Excellent video explaining the various, commonly used strategies, and loved the bloopers at the end. We use a hybrid of the straight 4 percent and the bucket strategy. In years like 2022, we just used the cash bucket and refilled in 2024 when we hit a new high. Because we have a pension that guarantees a portion of our retirement expenses, this strategy is fairly easy to maintain.
I wouldn't call the bucket system a withdrawal strategy. It is more of an allocation strategy. It is important to plan the withdrawal strategy (how much), and the allocation (how it is invested), and also which accounts/investments to withdraw from.
I thought the 4% rule covered inflation by design, and didn't need adjustment. Reason being: conservative average stock market returns=7%. Average annual inflation = 3%. 7%-3%=4%.
Good morning Erin. Great video on an important topic. You hit all the points and discussed them thoroughly so your viewers will have additional tools to help them through this decision process. It is so important to have a good understanding of your spending needs and sources of income to start with in the thought process. There are a few very good low cost software tools to help in this process which provide many insights and will show the cash flows etc. None of them are perfect of course and each do certain things better. I myself use Empower and New Retirement (each is different in approach) to help me monitor and keep an eye on my situation which meets my needs now. Your hair looked great today, but then always does 😉 and I love the bloopers. It's your Birthday week young lady; so, Happy Birthday Erin!! 🎂 Enjoy your special day and do something special. See you on the next one... Larry, Central Valley, Ca.
The biggest problem with the 4% rule is that spending is NOT consistent, especially in your 50’s, and 60’s. When in your 70’s maybe it is and then in the 80’s again NOT due to deaths and illnesses in the couple. In your 60’s it is the MOST variable due to retirement being variable, Social Security claiming strategies, and the option to par time work. We are now 65 and 67, both retired at 63, our budgets have been markedly different every year, and that will continue for another 6 years. The income streams are different and the needs vary. We ended up budgeting each year from 63 to 73, as they are all different. We go from nearly 7% to eventually 2% as a couple,obviously no clear idea as a survivor.
This is a great primer. A follow-on video about smart tax planning for these withdrawals would also complement this video. For those who have combinations of Roth IRAs, Traditional IRAs, 401Ks, and Brokerage Accounts, choosing the right account(s) for these withdrawals (at the right time) would also be an important consideration.
The first step is to consolidate all your accounts into one taxable, one tax-deferred and one tax-free, all at the same place. When you retire, live off the taxable account first and then the tax-deferred account, while doing just enough Roth conversions that you’ll be 100% tax-free by the age RMDs hit. Consider your asset allocation across all three accounts, but locate the cash/bond portion in taxable first and tax-free last, i.e. the order you’ll be taking withdrawals. If you need something more complicated than this, you can afford to pay a tax planner to fine-tune it.
Another nice video, but I think you mixed and matched things a bit. The first set of "strategies" you discussed are about how much money you can spend each year in retirement. The "bucket strategy" is an asset allocation approach. It would have been more consistent if you included the Guyton-Klinger Guardrails strategy instead of including the bucket allocation approach. Love the bloopers!
I like withdrawling a percentage of the portfolio based on the market performance. I think it's good to adjust your withdrawal amount based on market performance and your expenses. Studies show that spending tends to decrease as people get older. So most people can afford to spend more in the early years of retirement.
I really find myself in a position I thought I would never have. I will actually have more to spend in retirement than I have right now, I hope our health holds out. Great content, great channel.
I don't plan so much. To me, a plan becomes an expectation, life comes along and you end up disappointed. There are going to be times taxes, insurance, medical bills, things need to be repaired or replaced or you just decide you want something. I think for most savers, they have an inner force that guides them to spend in a way that leaves enough for the future.
Good general information on retirement portfolio withdrawal strategies. Life is usually not so simple though as retirement income source commencement times differ, requiring different withdrawal rates - especially when retiring before SS, pension or other income sources start.
I have a little over a million invested and collect SSDI and take about 4% a year out of my 750000 from my retirement accounts. I don't plan on changing my withdrawal amount. So, if my accounts go up I get more money and can spend the access or reinvest it in a taxable account. I am invested about 95 percent in stocks but I have a younger wife and a 15 year old daughter and am saving mostly for them.
I’m going to use the 4% rule and live off that and my pension when I retire at age 58 until we take SS at 67-70 and then give my portfolio a break and have it as a legacy inheritance for my children.
I like the idea of being flexible and being able to learn as you go. I think you should choose a strategy and then evaluate it after a year to see what was good and what was bad... and then adjust your strategy based on what you learned. I'm not retired yet, but I already know that in addition to withdrawing money to spend, I need to do aggressive roth conversions. But in a year, it's possible the tax tables will change and it might not make sense to do roth conversions quite so aggressively.
