Most people never touch their principle in their 401K/ IRA's, because they are so fearful of spending it and running out. That is a huge mistake. Learn to spend it/ give it away while you're still alive. You will get no enjoyment in doing it when your dead and your spouse/kids will face an enormous tax bill that won't be fun or enjoyable. You worked dammed hard for it all your life while you scrimped and saved for decades. Wealth is best enjoyed if it's used and spent on the things you love, not on taxes and nursing homes. Just some food for thought.
Indeed! Especially savers who have saved for 30+ years have trouble spending their retirement savings, even though that’s what they’ve been saving it for!
True up to a point. However, having just been the executor of wills and health advocate for two aged family members who lived into their 90s you'd better temper enjoying your wealth to account for potential longterm medical care. That is, unless you can move in with a nurse family member for the last years of your life or are willing to go on Medicaid. Our two elderly family members needed fulltime care of one sort or another for the last 4 years of their life. This includes skilled nursing facility care, fulltime/parttime at home care, assisted living facility care, memory unit care or some combination of all of these. The price tag can be $6000 or more per month in out-of-pocket costs that Medicare doesn't cover. That's $72,000 a year. That's $360,000 for 5 years of care. Medicare spends 25% of its budget on us in our last year of life. Consider this before you force your spouse/kids to spend their lifetime savings on your old age nursing home care because you overspent your hard earned wealth.
@@susanmarie4891 Yes. To be specific, under the Nursing Home Reform Act of 1983, a federal law, it is illegal for a nursing home to discriminate in the care that it provides to residents on the basis of their source of payment. However the rules of who qualifies for Medicaid paid SNF treatment are complex and vary by state. It's best to discuss with an Elder Law attorney before assuming Medicaid will fund your old age long term medical care.
The 4% rule assumes conservative 50/50 stocks and bonds and yearly adjustment for inflation. I plugged numbers into a withdrawal calculator and I decided on 6% fixed (no inflation adjustment since spending slows as you get older), staying in the C fund (my high federal physician's pension makes me very risk tolerant) that averages 10% per year, with a 7% expected return on investment (leaning pessimistic). It only requires a single TSP request for the monthly installments (the initial 6% of my TSP divided by 12), makes it easy to adjust for tax withholding each year, provides reliable steady income, will create a big cash savings safety net, and will probably result in a big nest egg at the end if the stock market does anything but perform poorly in the long run.
Great video, thanks! I think the 4% rule kind of assumes that your assets are allocated something like 60% stocks, 40% bonds. In other words, if you are 100% G fund, don't use the 4% rule.
When taking money out of the TSP, you always need to remember the 20% that goes to taxes. If you take out $40K, you will receive $32K. Automatic. Plus you might owe more when you file taxes. Many of us will also have to account for state taxes.
A couple of clarifications: 20% is withheld to pay your taxes. Your ultimate tax payment is determined by all your income and withholding, and could lead to a tax refund. You can also sign up for periodic payments and get reduced withholding. Also qualified Roth account withdrawals are not taxed.
Just fyi This guy is great but only you know your comfort levels. So If you are nervous about listening to the wonderful advice this guy gives TSP has some excellent and easy to use calculators. You add you TSP balance The rate of return you think is going to be and last how much money you want a month Out pops how long it will last you. Change the numbers all day long. .. no cost and is quick and easy
Ok I'm planning on selling my current home and moving to fl. Will use some of my TSP for the down payment and buying new furnture for the place. Will use a large part of the money i make off of old house put it into some type of account that will grow hopefully. I will with draw about $500 a month to have to cover expensnces and fun money. Will not touch TSP hopefully and let it grow back up after my taking out for new home.
I have pennies in my TSP and am needing to figure out how to grow and stretch them as I'm in a unexpected early retirement. Thanks for making videos and sharing your knowledge!
The distribution amount gets easy at age 72 where the goal is to run out of money and have the taxes all paid in the next 25 or so years and you go by a percent off a required distribution chart.
Great information, getting ready to retire in the next 12 months and your videos are fantastic. Also, you might want to change the battery in your clock. It didn't move for the entire video!
