2. Yes... Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 10-12% State .. California
Age: 53 ..
Our total portfolio is $7.5M excluding the value of the house that we are living in.
..
Questions: ..
1. Our expenses per year is ~200k
2. If we wanted to retire now can we do so?
3a. Conventional BH answer is no. But I did this.3a. Should we be redoing our investments so to help with retirement and to be reasonably confident the funds are available for the rest of our life?
For my investments that are in taxable accounts, I take the dividends and cap gains in cash and spend them. [I am paying taxes on those distributions anyways, so there is no additional tax due.]
I tried the "selling a few shares" strategy to provide an income stream. I didn't like it.
Mostly because every sell decision was an opportunity to make a mistake.
In what to sell, how much to sell, etc.
If I didn't need the cash, I didn't want to sell.
But that meant when I did need cash, I had to make decisions relatively quickly on what and how much to sell.
At age 55, deciding which stocks to sell to fund expenses seems like an acceptable plan. [It did to me.] But at age 75, it might be a struggle to make that decision correctly every time. I saw my dad make investing mistakes when he got old.
Most of us got a paycheck for 40+ years. It's easier and safer to have retirement income appear like paychecks. [That is another appeal of dividends.]
For me, sell decisions are complicated. Even though I still feel mentally competent at 69, it's a challenge to weigh all the issues associated with selling. e.g. taxes, rebalancing, risk diversification, future income stream effects, asset allocation, estate planning, etc. The tax issues alone are quite complicated for me. I have Roth, pre-tax, and taxable accounts at both Vanguard and Fidelity as well as Trust B accounts [yes, I file a 1041 every year] and a separate [inherited money] account. And there isn't a team of CPAs, CFPs, and JDs to make the decisions. It's just me.
I only started this approach after I retired. [Before retirement I reinvested all dividends and cap gains in all accounts.]
And it took several years to get there.
First I had to realize that I didn't like the "selling a few shares" strategy.
Then I had to figure out how much I needed in taxable dividends and gains.
Then I had to figure out the investments to meet the desired income.
Bottom line: You can generate an income stream if you want to. It's not optimal, but it's doable.
3b. Short answer: No.3b. Is 6% growth achievable with minimal risk?
There are lots of "it depends conditions" starting with what you mean by "minimal risk".
But it is unlikely that CDs average 6% for your 40-yr retirement.
The real question is why do you need 6% growth in retirement?
4. BH responses to this are scattered throughout several threads. Some people sell what they need to at the start of the year. Some people do quarterly sells. Some do monthly sells. Some [like I used to] did sells on the fly as they needed cash. Some have a cash bucket [e.g. 2 yrs of expenses] and only replenish it in years when the market is up.4. How do retirees withdraw money and how often do retirees withdraw money (is the book "The Bogleheads' Guide to Retirement Planning" a good source to answer this question with taxation in mind)? ..
The short answer is do whatever works for you.
Below is a snapshot of my taxable dividend income from 2023.
In addition, the TWCUX Ultra fund typically distributes $20-$35k in LTCG to me each year. [It's unpredictable.]
And I also received survivor's benefits from Social Security and rental income from a house. [not shown below]
These payments all go to the settlement fund or directly to my checking account.
So month-to-month I don't have any decisions. The income stream has already been set up.
As I said earlier, the point of this is to avoid making a mistake in month-month decisions.
It may not be optimal, but it's good enough for me.
The thread link below has previous responses to the question: "Income vs Return in Retirement"
viewtopic.php?p=7690021#p7690021
Statistics: Posted by doobiedoo — Fri Apr 19, 2024 2:01 am — Replies 11 — Views 1402