Yeah, I have little different plan. Pay off the house, retire at 50. Sell all the stocks, pay the taxes on gains. You need a pretty good stack of nickels to do this. Now you are mostly done with the IRS. Main bill will be property taxes. And it doesn't matter what the market does. Drop that money in an high interest account. Maybe some other investments. I'm done with the stock market. Spend what you like, keep an eye on what's left. Some years you can be extravagant, the year after you might need to hole up and lick your wounds for a while. Great channel, thanks.
I just discovered your channel and love it, especially behind the scenes. I browsed your channel looking for the Rule of 55. Have you covered it in the past?
Thank you, Erin! It would be helpful to share your thoughts on the unique withdrawal strategy characteristics for the bulk of us using a "hatchet shaped" withdrawal strategy. I believe this is what Michael Kitces calls it. This is when you draw from your portfolio first to delay claiming Social Security. This is often recommended for those retiring in their early 60's. This has unique benefits & risks and for most, implies they will exceed the 4% rule on their portfolio until Social Security kicks in - and then it will be much lower - maybe 1-2% for the duration of one's plan.
Exactly! Took approximately 8% each of 6 years. Amazingly my pretax accounts grew at 8% to remain the same. Moved money from 401K to IRA incremently to live on and invest when stocks were down. SS grew over 59% in 4 years. FRA to age 70.
I'm all for simplicity and probably lean heavy on the conservative side of things. With that said, I plan on mine being a hybrid 2 bucket system between a cash bucket AND managed account bucket with a 70/30 split. I don't care if I don't make the most money off of my investments as long as I make enough and I don't run out. I want my taxes to look nearly identical every year with of course you inflation moving it a little. Great work Erin. I've enjoyed many of your videos
Hello Erin, If you do more videos of this subject in the future, could you explain if the withdrawal of retirement funds per monthly (same as dollar cost-averaging) or withdrawal one lump sum per year. Will it make any differences? Big fan 🎉 Cheers,
I've done my projections and we'll more than likely start with 5-7% the first 10 years and adjust from there. However, (as you know) when we use our pension income as well, I don't know if we'll be able to spend that each month. Our plan is to do a cruise each month for the first 12 months in retirement, if not more. We're planning for a great retirement - just need to make sure we get there!
Look at it more needs/wants verses a system. We have a couple of RMDs but we live basically on SS. If we want to do something additional, such a house project, extra giving, gifts, travel etc. we look at everything & decide if we want to & can. Maybe because I like control over controlled by a system. Although do kind of have "buckets"
Retiring in one's early 60's, you could be retired for almost 30 years. This helpful review overlooks a big influence on executing one's withdrawal strategy: RMDs. We had been following the 4% X portfolio until 71 1/2 arrived but RMDs will be playing a role for ~ 2/3 of our total retirement....hopefully, at least.
Great overview as usual. I like the bucket strategy in my taxable account, and I also have both fixed income and equity across tax deferred and Roth. I withdraw from the taxable and will replenish from fixed income in tax deferred. It is a bit of juggling/
Another consideration when deciding how much to take out is that traditional IRAs are counted as income and if your income goes up above certain limits then not only is your income tax going up. But also your Medicare costs go up. Married filing jointly this year with an adjusted gross income of 206 k raises your monthly Medicare premium by just under $83
I’m still a while from retirement, but my plan is a variable withdrawal rate based off of market conditions of the previous year. If the market is flat or down, withdraw 3%, if up 0-10%, withdraw 4%, if up 11-20% withdraw 5% and if up >20%, withdraw 6%. I plan on staying 100% equities on money I won’t need for 10 years and 50/50 on money I need within 10 years with 1 year in HYSA. But I’m a math nerd and love looking over my numbers every month at least.
"Percent of portfolio" is always a safer option because it is adjusted by portfolio performance rather than inflation. Your paycheck was based on performance and your retirement income should be based on performance also.
RMD's are coming up and that will be the last adjustment to our budget unless something unexpected enters the picture such as health issues. It will allow us to spend more because we have been living and still saving for large purchases on our current income stream.
Thank you, Erin for sharing your knowledge and wisdom. This topic is very interesting. I haven't retired yet and decided which method I would use. But beside which method I would use, I often wonder how often I should withdraw. 4% of my portfolio once a year vs. 0.34% per month.
Hi Erin, excellent video as always. At another level, withdrawal strategy also involves which accounts to draw from in which order or in combination to minimize taxes and optimize for ACA subsidies for early retirees (pre Medicare). Many people have multiple account types, pretax IRA, Roth IRA, taxable. Do you have any guidance on withdrawal strategy by account type? The tax savings can be substantial if done correctly.