I guess I didn't see the video with the clock explanation until 5 minutes after I made the comment.......now I get it! Will be scheduling a consultation soon.
I am still doing what I am supposed to do as a responsible citizen but I am concerned about our financial system and my investments being attacked by an irresponsible government, leaving me broke and dependent. I think currently anyone retired should keep a cash reserve for times when the market is flat or down so you wont need to touch it that year. I plan to transfer my tsp so I have more control then I can keep a portion in cash and wont need to touch anything invested when the market is down.
Dallon, Excellent vid, as usual. 1. YES. Drives me crazy: "retirement" means RETIREMENT. "Working after "retirement"" is by definition NOT RETIREMENT. 2. I love your content, but I need to lean on you: I am One- Thousand- Percent Debt- Free. House free & clear; no credit cards; no auto, no nothing. You tend not to address debt. Please explain.
Great info, does the SEPP 72T stay around 4%? The minimum distribution method? It seems it’s recalculated every year so I wasn’t sure if it stays around 4%?
Question: does the 4% rule include your entire net worth? For example, we have about 600k in the tsp and other investments, but we have another 500k in assets.
I have 2 TSP accounts (FERS and Military) can I keep them separate when I retire, also a small percentage of my Military TSP is tax free because of deployments how will that work if I combined these 2 accounts ?
so in the 4%-- first year 4% but every year after you only take the inflation % from the original 4% whivch could be much less in high inflation years that could become income?
@@libbysherrill713 the concern with this is loss of purchasing power. As you know, the COLA's for FERS and SS really don't cover inflation. So we must make that up with our personal money. If you have enough in your TSP/IRA, you are good to go. If you don't, you will need some stocks to help your money keep up with inflation. Something in the 40/60 to 60/40 stocks/bonds seems to be appropriate.
I was at the GRB site and running the Project TSP Account calculator and it said I would earn 13k with no contributions, is this the fund I'm in or the TSP's 1%?
There is no such thing as an investment expert. You tell me how long I'm going to live first lol.....if you can't do that, you're just guessing like everyone else.
His advice and wisdom, if you have a pulse and are watching this, is free. He provides valuable information on taxes, and how to avoid them….Ive been doing financial research for 30 years, and always learn…..I trust that he’s an expert. Do you take your automobile to any mechanic? Most likely, you seek the wisdom of an expert, as you want the best outcome for your $ spent…..nuff said…
The 4% rule was based off of a 60/40 portfolio. But that rule was made when bonds actually returned more than 1%. Taking into account your fers pension and your ssi I wouldn't have more than 10% in bonds.
Most people never touch their principle in their 401K/ IRA's, because they are so fearful of spending it and running out. That is a huge mistake. Learn to spend it/ give it away while you're still alive. You will get no enjoyment in doing it when your dead and your spouse/kids will face an enormous tax bill that won't be fun or enjoyable. You worked dammed hard for it all your life while you scrimped and saved for decades. Wealth is best enjoyed if it's used and spent on the things you love, not on taxes and nursing homes. Just some food for thought.
Indeed! Especially savers who have saved for 30+ years have trouble spending their retirement savings, even though that’s what they’ve been saving it for!
Good point!
True up to a point. However, having just been the executor of wills and health advocate for two aged family members who lived into their 90s you'd better temper enjoying your wealth to account for potential longterm medical care. That is, unless you can move in with a nurse family member for the last years of your life or are willing to go on Medicaid. Our two elderly family members needed fulltime care of one sort or another for the last 4 years of their life. This includes skilled nursing facility care, fulltime/parttime at home care, assisted living facility care, memory unit care or some combination of all of these. The price tag can be $6000 or more per month in out-of-pocket costs that Medicare doesn't cover. That's $72,000 a year. That's $360,000 for 5 years of care. Medicare spends 25% of its budget on us in our last year of life. Consider this before you force your spouse/kids to spend their lifetime savings on your old age nursing home care because you overspent your hard earned wealth.
