I would welcome thoughts as to how to most efficiently draw down our funds as we create a bridge to Social Security. I have read the wiki page, watched Rob Berger video, researched TIPS ladders and Bond ETF ladders but appreciate more learned opinions than my own.
Wife, age 60, is retired this week and I will join her in retirement next July, if not sooner, when I am 62. Plan is to take SS at 70 (me)/68 (her) which when combined with her FERS pension will cover almost all of our spending target. I have been tracking our annual spending for some time and expect that we will need @$100,000 annually to maintain current lifestyle which already includes international travel, etc.. This, however, does not include lumpy expenses such as a new car purchase, bathroom remodel, and some home improvement projects so I have set an annual spending target of $150,000 per year to take these future expenses into account, and probably a little bit more.
Additionally, as my wife is a federal retiree, we have health coverage for life, so we will likely forgo Medicare Part B and Part D. As a result, IRMAA is not an issue for us although NIIT will be in future years.
We have the following assets to utilize for the bridge years from which I expect to need @$100,000/year until SS begins:
Taxable Accounts
@$1.2 million (VMRXX/VMSXX)
@$500,000 (VFIAX/VTMSX - long term, highly appreciated positions)
Retirement Accounts
@3.7 million (60% VTI / 40% BND)
Additional Assets
457(b) - $70,000 (payment can be spread over 10 years)
Inherited annuity - $50,000 (payment can be spread over 10 years)
My initial thought was to withdraw the 457(b) and inherited annuity over the roughly 8 year period when we need the bridge, thereby providing us with $15,000/year. I would then use our cash accounts to make up for the remaining yearly balance of $85,000.
Does this seem reasonable and, if so, is there a better way to deploy the roughly $680,000 that I would expend from our cash accounts? Bond ETF ladder?
Or should we drawn down first from our retirement accounts or do Roth conversions? It's a wonderful problem to have but otherwise our retirement accounts will probably double to almost $8 million before RMDs are necessary.
Under current tax law (which I know may change), if we spend first from our cash accounts we likely will fall in the 22% tax bracket, perhaps 24%, due to my wife's pension and investment income. Once RMDs begin, though, unless we spend down the retirement accounts or do Roth conversions we are easily in the 35% bracket, but there may be no way to avoid this.
We have two adult children who would be the IRA heirs along with charity.
Thanks for any suggestions.
Wife, age 60, is retired this week and I will join her in retirement next July, if not sooner, when I am 62. Plan is to take SS at 70 (me)/68 (her) which when combined with her FERS pension will cover almost all of our spending target. I have been tracking our annual spending for some time and expect that we will need @$100,000 annually to maintain current lifestyle which already includes international travel, etc.. This, however, does not include lumpy expenses such as a new car purchase, bathroom remodel, and some home improvement projects so I have set an annual spending target of $150,000 per year to take these future expenses into account, and probably a little bit more.
Additionally, as my wife is a federal retiree, we have health coverage for life, so we will likely forgo Medicare Part B and Part D. As a result, IRMAA is not an issue for us although NIIT will be in future years.
We have the following assets to utilize for the bridge years from which I expect to need @$100,000/year until SS begins:
Taxable Accounts
@$1.2 million (VMRXX/VMSXX)
@$500,000 (VFIAX/VTMSX - long term, highly appreciated positions)
Retirement Accounts
@3.7 million (60% VTI / 40% BND)
Additional Assets
457(b) - $70,000 (payment can be spread over 10 years)
Inherited annuity - $50,000 (payment can be spread over 10 years)
My initial thought was to withdraw the 457(b) and inherited annuity over the roughly 8 year period when we need the bridge, thereby providing us with $15,000/year. I would then use our cash accounts to make up for the remaining yearly balance of $85,000.
Does this seem reasonable and, if so, is there a better way to deploy the roughly $680,000 that I would expend from our cash accounts? Bond ETF ladder?
Or should we drawn down first from our retirement accounts or do Roth conversions? It's a wonderful problem to have but otherwise our retirement accounts will probably double to almost $8 million before RMDs are necessary.
Under current tax law (which I know may change), if we spend first from our cash accounts we likely will fall in the 22% tax bracket, perhaps 24%, due to my wife's pension and investment income. Once RMDs begin, though, unless we spend down the retirement accounts or do Roth conversions we are easily in the 35% bracket, but there may be no way to avoid this.
We have two adult children who would be the IRA heirs along with charity.
Thanks for any suggestions.
Statistics: Posted by Kiana — Wed Jun 26, 2024 4:44 pm — Replies 7 — Views 559