When you withdraw, how does that work physically? Do you have to request a disbursement every month or is it automatic? Is it monthly or a lump sum on Jan 1 into a HYSA to pull from over the following months?
Thanks for this, Erin. Can you go a bit further? On a given year, when is the best time to actually withdraw your money? In the past 10-20 years, what month/ season are the markets typically on a high (or lowest)? Do we have data on that?
Hello, I am due for retirement in two years, I'm a senior citizen but I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $50K per year but nothing to show for it yet.
I guess i always just though about planning for withdrawing up 4% as a way to figure out my target savings goal. The actual details of withdrawal i hadn't even thought about.
We retired ten years ago. We have a balanced portfolio in 401-k (retirement accounts) and Fidelity mutual funds (investment accounts). From a tax perspective, would it be better to take withdrawals from the retirement accounts or the investment accounts? RMD will start at age 73 at about 100k. Thanks.
How does that work with the Required Minimum Distribution formula? Almost all my money is in a 403B. So for me I am looking at the RMD when I start taking cash out.
You need to add in the new way, that is the reverse glide path. You go high bonnds and short term money market funds til you take Social Security, then get more aggressive. I am using that approach
Hey Erin, in thinking about my draw down strategy I have 2 questions. What’s the difference between Roth and an after tax brokerag, If both are invested in an index fund? More specifically, Which one can you access contributions and investment interest pre 59.5 yrs old?
Currently living off my wife's SS, my small pension and my stock dividends. We have no debt and I will be applying for my max SS next year at 70. Thanks for another view on distributions.
Based on historical data, the 4% rule only works in the USA and Canada In contrast, Japan once predicted to lead the global economy comes in last with an SWR of 0.26%
I believe that trinity study was using 50/50, and didn't say you must have 60% equity minimum. Duration of retirement matters too. You failed to mention variable percentage.withdrawals (amortization based) even though I think you did a video on using the RMD method to determine yearly withdrawal %
Can you discuss a tax free withdrawal strategy? i.e. $XX long term capital gains, $XX Roth conversion ladder, and $XX Roth/HSA, etc. and how much income can be replaced
Do you have any thoughts on how I can better estimate how much I should have saved/invested for retirement when I have no idea what my expenses will be like at that time? My savings rate is quite high, but my income is not very strong. I’m 29 and that causes me some concern that I won’t be able to provide adequately for my family. Great video as always, and thank you for the work you do on this channel!
My wife and I are putting away 15% of our income, plus the 8% from the employer. Still, growth in our 403(b) has been horrible as a moderate aggressive investor. Any downturn like we've seen in 2008, and 2020, and we're going to be toast. 12 more years to retirement.
Assuming we can save enough to retire, the approach in retirement will be the same as before retirement. Save some money for emergencies and spend what's needed each year.
It deserves a video for sure 😊 it’s definitely built into my plan, most of my donations go to training service animals for individuals with disabilities (specifically seizures) and Alzheimer’s research - those are the causes that have my heart ❤️
@@ErinTalksMoney encouraging people to think about 10-15% has a huge social impact. I prefer local churches and education especially in the poorest places (South Sudan is the poorest country on earth). I am eager to hear your pending video!!!
To me the bucket strategy is basically a balanced portfolio, I have a checking and money market that I spend from and refill from my equities and bonds in 401k and brokerages. I am in the situation where I don't "need" anymore than 1% of my portfolio per year to live, but I "want" closer to 3% for travel and entertainment. So I basically set 4% as a trigger point and if I go over because of a large purchase I reevaluate for the next year. But I don't have a set amount and then I fill up the 24% tax bracket with a Roth conversion for what I didn't spend.
I've been retired since late 2016, and so far my withdrawal rate has been zero. My dad and I live comfortably on his social security, his pension, and my military retirement pay. When my dad passes away (he's 89-years-old now), I will probably start withdrawing about $20k a year, which is currently about 1% of my portfolio value, and increase it every year to keep up with inflation. I can cover my daily living needs entirely with my military retirement pay. The $20k would mainly be for home upgrades. If the market crashes, I can always skip home upgrades until it recovers. This video drove me to turn a vague idea into a written strategy, which is always better. Thanks for making me think about it.
We are early retirees 52 and 55. We used the rule of 55 and are living off one 401k until 59.5. That account will last longer, but at that point, we will have more options. We withdraw based on expenses. Once we take ss, we will adjust our withdrawal from our IRAs and 401ks.
Erin, you are looking awfully polished these days. It’s true what they say. If you look like a million bucks, you are more likely to attract a million bucks. 🤑
Erin looks best in dark colors, especially black. You are beautiful Erin, and intelligent and your channel has been very helpful to me as I’m sure it has been to many others.