Whether you're paying with cash or on Medicaid - all patients in a skilled facility (SNF) are getting the same level of nursing care
@@susanmarie4891 Yes. To be specific, under the Nursing Home Reform Act of 1983, a federal law, it is illegal for a nursing home to discriminate in the care that it provides to residents on the basis of their source of payment. However the rules of who qualifies for Medicaid paid SNF treatment are complex and vary by state. It's best to discuss with an Elder Law attorney before assuming Medicaid will fund your old age long term medical care.
The 4% rule assumes conservative 50/50 stocks and bonds and yearly adjustment for inflation. I plugged numbers into a withdrawal calculator and I decided on 6% fixed (no inflation adjustment since spending slows as you get older), staying in the C fund (my high federal physician's pension makes me very risk tolerant) that averages 10% per year, with a 7% expected return on investment (leaning pessimistic). It only requires a single TSP request for the monthly installments (the initial 6% of my TSP divided by 12), makes it easy to adjust for tax withholding each year, provides reliable steady income, will create a big cash savings safety net, and will probably result in a big nest egg at the end if the stock market does anything but perform poorly in the long run.
The G Fund Interest Calculator (clock w/no batteries) approves of your excellent work.
1 to 2.5 % annually is better than a poke in the eye.
Great video, thanks! I think the 4% rule kind of assumes that your assets are allocated something like 60% stocks, 40% bonds. In other words, if you are 100% G fund, don't use the 4% rule.
Good point!
Why would you ever be 100% in the g fund?
I'm not. I was just making a point.
@@timjones2402 Why would you ever be in the G fund at all?
@@timjones2402 I was in the G Fund for the first 5 years of my federal service 😩😩😩 I didn’t know any better 😓
When taking money out of the TSP, you always need to remember the 20% that goes to taxes. If you take out $40K, you will receive $32K. Automatic. Plus you might owe more when you file taxes. Many of us will also have to account for state taxes.
A couple of clarifications: 20% is withheld to pay your taxes. Your ultimate tax payment is determined by all your income and withholding, and could lead to a tax refund. You can also sign up for periodic payments and get reduced withholding. Also qualified Roth account withdrawals are not taxed.
Good point!
If you take periodic payments, say monthly, the default withholding is 3 dependents.....you will not be paying 20% in taxes automatically
Just fyi This guy is great but only you know your comfort levels. So If you are nervous about listening to the wonderful advice this guy gives TSP has some excellent and easy to use calculators. You add you TSP balance The rate of return you think is going to be and last how much money you want a month Out pops how long it will last you. Change the numbers all day long. .. no cost and is quick and easy
Great video, thanks for your advice.
Thanks for watching!
Ok I'm planning on selling my current home and moving to fl. Will use some of my TSP for the down payment and buying new furnture for the place. Will use a large part of the money i make off of old house put it into some type of account that will grow hopefully. I will with draw about $500 a month to have to cover expensnces and fun money. Will not touch TSP hopefully and let it grow back up after my taking out for new home.
Why take money out of the TSP, only to invest the proceeds of the sale of your previous home? The proceeds won't be in a tax advantage account.
I have pennies in my TSP and am needing to figure out how to grow and stretch them as I'm in a unexpected early retirement. Thanks for making videos and sharing your knowledge!
Cut as much debt and spending as you can. If you’re over 50, max that bad boy…..C, S, and I
The distribution amount gets easy at age 72 where the goal is to run out of money and have the taxes all paid in the next 25 or so years and you go by a percent off a required distribution chart.
Thank you. This makes perfect sense!
Glad it was helpful!
You would think everyone would know the answer is the same percentage as you make its simple math
Appreciate all your information and tell my coworkers at ACC DTA to watch your videos.
Glad it is helpful! Have a great day!
Just FYI My comment below is honest praise for this guy No sarcasm meant I love this guys advice
Thanks David for being part of the community. Have a great day!
Thanks for all of this info Dallen!
Sounds like making and keeping a budget is key. Hard to do I think.
Great to hear! Thanks for being part of the community!
Great information, getting ready to retire in the next 12 months and your videos are fantastic. Also, you might want to change the battery in your clock. It didn't move for the entire video!
I guess I didn't see the video with the clock explanation until 5 minutes after I made the comment.......now I get it! Will be scheduling a consultation soon.
