to another.
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I am eagerly awaiting a layoff in 6 months and hopefully nobody drops another job in my lap (which actually happened last time.).

Be proactive. I went to my boss (as did a couple of others, all independently) and told him, "I get the feeling there may be a layoff happening in a few months. If there is, I want to volunteer for it, right here and now."

He was actually grateful, because that meant he would not have to go through the emotional anguish of telling somebody they were laid off. Most bosses hate hate hate laying off good workers.
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Engr27 writes,

I know SWRs have been debated ad nauseum here, but when that 50% stock market decline finally happens no recent retiree is going to respond by taking an annual withdrawal of 8% of what their starting balance was (it was only 4% when they retired)

</snip>


I understand what you're saying, but that's really more of a behavioral problem than a financial planning problem. It just depends on whether you understand the arithmetic and are willing to act on it. Kind of like Rayvt's example of the coworker who saw 24 monthly paychecks to be preferable to the same amount of money upfront in a lump sum, seemingly not understanding the time value of money.

That's probably why William Bernstein wrote an article about 25 years ago saying that when you look at all the knowledge and skills you need to effectively manage your own money, maybe 1% of people possesses the whole skill set.

Bernstein is a medical doctor himself (neurologist) and put on a seminar for his follow physicians commenting that as a whole, doctors make terrible money mangers.

William Bernstein, White-Coat Investor
https://www.whitecoatinvestor.com/four-pillars-of-investing-...

</snip>


intercst
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I don’t suppose it’s possible to file separately and throw just myself into a lower tax bracket? Something tells me no.

You could always try it in some tax software and see. But it's unlikely, since MFS brackets are, at best, 50% of the MFJ brackets, and some rules, like IRA contributions, are much more restrictive for MFS - the Roth contribution income limit for MFS is $10k.

AJ
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I am eagerly awaiting a layoff in 6 months and hopefully nobody drops another job in my lap (which actually happened last time.).

Be proactive. I went to my boss (as did a couple of others, all independently) and told him, "I get the feeling there may be a layoff happening in a few months. If there is, I want to volunteer for it, right here and now."

He was actually grateful, because that meant he would not have to go through the emotional anguish of telling somebody they were laid off. Most bosses hate hate hate laying off good workers.


Exact same. Even got me the right to work from home for 3 months, the time between coming off of maternity leave and layoffs.

Super grateful.

IP
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