I like the bucket strategy, not because it's any better, but because like you said the for greater "piece of mind". I keep about three years of spending expenses in a cash like bucket.
I like your channel Erin a lot! How do these three strategies compare to the IRS's RMD? I am using a blend of RMD plus some addition withdrawl limited by tax trigger points; whether medicare payments or the step increases in tax rates this optimizing the withdraw efficiency. With the extra withdrawls over the RMD's I am funding a Roth IRA (to leave for our family). We are in a postiion that our life style is mostly funded by pensions and SS.
A good strategy can save you thousands in taxes. I started trading six months ago, and with my RMD, I’ve reinvested smartly thanks to Ryan’s 1-on-1 sessions. Now, I’m averaging $45k a week with minimal trading 😂. It’s not a fortune, but it eases financial stress. Best of luck with your RMD!
@@TheLightBender I appreciate this recommendation and hope that by hearing about it I can gain some insights into the direction of the market and strategies to combat the downtrend.
I have a different strategy. Take out only the amount that can come out tax free. Nice to have an IRA and a Roth to manage this. My plan is to pay -0- in taxes in retirement. 7 years in and I am meeting that goal.
I use a fixed dollar strategy based on my spending needs and the tax brackets. I plan to defer Social Security until 67 or 70, so what I am withdrawing today from my 403b is higher than it will be when I start taking SS
This is my plan also. Withdrawal what I need to live while I defer taking SS. I'm retiring at 65. If I wait until 70, my SS will be all I need from then on and I can let my portfolio build for the kids.
You are better off being 100% in stocks and forget about a bucket strategy. You should have some flexibility to allow for down markets. You should be able to pull out about 5.5% every year, but you can't adjust for inflation because there will be down years. Over time your withdrawals will increase because your nest egg will go up. You should also consider pulling out more in the first years because those are your gogo years, when you will have the best health. So, maybe pull out 8% the first 5 or 10 years, but monitor your nest egg to make sure it will sustain it. If there is a bear market you may need to pull back some. If you stick to a 4% withdrawal rate you’ll likely die with much more money than you started with and maybe you could have enjoyed that money in the early years of retirement.
I’m all over the place! I got a pension / :457b / and Roth IRA. Don’t know if I’m doing too much or doing not enough. Should I open a tax brokerage as well?
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Might be good to cover a "guardrails" strategy. Some people also use an "income only" strategy.
Excellent video explaining the various, commonly used strategies, and loved the bloopers at the end. We use a hybrid of the straight 4 percent and the bucket strategy. In years like 2022, we just used the cash bucket and refilled in 2024 when we hit a new high. Because we have a pension that guarantees a portion of our retirement expenses, this strategy is fairly easy to maintain.
Erin is on Fire 🔥, appreciate your videos. Love to see the growth of your channel.
Yay! Thank you!
Watched at work, so not signed in. Compelled to log on at home give you a thumbs up Erin. Good content. Rich
Thank you so much! I couldn’t ask for more support than that!! 😊
Thank you for your videos 😁 I'm just getting started on my financial journey (at 43yrs old 🤦🏽) and your videos have been so helpful. Happy birthday 🎉
I'd love to send you a gift card, send me an email at erintalksmoney@gmail.com 😊
I wouldn't call the bucket system a withdrawal strategy. It is more of an allocation strategy. It is important to plan the withdrawal strategy (how much), and the allocation (how it is invested), and also which accounts/investments to withdraw from.
Every Monday I wake up and look forward to Erin's video. Thank you for making me a better investor!
Great video on this Erin. Great job!
Thanks!
Thank you!!! 🙏
I thought the 4% rule covered inflation by design, and didn't need adjustment. Reason being: conservative average stock market returns=7%. Average annual inflation = 3%. 7%-3%=4%.
no
Yes your right from everything I ever heard
The 4% rule says to increase your withdrawal amount by inflation every year regardless of actual portfolio value or return.
This is an excellent video and a great topic. It really has no right or wrong answer because everyone situation is so different. Great job as usual.
This is a very enlightening video. I prioritized diversification and tax optimization
Good morning Erin. Great video on an important topic. You hit all the points and discussed them thoroughly so your viewers will have additional tools to help them through this decision process. It is so important to have a good understanding of your spending needs and sources of income to start with in the thought process. There are a few very good low cost software tools to help in this process which provide many insights and will show the cash flows etc. None of them are perfect of course and each do certain things better. I myself use Empower and New Retirement (each is different in approach) to help me monitor and keep an eye on my situation which meets my needs now. Your hair looked great today, but then always does 😉 and I love the bloopers. It's your Birthday week young lady; so, Happy Birthday Erin!! 🎂 Enjoy your special day and do something special. See you on the next one... Larry, Central Valley, Ca.
