No. of Recommendations: 2
tricomi asks,

I'm 52 yrs old and plan on retiring at the age of 55. When I reach 55 I expect to have approximately 1.3 million in tax deferred retirement accounts with an an assumed 10% annual earnings rate and 500k in non tax deferred accounts earning 7% per year. I estimate that I will need 70k in pre-tax annual income with an adjusted annual inflation rate of 3%. My question is; should I exhaust the after tax 500k and let the retirement accounts grow tax deferred or should I withdraw approximately 3% per year from the retirement accounts and with the earnings from the 500k give me the annual income needed and never exhaust the 500k? Comments will be appreciated.


A $70,000 per year inflation adjusted withdrawal from a $1.8 million portfolio (3.89% of assets) is almost "100% safe" according to the Retire Early Study on Safe Withdrawal Rates, see link:

My preference has been to tap my IRA account under the 72(t) exception and leave my taxable account (100% stock, LTB&H) intact. This will lessen the impact of required minimum distributions (RMD) at age 70.5 since my IRA will be smaller. Your hiers will enjoy a "stepped up basis" on any stock held in a taxable account, whereas they have to pay ordinary income tax on all assets held in an IRA. There are also regulations on how quickly your hiers must draw down an inherited IRA and pay tax on the money. There are no such restrictions on inherited stock held in a taxable account.

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