Four Fundamentals of Retirement Drawdown

Spend Taxable Accounts First (fully)

  • Low capital gains (live off)

  • Basis recovery

  • Sequence of return risk (income tax expense)

  • Dividends (tax the dividends)

  • Creditor protection (not protected compared to IRA/401k)

  • Premium Tax Credit on ACA Plan (income limited) keep income low. (If you have $0 income, you may draw enough to be eligible). It below ~$84k.

  • Turn off Dividend Reinvestment and take the cash.

  • ROTH Conversions—be more strategic when to do this. (Within Standard Deductions of 0% if below)

Spend Traditional Retirement 401k/IRA

  • More conservative (e.g. bonds)

Delay SS until Age 70

Tax-Free Pools Strategically (ROTH/HSA)

  • Tax credit

  • For special spends

  • To avoid tipping into the next tax bracket

  • Invest more aggressively here

Phases:

Retirement to Depletion of Taxable Accounts

Golden Years (66-69)

  • If still living off taxable accounts prior getting onto Medicare

  • TTRC (Tailored Taxable Roth Conversion up to the level of the senior deduction—after all other income) ROTH - deduction, but stay below 0% Capital Gains limit. Avoid Federal tax on conversions.

  • HCA Premium Tax Credit is not a factor at Medicare age 65.

  • Delay SS

  • If one’s Spouse is a different age:

  • If taking from traditional IRA/401k allows up to Std Deduction (~$48k) at 0% Senior deduction. Taxed at 10%-12% rate after that amount.

  • Or withdraw ROTH contributions or HSA (if you can still qualify for tax credit for HSA).

70s-RMD

  • Must take SS by this time, generates income

  • It su Limitations

  • ROTH distributions

  • QCD instead of donating by checks. Qualified IRA custodian (direct transfer from Traditional IRA/401k)

  • Secure 2.0 RMD calculation (for my age 1964+) can start RMDs at age 75

  • Considerations: RMD, QCD, Bond in retirement accounts to mitigate the size…, life expectancy, early withdrawal strategy

RMD-75

Widow/Widdower Years

Michael Wei