Great breakdown of how the strategies relate and how they may affect your personal plan!
The biggest problem with the 4% rule is that spending is NOT consistent, especially in your 50’s, and 60’s. When in your 70’s maybe it is and then in the 80’s again NOT due to deaths and illnesses in the couple.
In your 60’s it is the MOST variable due to retirement being variable, Social Security claiming strategies, and the option to par time work.
We are now 65 and 67, both retired at 63, our budgets have been markedly different every year, and that will continue for another 6 years. The income streams are different and the needs vary.
We ended up budgeting each year from 63 to 73, as they are all different.
We go from nearly 7% to eventually 2% as a couple,obviously no clear idea as a survivor.
Great video Erin! The other consideration is tax planning and strategy - figuring our which bucket to withdraw from, tax free, tax deferred etc.
This is a great primer. A follow-on video about smart tax planning for these withdrawals would also complement this video. For those who have combinations of Roth IRAs, Traditional IRAs, 401Ks, and Brokerage Accounts, choosing the right account(s) for these withdrawals (at the right time) would also be an important consideration.
The first step is to consolidate all your accounts into one taxable, one tax-deferred and one tax-free, all at the same place.
When you retire, live off the taxable account first and then the tax-deferred account, while doing just enough Roth conversions that you’ll be 100% tax-free by the age RMDs hit.
Consider your asset allocation across all three accounts, but locate the cash/bond portion in taxable first and tax-free last, i.e. the order you’ll be taking withdrawals.
If you need something more complicated than this, you can afford to pay a tax planner to fine-tune it.
Another nice video, but I think you mixed and matched things a bit. The first set of "strategies" you discussed are about how much money you can spend each year in retirement. The "bucket strategy" is an asset allocation approach. It would have been more consistent if you included the Guyton-Klinger Guardrails strategy instead of including the bucket allocation approach.
Love the bloopers!
I like withdrawling a percentage of the portfolio based on the market performance. I think it's good to adjust your withdrawal amount based on market performance and your expenses. Studies show that spending tends to decrease as people get older. So most people can afford to spend more in the early years of retirement.
Personalisation and flexibility are important in these cases. Great overview.
you are so good ! thanks Erin
I really find myself in a position I thought I would never have. I will actually have more to spend in retirement than I have right now, I hope our health holds out. Great content, great channel.
Here’s to a long, healthy retirement!! 😊
I don't plan so much. To me, a plan becomes an expectation, life comes along and you end up disappointed. There are going to be times taxes, insurance, medical bills, things need to be repaired or replaced or you just decide you want something. I think for most savers, they have an inner force that guides them to spend in a way that leaves enough for the future.
Love the content, and the bloopers!! 😂
Good general information on retirement portfolio withdrawal strategies. Life is usually not so simple though as retirement income source commencement times differ, requiring different withdrawal rates - especially when retiring before SS, pension or other income sources start.
I have a little over a million invested and collect SSDI and take about 4% a year out of my 750000 from my retirement accounts. I don't plan on changing my withdrawal amount. So, if my accounts go up I get more money and can spend the access or reinvest it in a taxable account. I am invested about 95 percent in stocks but I have a younger wife and a 15 year old daughter and am saving mostly for them.
I’m going to use the 4% rule and live off that and my pension when I retire at age 58 until we take SS at 67-70 and then give my portfolio a break and have it as a legacy inheritance for my children.
You can live off SS alone?
@@chemquests Yes 2 SS checks and a pension.
@@dantheman6607 ah, right. I read the sentence as giving everything a break but of course you said just your portfolio. Good stuff, thanks!
I like the idea of being flexible and being able to learn as you go. I think you should choose a strategy and then evaluate it after a year to see what was good and what was bad... and then adjust your strategy based on what you learned. I'm not retired yet, but I already know that in addition to withdrawing money to spend, I need to do aggressive roth conversions. But in a year, it's possible the tax tables will change and it might not make sense to do roth conversions quite so aggressively.
I think this strategy is a great starting point
Yeah, I have little different plan. Pay off the house, retire at 50. Sell all the stocks, pay the taxes on gains. You need a pretty good stack of nickels to do this. Now you are mostly done with the IRS. Main bill will be property taxes. And it doesn't matter what the market does. Drop that money in an high interest account. Maybe some other investments. I'm done with the stock market. Spend what you like, keep an eye on what's left. Some years you can be extravagant, the year after you might need to hole up and lick your wounds for a while. Great channel, thanks.