Great to hear :) Have a great day!
Great topic 👏
I am still doing what I am supposed to do as a responsible citizen but I am concerned about our financial system and my investments being attacked by an irresponsible government, leaving me broke and dependent. I think currently anyone retired should keep a cash reserve for times when the market is flat or down so you wont need to touch it that year. I plan to transfer my tsp so I have more control then I can keep a portion in cash and wont need to touch anything invested when the market is down.
Thanks for sharing!
The 4% rule basically applies if you are invested in like the C fund or others. What if your just in G. .? Will the 4% work?
Dallon, Excellent vid, as usual. 1. YES. Drives me crazy: "retirement" means RETIREMENT. "Working after "retirement"" is by definition NOT RETIREMENT. 2. I love your content, but I need to lean on you: I am One- Thousand- Percent Debt- Free. House free & clear; no credit cards; no auto, no nothing. You tend not to address debt. Please explain.
Good point Dan, debt is a big deal! I'll address it more in the future.
Very informative. Thanks
Glad it was helpful!
Your videos are so helpful.
Glad to hear it!
Great info, does the SEPP 72T stay around 4%? The minimum distribution method? It seems it’s recalculated every year so I wasn’t sure if it stays around 4%?
Let's say if I retire today, which TSP fund(s) (G, C...etc) would you recommend distributing my total $$ ?
Question: does the 4% rule include your entire net worth? For example, we have about 600k in the tsp and other investments, but we have another 500k in assets.
Ah, I see a response
I have 2 TSP accounts (FERS and Military) can I keep them separate when I retire, also a small percentage of my Military TSP is tax free because of deployments how will that work if I combined these 2 accounts ?
That makes perfect sense
Glad it was helpful!
so in the 4%-- first year 4% but every year after you only take the inflation % from the original 4% whivch could be much less in high inflation years that could become income?
The 4% rule says you can increase the original withdrawal amount by inflation every year
Does the 4% rule even work with the tsps archaic withdrawal structure where you can't choose which funds you pull money from?
@@marknussbaum8394 you can't pull it from one fund. Tsp withdrawals are pulled evenly from all funds based on your allocation %.
@@aaront936 After the withdrawal, rebalance if needed.
Or maybe rebalance once a quarter.
When I retired I put my whole TSP in the G Fund. Granted it won’t grow much but I hope this works for a withdrawal strategy
@@libbysherrill713 the concern with this is loss of purchasing power. As you know, the COLA's for FERS and SS really don't cover inflation. So we must make that up with our personal money. If you have enough in your TSP/IRA, you are good to go. If you don't, you will need some stocks to help your money keep up with inflation.
Something in the 40/60 to 60/40 stocks/bonds seems to be appropriate.
@@libbysherrill713 I wouldn't recommend 100% bonds even during the draw down.
I was at the GRB site and running the Project TSP Account calculator and it said I would earn 13k with no contributions, is this the fund I'm in or the TSP's 1%?
Could this work in retirement as added eranings as well?
I will retire on 12/31/21. That is pay period 26 but minus 1 day. Do I get my salary for the entire pp and do I get my annual leave and sick leave?
So how did retirement go for you. Do you get taxed 20 percent or 10 percent on the Tsp.
There is no such thing as an investment expert. You tell me how long I'm going to live first lol.....if you can't do that, you're just guessing like everyone else.
His advice and wisdom, if you have a pulse and are watching this, is free. He provides valuable information on taxes, and how to avoid them….Ive been doing financial research for 30 years, and always learn…..I trust that he’s an expert. Do you take your automobile to any mechanic? Most likely, you seek the wisdom of an expert, as you want the best outcome for your $ spent…..nuff said…
What is the best asset allocation of my TSP balance in retirement to achieve the 4% rule?
The 4% rule was based off of a 60/40 portfolio. But that rule was made when bonds actually returned more than 1%. Taking into account your fers pension and your ssi I wouldn't have more than 10% in bonds.
@@aaront936 If stocks are only returning 1% for you, I don't know what you're invested in.
@@timjones2402 typo I meant bonds
Time stood still 😂
Your clock's broken.
Already been addressed and answered