This Is The Only Withdrawal Strategy That Applies To An Early Retirement
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- Опубліковано 1 сер 2024
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This video will go over the best ways to withdraw money in retirement to ensure you never run out.
I emphasize a dynamic approach, using a real-life example of using Roth conversions to maximize retirement savings and examining the limitations of the 4% rule.
I will also provide practical steps for withdrawals, starting with cash, then brokerage accounts, pre-tax assets, and finally Roth IRAs.
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Time Stamp
00:00 Intro
01:10 Adjusting Spending Based on Market Performance.
02:56 Real-Life Example of a Client
04:00 Roth Conversions During a Market Downturn.
05:45 Follow Dynamic Approach
06:35 Introducing 4% Rule
08:49 Main Issue With 4% Rule
10:30 Cash vs Managing Other Accounts
12:30 Doing a Real Tax Planning
15:13 Pro Tips for My Clients
17:15 Summary
17:40 Work With Us
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PODCAST - earlyretirementpodcast.com/
INSTAGRAM - / earlyretirementari
LINKEDIN - / aritaublieb
What video topic would you like to see discussed in a future video?
Ari Taublieb, CFP®, MBA, is the Vice President of Root Financial Partners (Fiduciary) and host of the Early Retirement Podcast.
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All content is not to be received as financial advice, and each individual should consult with their dedicated financial planner, tax preparer, estate attorney, etc., before making any financial decisions.
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This was an AWESOME Video Ari! Great examples and I loved when you put in KEY information in writing on the screen
! It was so useful I was doing screenshots thank you!!
Thank you very much!!
I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
Got it! Buying stocks during a recession when prices are down could be a good move. You might get them at a lower price and sell later when they go up. Just do your homework and be aware of the risks before diving in!
That's awesome! Investing in stocks with a reliable trading system can lead to great outcomes. It's fantastic that you've been working with a financial advisor for a year now. Starting with less than $200K and being just $19,000 away from making half a million in profit is impressive! Keep up the good work!
Mind if I ask you to recommend this particular coach you using their service?
Deborah Lynn Dilling is the licensed adviser I use. Just research the name. You’d find necessary details to work with to set up an appointment.
I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip
My retirement was just last month. Having pre-tax income of $5.7 million, I did follow my one-time advice from *Leah* *Alderman* *Foster* Since I have an inherited $700k that I have to spend down in seven years, I had to do it all at once. I'm currently 59 years old. I have $3.5 million in Roth since I have a pension. Stocks worth $4.5 million are taxed. I'm starting to give my kids gifts now, as you stated, to help with a house down the road.
I am no longer suffering with rmd. Children receive it free of tax. The only thing my wife has is $600,000 before taxes, which I may need to convert at some point. I'm attempting to avoid paying for Medicare, but it appears like I will have to for a time. I am unable to even deplete my pension each month. excluding the remainder of my investments.
Even if it seems like you are in a position of freedom and have been strategic in your retirement planning with your adviser, I still look for her. When RMD time arrives, it's good not to have a partner (IRS) hanging over you. We hope the best for you!
My children have always heard me say that there are no scholarships for retirement. As soon as you begin working after school, start saving. They are teaching their kids the same lessons and are debt free.
Ha ha ha
It sounds like you've done a remarkable job managing your assets and planning for your retirement. Navigating complex financial situations like this can be challenging. How are you planning to address the potential Medicare costs and make the most of your remaining assets while maintaining financial stability for you and your family?
Great explanation. I recently realized that $94k of cap gains will be tax free. We are retired at 49 and have cash, brokerage, pension, and Roth. Coincidentally, we have $400k plus in unrealized gains in AAPL in brokerage. My plan is to sell $94k for the next few years to pay $0 taxes and roll the unspent proceeds into VOO. Then our pension kicks in at 55 to cover most of our expenses. We can withdraw 2.5% and that will fund our retirement for 50+ years and still die with more than we currently have.
I've kept much of my savings in cash for safety, but I'm unsure if it's right for retirement. Contemplating investing $100K in stocks, as I've heard investors can profit in tough times. Unsure about my next move.
it's wise to redistribute your capital to mitigate risks during market fluctuations. Consulting a financial advisor can help simplify this process
Yeah, I’m also closing in on retirement, and I have benefitted much from using a financial advisor. I didn’t really start early, so I knew the compound interest of index fund investing would not work for me. Funny how I pulled in more profit than some of my peers who have been investing for many years.