I just discovered your channel and love it, especially behind the scenes. I browsed your channel looking for the Rule of 55. Have you covered it in the past?
Thank you, Erin! It would be helpful to share your thoughts on the unique withdrawal strategy characteristics for the bulk of us using a "hatchet shaped" withdrawal strategy. I believe this is what Michael Kitces calls it. This is when you draw from your portfolio first to delay claiming Social Security. This is often recommended for those retiring in their early 60's. This has unique benefits & risks and for most, implies they will exceed the 4% rule on their portfolio until Social Security kicks in - and then it will be much lower - maybe 1-2% for the duration of one's plan.
Exactly! Took approximately 8% each of 6 years. Amazingly my pretax accounts grew at 8% to remain the same. Moved money from 401K to IRA incremently to live on and invest when stocks were down. SS grew over 59% in 4 years. FRA to age 70.
I'm all for simplicity and probably lean heavy on the conservative side of things. With that said, I plan on mine being a hybrid 2 bucket system between a cash bucket AND managed account bucket with a 70/30 split. I don't care if I don't make the most money off of my investments as long as I make enough and I don't run out. I want my taxes to look nearly identical every year with of course you inflation moving it a little. Great work Erin. I've enjoyed many of your videos
Hello Erin,
If you do more videos of this subject in the future, could you explain if the withdrawal of retirement funds per monthly (same as dollar cost-averaging) or withdrawal one lump sum per year. Will it make any differences?
Big fan 🎉
Cheers,
I've done my projections and we'll more than likely start with 5-7% the first 10 years and adjust from there. However, (as you know) when we use our pension income as well, I don't know if we'll be able to spend that each month. Our plan is to do a cruise each month for the first 12 months in retirement, if not more. We're planning for a great retirement - just need to make sure we get there!
Look at it more needs/wants verses a system. We have a couple of RMDs but we live basically on SS. If we want to do something additional, such a house project, extra giving, gifts, travel etc. we look at everything & decide if we want to & can. Maybe because I like control over controlled by a system. Although do kind of have "buckets"
Retiring in one's early 60's, you could be retired for almost 30 years. This helpful review overlooks a big influence on executing one's withdrawal strategy: RMDs. We had been following the 4% X portfolio until 71 1/2 arrived but RMDs will be playing a role for ~ 2/3 of our total retirement....hopefully, at least.
Great overview as usual. I like the bucket strategy in my taxable account, and I also have both fixed income and equity across tax deferred and Roth. I withdraw from the taxable and will replenish from fixed income in tax deferred. It is a bit of juggling/
Simplicity is probably the best strategy, the 4% rule is evidence based and accounts for inflation. Good job Erin!
Another consideration when deciding how much to take out is that traditional IRAs are counted as income and if your income goes up above certain limits then not only is your income tax going up. But also your Medicare costs go up. Married filing jointly this year with an adjusted gross income of 206 k raises your monthly Medicare premium by just under $83
I prefer the forgo inflation or guardrails strategies.
Hi Erin, just came across your channel and video. Great and informative content. How can we get one on one coaching?
Please address how we can deal with rmds.
I’m still a while from retirement, but my plan is a variable withdrawal rate based off of market conditions of the previous year. If the market is flat or down, withdraw 3%, if up 0-10%, withdraw 4%, if up 11-20% withdraw 5% and if up >20%, withdraw 6%. I plan on staying 100% equities on money I won’t need for 10 years and 50/50 on money I need within 10 years with 1 year in HYSA. But I’m a math nerd and love looking over my numbers every month at least.
"Percent of portfolio" is always a safer option because it is adjusted by portfolio performance rather than inflation. Your paycheck was based on performance and your retirement income should be based on performance also.
RMD's are coming up and that will be the last adjustment to our budget unless something unexpected enters the picture such as health issues. It will allow us to spend more because we have been living and still saving for large purchases on our current income stream.
Thank you, Erin for sharing your knowledge and wisdom. This topic is very interesting. I haven't retired yet and decided which method I would use. But beside which method I would use, I often wonder how often I should withdraw. 4% of my portfolio once a year vs. 0.34% per month.
Good Question and wondered the same.
Surprised you did not mention the Guard rails approach?
Hi Erin, excellent video as always. At another level, withdrawal strategy also involves which accounts to draw from in which order or in combination to minimize taxes and optimize for ACA subsidies for early retirees (pre Medicare). Many people have multiple account types, pretax IRA, Roth IRA, taxable. Do you have any guidance on withdrawal strategy by account type? The tax savings can be substantial if done correctly.
When you withdraw, how does that work physically? Do you have to request a disbursement every month or is it automatic? Is it monthly or a lump sum on Jan 1 into a HYSA to pull from over the following months?
