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I’m withdrawing a bit from IRAs, ahead of RMDs in a few years, which will decide for me how much I’ll be taking out each year. For those of you who make voluntary withdrawals, do you go with a fixed percentage, like 4% every year, plus an inflation boost, calculated on Jan. 1 and taken at the beginning of the year? Or do you recalculate to reflect market change, and withdraw gradually throughout the year? Or wait till Dec. 31 when you know how the year went, and then take it?
I’m thinking this is sort of related to “decummulation”, which for me includes both retirement money and other savings socked away. 4% a year max spent out of all your assets? Or more variable?
I’m not withdrawing (yet), but am absolutely doing taxable Roth conversions from my rollover IRA. More conversion-bang for the taxable buck.
I’m withdrawing about 7.5% from my TIRA until I reach age 70 when I will start SS. Overall, my withdrawals are sub 4% of our entire portfolio, which is my general benchmark for withdrawals. I’ve set up an automatic withdrawal from the TIRA to create a monthly “paycheck”. Leaning on the TIRA for withdrawals now to smooth out our expected tax rate when RMDs kick in at age 73.
If you are inclined to be charitable then here is a different place to start to use a RMD strategically with a Qualified Charitable Distribution (QCD). If you’re 70½ or older, you can give up to $100,000 directly from your IRA to a charity. The QCD counts toward your RMD but isn’t taxable income, so you save on taxes, and the charity gets the full amount.
Key rules:
The donation must go straight from your IRA to the charity.QCDs can’t fund donor-advised funds or private foundations.Confirm with your IRA custodian it’s a QCD and keep a charity receipt.QCDs lower your taxable income, potentially reducing taxes on Social Security or Medicare. It’s a tax-smart way to give without dipping into other accounts.
I like starting from a baseline using the single life expectancy table the IRS publishes. Here’s a copy from Fidelity https://www.fidelity.com/retirement-ira/irs-single-life-expectancy-table It’s about 4% around age 62-63. You get that by dividing 100 by the number of years in the table for a given age. And that age is around when most people think about the 4% guideline.
Where it helps is that each year going forward I reset based on my actual investment experience, my actual age, and what I have actually already spent. And of course it’s still just a guideline.
In most cases, the people actually asking this question are the ones spending way less than this guideline would suggest. That would be us.
There are two IRS Uniform Lifetime Tables. A different one is for IRA owners with a sole beneficiary who