This caught my interest. I worry that I have a couple more months before retirement, and I want to switch to using a financial advisor, but I don’t really know how to find one.
Melissa Elise Robinson" is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
I appreciate this. After curiously searching her name online and reviewing her credentials, I'm quite impressed.
Don’t adjust spending based on market performance. Adjust withdrawals. When the market is doing great, withdraw a lot and hold extra in cash so you don’t have to withdraw when the market is down.
But you also don"t want to withdraw too much during a bull market otherwise you will have a bunch of cash sitting there not growing.
@@MaullerTwin The point is that you put that cash to work in other shorterm agents (CD ladder is what I use). And then when th market falls you simply leave your investments, using your cash funds to live on for a couple/few years.... or whatever time thee market needs to recover.
@Davek111 correct. If I told my advisor that I needed a certain dollar amount each year, then it's my advisor job to ensure I get it, no matter what the market is doing. They better know to do as you are saying. If they don't or can't then what are they being paid for?
Hi, I’ve heard before about using a bucket system and as it approaches the now bucket will be more cash or bonds that can be liquidated easy and the others are for investment, long term higher risk/return and the other mid term lower risk.
The idea is that the cash is available and not causing you to sell at the wrong time.
Cash is king is another saying, that you can now understand.
I’m not a financial adviser, go and get one!
Take care all M.
It's recommended to save at least 20% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 20% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over $2.8million.
@@joshbarney114 I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
Finding financial advisors like Marisa Breton Dollard who can assist you on things like investing, insurance, making sure retirement is well funded, going over tax benefits, ways to have a volatility buffer for investment risk would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I greatly appreciate it. I'm fortunate to have come upon your message because investing greatly fascinates me. I'll look Marisa Breton Dollard up and send her a message. You've truly motivated me. God's blessings on you.
Ari absolutely BRILLIANT!!!
Thanks James!!
"Love this video on 'The Only Withdrawal Strategy for Early Retirement'! It's intriguing to see how this strategy applies specifically to early retirees. The clear guidance and numerical insights make planning for financial independence more accessible. Excited to delve deeper into optimizing retirement strategies!"
Thanks Ari for another very informative video! I love these types videos!
Thank you
Bravo 👏 this video is next level. Been watching your content for some time. Love the nerd out and approach.
Thank you very much
Love this peek behind the curtain, and let your geek flag fly in terms of deep dives going forwards. I didn't understand all of the considerations and optimization strategies my advisor needs to take into account, and this helps a lot in both perspective and in terms of planning.
Thank you sir
phenomenal video, Ari ⭐
your content is truly making a difference for me. at 50, I'm making changes to how I'm planning for early retirement. when I talk to my financial advisors through my employer, they often pause and say something like "actually, that's really smart." 😂
Ha thank you
Just love your content! My thought process is very similar to yours. I’m all about not stuffing oneself in the box. My OCD won’t allow me to consider a blanket 4% approach. I will be looking for optimizing the strategy based on what’s happening for sure. Thank you Ari!
You’re so underrated. This is good stuff.
Appreciate that more than you know!
Great video 👍
Great information presented in a "user-friendly" manner for all us folks who are not CFPs. You've earned my sub! (You actually remind me a lot of my personal CFP!)
Thank you very much!
Thanks Ari, wish I new that information a lot sooner. It would’ve changed the way invested years ago.
You know it now!
Ready to 🤓 out!
Thanks a lot!
Of course!
Great content, very helpful for early retirement
Glad it was helpful!
Love the content! Only bummer is as a single person the brackets are smaller and so is the standard deduction. Imagine if you did a great job saving and investing there is a lot less wiggle room when you are single
Doubling the brackets was a monster gift to marrieds, who get to call being single a “tax trap”.
You don't get a secret advantage by being married guys. The federal tax rates are the same. The married tax rate is the single tax rate doubled because there are... two people
@@rayzerot Nobody said it was a secret. The advantage is quite visible in black and white.
