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Okay...my wife and I have saved all of our lives and are now at the point (age 60) where we want to start making use of our retirement savings.

We have about 900K in an IRA, about 175K in a Roth IRA, about 225K in cash value in Universal Life Ins policies, and about 50K in a taxable MM account. In addition to a defined benefit retirement plan that provides us about 50K/yr

We've been really good at saving, but we aren't too sure how to start spending.

If I wanted to generate an additional 50K/yr out of our retirement savings, which accounts should I tap first and in what order?

Any thoughts from my fellow fools?
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KODB asks,

We have about 900K in an IRA, about 175K in a Roth IRA, about 225K in cash value in Universal Life Ins policies, and about 50K in a taxable MM account. In addition to a defined benefit retirement plan that provides us about 50K/yr

We've been really good at saving, but we aren't too sure how to start spending.

If I wanted to generate an additional 50K/yr out of our retirement savings, which accounts should I tap first and in what order?

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Since the $900k IRA makes up such a large portion of your assets, I'd start with that.

intercst
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If I wanted to generate an additional 50K/yr out of our retirement savings, which accounts should I tap first and in what order?

Any thoughts from my fellow fools?


First, don't touch the Roth IRA. Let that be the last money you plan to spend.

Who are the beneficiaries of your Life Ins? Think about how you want to handle that before deciding anything else.

With a $50K annual dole, you could reckon that at a present value of $2.8 million (30 years, 4% interest). Your other assets come to $1.3 million, and you haven't mentioned Social Security. By my estimate, you are loaded. ($4.1 million)

The usual rule for a Safe Withdrawal Rate is 4% per year. so figure an annual income of (0.04*4.1 million) or $164,000. You already have $50K, so an additional $114,000 annual would be "safe", ergo an additional $50K is a no-brainer.

From what I have said, I am down to the taxable MM account, the insurance policy, or the IRA. Does the MM account make any money? Less than 4%, I vote to get rid of it, unless you feel the need for a rainy day savings.

Either the insurance policy or the IRA gets my vote, depending on what your plans are for the insurance. If you want to leave a nice bequeath to a child, leave that alone. (Or change the beneficiary to me!)

So, I think you know the answer: The IRA.

Congratulations on a fine retirement nest egg.

Count No'Count
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I generally agree with the suggestions you have received.

Carefully consider your tax situation and how it will change in the future. Adding Social Security will increase your income and possibly your tax rate. Mandatory distributions at age 70-1/2 will probably give you the highest rate you will see in retirement (other things being equal). Spending your savings and Roth means no increase in taxable income.

So plan it out to pay taxes on your IRA at the lowest possible rate. Even if you don't need the income, make sure you use all of the lower income tax brackets every year. Use surplus bracket to do partial Roth conversion on the IRA.
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