Thanks for this, Erin. Can you go a bit further? On a given year, when is the best time to actually withdraw your money? In the past 10-20 years, what month/ season are the markets typically on a high (or lowest)? Do we have data on that?
Wise beyond your years !
Good advice!
Hello, I am due for retirement in two years, I'm a senior citizen but I'm curious to know best how people split their pay, how much of it goes into savings, spendings or investments, I earn around $50K per year but nothing to show for it yet.
I like the percentage of portfolio approach personally. Just super simple :).
I guess i always just though about planning for withdrawing up 4% as a way to figure out my target savings goal. The actual details of withdrawal i hadn't even thought about.
Sound advice….love your bloopers….you’re actually quite adorable, kiddo.
We retired ten years ago. We have a balanced portfolio in 401-k (retirement accounts) and Fidelity mutual funds (investment accounts). From a tax perspective, would it be better to take withdrawals from the retirement accounts or the investment accounts? RMD will start at age 73 at about 100k. Thanks.
I love that necklace! Is it possible to drop an affiliate link to buy it?
For me, when speaking tax deferred account withdrawal , up to the 12% tax bracket (and don't forget to factor in the std deduction)
How does that work with the Required Minimum Distribution formula? Almost all my money is in a 403B. So for me I am looking at the RMD when I start taking cash out.
You need to add in the new way, that is the reverse glide path. You go high bonnds and short term money market funds til you take Social Security, then get more aggressive. I am using that approach
Erin, do you have anything in print that shows the different withdrawal types you could send out?
YES a males pull out skills should be well planned 😊
Hey Erin, in thinking about my draw down strategy I have 2 questions. What’s the difference between Roth and an after tax brokerag, If both are invested in an index fund? More specifically, Which one can you access contributions and investment interest pre 59.5 yrs old?
Currently living off my wife's SS, my small pension and my stock dividends. We have no debt and I will be applying for my max SS next year at 70. Thanks for another view on distributions.
Based on historical data, the 4% rule only works in the USA and Canada In contrast, Japan once predicted to lead the global economy comes in last with an SWR of 0.26%
I believe that trinity study was using 50/50, and didn't say you must have 60% equity minimum. Duration of retirement matters too. You failed to mention variable percentage.withdrawals (amortization based) even though I think you did a video on using the RMD method to determine yearly withdrawal %
Can you discuss a tax free withdrawal strategy? i.e. $XX long term capital gains, $XX Roth conversion ladder, and $XX Roth/HSA, etc. and how much income can be replaced
Do you have any thoughts on how I can better estimate how much I should have saved/invested for retirement when I have no idea what my expenses will be like at that time? My savings rate is quite high, but my income is not very strong. I’m 29 and that causes me some concern that I won’t be able to provide adequately for my family. Great video as always, and thank you for the work you do on this channel!
Love the channel Erin, I was wondering if you would do a video on something like “should cryptocurrency make up a small percentage of your portfolio?”
My wife and I are putting away 15% of our income, plus the 8% from the employer. Still, growth in our 403(b) has been horrible as a moderate aggressive investor. Any downturn like we've seen in 2008, and 2020, and we're going to be toast. 12 more years to retirement.
Nice
Assuming we can save enough to retire, the approach in retirement will be the same as before retirement. Save some money for emergencies and spend what's needed each year.
Thanks Erin! Great info
4 percent rule is great if you want to make you fee based financial advisor and your kids rich
Love your channel. Would love for you to include the idea of generous giving. Seems like the missing piece in your portfolio. Keep up the good work.
It deserves a video for sure 😊 it’s definitely built into my plan, most of my donations go to training service animals for individuals with disabilities (specifically seizures) and Alzheimer’s research - those are the causes that have my heart ❤️
@@ErinTalksMoney encouraging people to think about 10-15% has a huge social impact. I prefer local churches and education especially in the poorest places (South Sudan is the poorest country on earth). I am eager to hear your pending video!!!
To me the bucket strategy is basically a balanced portfolio, I have a checking and money market that I spend from and refill from my equities and bonds in 401k and brokerages. I am in the situation where I don't "need" anymore than 1% of my portfolio per year to live, but I "want" closer to 3% for travel and entertainment. So I basically set 4% as a trigger point and if I go over because of a large purchase I reevaluate for the next year. But I don't have a set amount and then I fill up the 24% tax bracket with a Roth conversion for what I didn't spend.
I've been retired since late 2016, and so far my withdrawal rate has been zero. My dad and I live comfortably on his social security, his pension, and my military retirement pay. When my dad passes away (he's 89-years-old now), I will probably start withdrawing about $20k a year, which is currently about 1% of my portfolio value, and increase it every year to keep up with inflation. I can cover my daily living needs entirely with my military retirement pay. The $20k would mainly be for home upgrades. If the market crashes, I can always skip home upgrades until it recovers.