@@headlibrarian1996Except there isn't an advantage. Federal income taxes are per person. The reason the married tax brackets are two times as high is because two people are being taxed. If each spouse earned the same amount then their total taxes would be the same whether they filed together married, or if they filed as singles and then added the tax bill together. You can check the math
It's called the singles tax trap because in retirement they basically go from 2 incomes taxed as 2 people to 2 incomes taxed as 1 person when a spouse dies
@@rayzerot Couples rarely earn exactly the same money. Any significant disparity in earnings means the two are better off tax-wise than had they remained single.
A widow/widower also rarely keeps the income they had while their spouse was alive. Social security payments and pensions cease at death, and annuities stop paying because most are single-life.
Rebalancing /adding more liquid when equities are frothy and mmkt yields high is just prudent and how we got to retire early in the first place.
QUESTION: We are both over 59 1/2 and just retired. We are cashed up for a year's worth of expenses and emergency fund. I'm thinking as we replenish the case, it could go in a money market account in our Roth IRAs and then be pulled when we need it. The advantage would be earning the interest tax free. (Yes, we've had Roth IRAs for over 5 years.)
Thank you for the great video as always Ari! Your example of the $280k conversion during a downturn kept me thinking: These large Roth conversions are usually best for large pre-tax balances to avoid large RMDs. At the same time, most folks tend to locate their bonds in the IRA since it is more tax-efficient and it also prevents the IRA from growing too fast. In such a case, during a downturn, your IRA balance will not go down that much if it is mostly bonds (okay, 2022 was an exception), so you would not be able to take advantage of the downturn for a significant conversion. What are your thoughts? Would you suggest re-locating a large amount of your growth stock allocation to the IRA hoping for a downturn (that could backfire at RMD time)? Any other strategy you can think of?. Thanks again!
I withdraw money bases on the performance my investment. This is to make sure i am sufficient money for the rest of my life
Unless I missed it, I didn't here you say how old your client was that wanted to retire in 2020. A withdrawl rate of 5.8% is not a bad thing in some cases. I retired last June at 62 and my current withdraw rate is about 6.5%. That will be the case for 5 years, until I collect SS at my FRA. I have 4 years in cash, so a downturn in the market won't really hurt me. At that point, my withdraw rate will drop to about 1.5 - 2%. Three years later, when my wife collects SS, out bills will be covered by ourSS and a small pension I have from an old job.
59
Your thoughts on: Married with 1 kid - what is the order of withdrawal from retirement accounts (401K, 403B, Roth IRA, Pension, Brokerage) with regards to the 10-year mandatory withdrawal for heir.
Oops, I forgot to earn enough money to fill up my tax advantaged accounts with enough left over to start a brokerage account.
"Interesting topic! Forgetting to allocate enough funds for tax-advantaged accounts and starting a brokerage account can impact retirement planning. It's crucial to strategize and allocate wisely to maximize savings. Looking forward to learning more about optimizing financial strategies!"
Can you do a video on Guyton's guardrails with examples?
Yes
Great video! Is the 2024 important numbers document that you refer to available to download? Thanks!
Yes in the academy!
@@earlyretirementari thanks!
Ari, what should the withdrawal strategy be if my wife and I have a combined pension of about $80,000 per year but want to have an annual budget of $120,000 at age 50?
Ari, thanks for the video. I understand this strategy, but how do you decide whether it’s better to pull from your brokerage account and pay no taxes, or do ROTH conversions from your 401(k) up to a certain income tax bracket, and THEN pull what you need to spend from your brokerage account at the 15% Capital gains rate?
I’ll do another video on that :)
Drat. I missed the boat and never opened a Roth IRA. Have only brokerage and 401k. 58 and likely forced to retire at 60
You can look at doing Roth conversions
A thumbs up on the other reply just wasn't enough. Look into roth conversions.
I’m 57 and just opened one outside my 401k and just changed my 401K contribution to go Roth. For a long time I wasn’t eligible and was always thinking save taxes now. I wish we’d been better informed when Roth came about. Yes my paycheck is smaller now from more taxes but figured I should do it while the brackets are still lower.
Bucket strategy works for me
Most money that goes into a brokerage account for the average Joe would be after tax money. Sure you can pull it out tax free but you already paid the taxes. Just a thought. Great video!
