[JS]

When you start pulling from your investments in retirement do you do it once a year? Monthly? Does it matter for taxes etc?

“How frequently should retirees withdraw from their investments to optimize tax efficiency?

Understanding the best withdrawal strategy during retirement is crucial, especially for minimizing tax liabilities.

Are there general guidelines or strategies that can help retirees decide how often to make withdrawals from their retirement accounts?

For example, is it better to withdraw smaller amounts more frequently, or should retirees aim for fewer, larger withdrawals?

Additionally, how do factors such as required minimum distributions (RMDs) or changes in tax brackets play a role in determining the ideal withdrawal schedule?

Share your insights, experiences, or advice on this important financial planning topic.”

[Ricky]

I’ve done it once a year since I started using a 72(t) (SEPP) to tap my IRA when I retired in 2018.

In my case, I concluded that once a year was far less likely to result in a miscalculation and potential IRS penalty.

This year was my last obligated draw.

After this summer, I probably draw only if needed and no more frequent than quarterly to keep Vanguard happy with less draws.

The taxes matter since your IRA draws are classified as taxable income unless they are Roth.

For other investment savings the tax rate is a matter of timing for capital gains.

Short term gains versus long term.

[Kelly]

I’m a ways off from pulling from investments, but my assumption would be to spread it out so the $$ is still working for you.

Otherwise you pull out said chunk and place it in a minimal earning savings/checking or even HYSA.

Does this make sense?

[Laurie]

If you are drawing from a taxable retirement account, taxes will be withheld.

Be sure to have enough withheld to cover your tax bill.

[Brian]

If you wait till the end if the year, can you avoid paying quarterly tax payments?

[Laurie]

Do it monthly so you can live on a “budget”. It doesn’t really matter for taxes.

[Sandy]

It generally doesn’t matter. Most people do it monthly to replicate something similar to a paycheck

[Debbi]

You may need to pay estimated taxes quarterly. December is when you will have a capital gains estimate and opportunity to compensate with loss sales.

Then you can look at your budget to see what you need and plan how you will fund it during the upcoming year.

[Tom]

20% of my portfolio is fixed income which I have setup to pay in a lump sum on January 5th each year.

It will count 100% toward RMDs once they start is 2 years.

RMDs must be taken first for tax purposes.

After that has been satisfied I can schedule my Roth conversion for the year.

[Author]

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