This video drove me to turn a vague idea into a written strategy, which is always better. Thanks for making me think about it.
Great insight near the end of this video in that using a combination of strategies over the withdrawal years is a strategy that can work.
The thanks so much!!
what is a good asset allocation to have in retirement
Wat does it cost to do a one on one and do a breakdown ???
We are early retirees 52 and 55. We used the rule of 55 and are living off one 401k until 59.5. That account will last longer, but at that point, we will have more options.
We withdraw based on expenses.
Once we take ss, we will adjust our withdrawal from our IRAs and 401ks.
Erin, you are looking awfully polished these days. It’s true what they say. If you look like a million bucks, you are more likely to attract a million bucks. 🤑
i agree
simp
Couldn’t have said it better!!!
@@billyrock8305 you can always dream. I’m still waiting on a call from Kate Beckinsale.😄
Erin looks best in dark colors, especially black. You are beautiful Erin, and intelligent and your channel has been very helpful to me as I’m sure it has been to many others.
I like the bucket strategy, not because it's any better, but because like you said the for greater "piece of mind". I keep about three years of spending expenses in a cash like bucket.
What is the triangle thing with a handle on it in the bottom right of the vid?
I thought It was a potato masher 😂
For non-RMD accounts: do retirees pull monthly to budget, or pull once a year and budget monthly from a HYSA or something?
Risk-based guardrails!!! [Not Guyton-Klinger!]
Good info. And no, you are not broken… lol
I like your channel Erin a lot! How do these three strategies compare to the IRS's RMD? I am using a blend of RMD plus some addition withdrawl limited by tax trigger points; whether medicare payments or the step increases in tax rates this optimizing the withdraw efficiency. With the extra withdrawls over the RMD's I am funding a Roth IRA (to leave for our family). We are in a postiion that our life style is mostly funded by pensions and SS.
A good strategy can save you thousands in taxes. I started trading six months ago, and with my RMD, I’ve reinvested smartly thanks to Ryan’s 1-on-1 sessions. Now, I’m averaging $45k a week with minimal trading 😂. It’s not a fortune, but it eases financial stress. Best of luck with your RMD!
@@TheLightBender I've also heard a lot about Ryan, but no one shares his details. please can youshare?
@RyanBrooksFA :That's his Handle!
He communicates on tele gram..
@@TheLightBender I appreciate this recommendation and hope that by hearing about it I can gain some insights into the direction of the market and strategies to combat the downtrend.
Great hair style. Really enjoy watching beautiful video.
I have a different strategy. Take out only the amount that can come out tax free. Nice to have an IRA and a Roth to manage this. My plan is to pay -0- in taxes in retirement. 7 years in and I am meeting that goal.
Just make sure you don't have too much in rmd age or you might ended up getting taxed more over your life then you hoped with your strategy.
You’re going to get slammed with RMD’s not good 😢
@@dantheman6607 Nope. Most of my money is already in the Roth and I convert an amount to the Roth each year to get to the tax free number.
Yep...that is my plan too.
The market.....ohhh, the market.
I use a fixed dollar strategy based on my spending needs and the tax brackets. I plan to defer Social Security until 67 or 70, so what I am withdrawing today from my 403b is higher than it will be when I start taking SS
This is my plan also. Withdrawal what I need to live while I defer taking SS. I'm retiring at 65. If I wait until 70, my SS will be all I need from then on and I can let my portfolio build for the kids.
@@gregkloe we are thinking alike. I retired 7 months ago when I turned 63
Good strategy
Best strategy. Guardrails
Nothing else comes close
You are better off being 100% in stocks and forget about a bucket strategy. You should have some flexibility to allow for down markets. You should be able to pull out about 5.5% every year, but you can't adjust for inflation because there will be down years. Over time your withdrawals will increase because your nest egg will go up. You should also consider pulling out more in the first years because those are your gogo years, when you will have the best health. So, maybe pull out 8% the first 5 or 10 years, but monitor your nest egg to make sure it will sustain it. If there is a bear market you may need to pull back some. If you stick to a 4% withdrawal rate you’ll likely die with much more money than you started with and maybe you could have enjoyed that money in the early years of retirement.
All of these options are fine, but none of them address RMDs
I’m all over the place! I got a pension / :457b / and Roth IRA. Don’t know if I’m doing too much or doing not enough. Should I open a tax brokerage as well?
And don't forget what you reap from social security.
My intent is some form of the bucket strategy - allowing me to withdrawal more money during market highs and less during lows.