Brokerage accounts GROW. If you put 300K into a brokerage account and 5 years later you have 400K. You have to pay capital gains taxes on that 100K in growth (unless you are withdrawing according to the strategy he discussed in the video)
@@briananderson4007 BUT you only pay federal tax on the capital gains if the amount reaches a certain level. There's absolutely no reason for ever pulling out the full $400k!!!
I retired six years ago at 55 with $200K in the bank. I take out what I need. Whatever it is. I keep all my money SAFE in the bank. I have a mortgage, car payment, and am sending my son to college. No problems.
Hahah. Yeah. Not.
I disagree it’s better to convert when markets go down (I am not saying not to convert just that it does not improve the result vs markets going up). Reasons.
1. One main reason to convert to Roth is that you have a high pre tax balance and want to reduce RMDs. Let’s say you have $1m balance and convert $100k and pay tax. If markets drop by 10%, you have achieved the same reduction in IRA balance/future RMD without paying tax. If your IRA is on the cusp as to whether or not converting makes sense, a market decline can make the math less beneficial to convert.
2. No one knows when we will hit a bottom. Markets went down in 2022 but recovered in 2023 so in hindsight it was a good time to convert and take advantage of the market gains but what if you converted at end of 2022 and markets continued to drop in 2023.
3. The math comes out the same whether markets are up or down. It only matters when you pay the tax what the rate will be with goal of paying lower rate.
Is it possible if i can get the tax sheet you showed
Yes- all in the academy!
I understand the geeking out part, I do that also. There are so many different situations that may be state specific also. Myself and my spouse found ourselves in a unique situation where we are trying to keep out income as low as possible because we are taking advantage of reduced property taxes and reduced medical expenses that have benefitted us due to lower income level. Our next strategy will be something I will have to geek out on to determine which is the best course of action: pull from Roth IRA so our income is still lower to qualify for subsidies or keep the Roths and not pull from them and start instead to use the Taxable IRAs and lose the cash savings on medical and property taxes?
You know that in the 4% rule, the financial advisor's fees comes out of that too.
How does social security work as far as 1 yr living expenses are concerned
You're going to need to be more specific. I'm not quite sure what you're asking. If you're in early retirement like the video is talking about then you won't get social security unless you're disabled or in a different selected group
If you're retiring at your full retirement age then I think social security typically covers ~33% or so of your working pay
You are very smart! Love to see young folks looking at this so closely! Few have your wisdom.
Thank you so much!
While this is the tax code today, chances are these rates will expire, change and only become more aggressive over time. How does one plan for the unknown future of federal tax law?
How do taxes get higher over time when 25 years ago the tax rates were higher than what they are today?
1999: 15%, 28%, etc..
2024: 10%, 12%, etc..
I did a video on your question here: ua-cam.com/video/H_cIt8WlfiU/v-deo.htmlsi=FCLk3aurE7WaLCRx
@@earlyretirementari Awesome. Thanks, Ari!
Why would you assume taxes are going to go up? They have been coming down for 40 years.
Hey, do you need any help for your video editing or thumbnails, if so we can help
This only works if your low income but a lot of people have 150000.00 or more in pensions and social security. I guess we are just trying to stay out of the 37% bracket.
Wow, you live by UCLA - could you hear the encampments from your apartment? I hope you're safe!!!!
We are okay!
guyton Klinger method
Most people won't live to see 30 years in retirement, so the 4% rule is actually too low just on that alone.
All of the studies are irrelevant based on economics that have changed forever looking forward. Also the aggressive market money can tank anytime and your longevity is total guess work. Future tax rates are unknown. In other words financial advisors are selling educated guesses period. They don’t know what is going to happen in Your life so your plan is as good as theirs. Your expenses are the variable only you know. Advisors had no answers in 2008 except don’t look at your losses.
Probably a good video but man you covered too much in one video. Break it up a little.
Thank you for the feedback
Great video.
I was a process control engineer (just retired 2/21/24) I would always stress test my projects just to make sure it would work under all conditions.
Also depending on the government.
But I found away of earning more income despite my Retirement. $57k weekly returns has been life changing, after so much struggles.
Thank you very much
lol