We are 54 years old, have $4.5 million in savings and don’t know how to withdraw it in retirement. what should we do


My wife and I are both 54 years old and have amassed $2.3 million in combined tax accounts and $2.2 million in combined retirement assets. We want her to retire at 55, but are wondering how best to receive her dividends. Obviously, we won’t touch eligible funds until we reach 59 1/2.

I understand the 4% rule, but when I receive money, is it better to withdraw a set amount monthly, quarterly, yearly, or in one lump sum? I can see myself going insane trying to time the market high to get my dividend. I was making plans to let go of the money after the 2021 peak. I intentionally put it on hold until 2022 for tax reasons, and it backfired.

Is it the best course of action to set it monthly, quarterly, or yearly and forget about it?

look: I’m 54 and the primary breadwinner, but I’m “professionally exhausted.” You have $2.18 million, what about healthcare?

Dear Reader,

You touch on a very common problem retirees have: the distribution stage.

For decades, Americans have been told to save, save, save for retirement, but eventually we reach a point where we have to start spending that money…and it becomes a complicated process. There is a possibility. Retirees think about how much to withdraw, how that distribution will affect the rest of the eggs in the nest, what to expect at tax time, and how not to rush that money too quickly. must be

As with much of personal finance, the answer to your question will depend greatly on your individual circumstances. We’ll get to that in a moment.

First, a note about the 4% rule. This rule is intended as a guideline. 4% is too much for some, not enough for others. Experts have also argued for its applicability, with Morningstar, for example, saying retirees will be able to take advantage of the 3.3% interest rate and have a 90% chance of not running out of money in retirement.

Want more actionable tips for retirement savings? Read MarketWatch “Post-retirement hack” digit

Before you follow the 4% rule (which you can always adjust as the years go by, of course), do a quick calculation of how much you can expect to spend in retirement (including buffers) and see what the percentage is. Of your total actual retirement savings, you may be able to retain more retirement assets than you expected.

If you’re still not sure how much you can take out, start a little more modestly to preserve your investment. The less money you withdraw, the more money in your account can keep growing.

Also be aware of something called “stream of returns” risk. This is a rapid decline in the value of the portfolio at the start of circulation. The results may not be ideal for your account.

read: Decumation Drawdown: How Spending Has Become a Big Post-Retirement Dilemma

Be aware of the tax implications of your decisions and consider consulting a qualified financial planner or accountant who can help you work out the numbers. There are a number of factors that aren’t listed in the letter, such as whether some of that money is in Ross’ account, but even then, a qualified financial planner will look into the details to help maximize retirement spending. It will help you make the most of it. savings. As your taxable income decreases, you may find conversion to Roth beneficial. This is also a way to avoid the minimum distribution required in the future.

You’re also right that you don’t touch your retirement assets until you’re 59 1/2 (and for those of you who don’t know, most assets in retirement accounts are now available with no penalty). That’s when it will be). There are exceptions, such as the “55 rule,” which allows people over the age of 55 to withdraw money from their retirement account after retirement. Withdrawal accounts must be associated with the job you are leaving and may be subject to other conditions. Check with your employer to see what your retirement plan can and cannot do.

Now, how often do you distribute? This depends on your comfort level, but some advisers suggest withdrawing 6-12 months worth of your monthly spending into your money market account to create a paycheck effect. “Setting up a monthly or fortnightly distribution gives you the feeling that you are still working and helps you stay on budget,” says Brian, certified financial planner and managing director of wealth management at The Mother Group. Schmehir said.

See also By the time you’re 55, you’ll have been working for 30 years. What are the pros and cons of retiring at that age?

Make sure the account you’re withdrawing is a short-term, low-risk investment, Schmehir said. That way, “you can continue to spend the money you want and reach your goals without worrying too much about market volatility.” . This is consistent with the bucket approach of dividing assets into different investment horizons. The least risky investments are placed in short-term “buckets”, while the riskiest investments are allocated for the long term.

Having a monthly distribution schedule can help you keep track of things. “For most people, I prefer monthly,” says David Haas, certified financial planner and owner of Cereus Financial Advisors. “If you tend to overspend, you start thinking about your monthly budget.”

Keep in mind how many variables can change after you retire. For example, changing the source of your retirement benefits (tax account, retirement account, social security, etc.) can change your tax liability. Inflation can also affect spending and the withdrawal of distributions. Your risk tolerance may change, especially as you age, lose eggs in your nest, or face market volatility. The frequency with which you receive your money may change, but that doesn’t matter.

Readers: Any suggestions for this reader? Add them in the comments below.

Questions about your retirement savings? Email us at HelpMeRetire@marketwatch.com

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