[USER]

I am financially able to retire but I’m curious about how you all manage taking your distributions.

I am about to start managing my own traditional brokerage account.

I’ll be moving everything in kind and need to know how you go about getting your monthly draw.

Do you sell off stocks to take what you need or do you invest strictly in dividends funds that pay out the amount you need?

Please give me all of your tips and guidance.

I don’t want to take any more than 4% per month.

[Sean]

I assume you mean take 4% per year and just withdraw monthly. 4% per month would be way too high.

Most just sell stocks and bonds as needed.

There isn’t much benefit to having dividend funds instead of just selling.

Plus with dividends you have no control over the amount or timing of the sale.

Many people keep a few years of cash as well to help reduce the impact of sequence of return risk.

Generally most agree that is reasonable, but a bad enough downmarket to actually sink a portfolio due to sequence risk will last far more than the couple years of cash you would keep.

And remember if you’re pulling from cash in the down market you will eventually have to refill that cash bucket, so when and how will you do that, how will you optimize taxes while doing so.

What will you do in a 3 year downmarket if you have 2 years of cash will you sell at the bottom to fund year 3, will you have bonds to sell, when will you refill the cash position, what if another bear market comes before you’ve refilled the cash position?

[Stan]

I personally have a portion invested in bond funds, as they pay monthly and ensure a baseline level of income each month.

Then I have dividend funds that pay quarterly and can also grow in principal.

Then I have other market exposure (index funds) that purely provide capital appreciation and I sell if needed.

This combination allows for regular income and growth while remaining relatively stable.

Although I could have done better just being invested in equities, I don’t need to take the risk.

[Scott]

during drawndown on a taxable brokerage account you would spend dividends first and then sell shares as dividends are taxed regardless or if you reinvest or spend

[Trevis]

Drawdown is the opposite of accumulation. Your investment strategy should have a target asset allocation.

When you take a distribution, you sell what is high to maintain the planned allocation.

[Zimmermann]

Keep 6 to 12 months in cash
Make it payday whatever week you need

[Debbi]

I would advise consulting with a fiduciary planner to review your current holdings, annual expenses and long term care needs and discuss a sustainable plan.

[Steve]

It depends on what you have to start with. If you have dividend stocks, figure out how much income that is and sell something else.

Then look at your gains and losses to minimize your taxes, remembering your standard deduction, etc.

Your overall strategy should be to sell stock that are up, bonds that are up, cash, bonds that are down, stocks that are down.

[Tristan]

If you are needing to take 4% per month I would quickly rethink your ability to retire.

I’m hoping you mean per year.

And at 4% per year even, while many believe this is the law and not a theory, it truly depends on what the market is doing when.

I highly recommend doing some digging in to sequence of returns risk before determining your withdrawal strategy

[Mitch]

We just have dividend stocks and ETFs, gives us 8-10% per year.
Some reinvested, some for spending.

[Author]

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