Your 401k and your DGI portfolio?

[ken-do-nim]

For those of you 59 and a half and older, what has been your 401k withdrawal strategy?  I ask because I'm wondering if, even though I keep working into my 60s, whether I might pull a substantial amount down annually to feed my taxable DGI portfolio.  Or if it's better to start pulling down 401k money only after I retire, if before the required minimum distributions kick in.

PS: I turn 50 in a couple weeks, so this is looking way in the future.

[ChadR]

If you are still working and don't need the 401k money for living expenses, I wouldn't touch the 401k until after you retire. No point in paying the higher tax rates to fund your DGI portfolio especially since you could possibly create a DGI portfolio inside the 401k.

[ken-do-nim]

My 401k only allows for about 15 mutual funds.

Anyway, I think I've hit on a better solution.

Step 1: Retire.
Step 2: Move into high-paying dividend stocks in the ROTH.
Step 3: Move into growth-oriented stocks in the Taxable.

Annual income:
Step 1: Collect the tax-free dividends from the ROTH
Step 2: Pull down 401k money; some to live with, other to reinvest in the taxable.
Step 3: (Social security, if it exists...)

Once the 401k is pulled down, somewhere perhaps in my mid 70s, switch the taxable to dividend payers. Then it will be ROTH dividends + Social Security + Taxable dividends + any remaining 401k.

[ChadR]

With that few options in your 401k, I would change your steps.

Step 1: Retire
Step 2: Move 401k into an IRA then you can invest in DGI stocks and pull out the dividends from the IRA.
Then your next 2 steps.

[rayray]

ken,

i believe in planning and options, i plan in order to have options in the future--because the future is hard to predict

i'm just a little older then you--i'll be turning 52 this spring with 27 years with my employer

i plan on retiring 59 to 62 years old

about 2 years ago i lowered my tax deferred kplan contributions from 16% to 6% (to still get full company match) in order to build up a non-retirement/tax deferred account in case i have to leave my job before that retirement age, plus to give me options of income when we're retired--i'm hoping i stay put for another 10 years or so--that's the plan anyways

we have

brokerage account
roth ira
401k tax deferred
403b tax deferred
traditional ira


about 10 years ago i did a trust-to-trust tax deferred transfer, from kplan to traditional ira--it was a non taxable event--it was done because at the time the company sponsored kplan did not have great fund options, and i felt i needed more investment choices--it was a good move

fast forward to 2023--the company sponsored kplan has some good choices, limited but the funds are good--so that's a plus

i'll just keep plugging away and saving--kplan--roth--brokerage account--every year like clock work

i don't think too much what i'll do once i retire because i'm not sure what the tax laws will be--but i do think about it

so....the plan

is to retire in the 59 to 62 age group and start doing roth conversions, to get that money out of tax deferred accounts--i'll most likely not get all the money converted but even if it saves me "x amount" once RMD's hit i'll be happy with the move

i might delay SS till 67, maybe even 70--i don't know

for know it's kind of just back of my mind

i'll be reassessing everything at age 55, and then again once i retire

[fenders53]

(02-07-2023, 08:30 AM)ken-do-nim Wrote: For those of you 59 and a half and older, what has been your 401k withdrawal strategy?  I ask because I'm wondering if, even though I keep working into my 60s, whether I might pull a substantial amount down annually to feed my taxable DGI portfolio.  Or if it's better to start pulling down 401k money only after I retire, if before the required minimum distributions kick in.

PS: I turn 50 in a couple weeks, so this is looking way in the future.

Retired less than a year.  So far my strategy has been withdraw only what I need. I know the 4% rule likely works out long term.  I withdrew 4% year one and with the recent market bounce the port is down 2% after withdrawals.  So far so good.

[fenders53]

And this is stressful at first. I know I won't starve to death no matter what I do but I want to dodge the market downdraft on the port at least once.

[ken-do-nim]

(02-07-2023, 08:32 PM)fenders53 Wrote: And this is stressful at first. I know I won't starve to death no matter what I do but I want to dodge the market downdraft on the port at least once.

Yeah, if you can manage to withdraw just as much as your port is growing, or less, then you never have to look ahead to the age at which you run out of money.  I have lots of respect for each of you that just retired into this mess.

[ken-do-nim]

(02-07-2023, 08:13 PM)rayray Wrote: ken,


so....the plan

is to retire in the 59 to 62 age group and start doing roth conversions, to get that money out of tax deferred accounts--i'll most likely not get all the money converted but even if it saves me "x amount" once RMD's hit i'll be happy with the move

i might delay SS till 67, maybe even 70--i don't know

for know it's kind of just back of my mind

i'll be reassessing everything at age 55, and then again once i retire

Yeah, my original plan was to retire right at 59.5, but there are SO many variables at play.  If my daughter doesn't go to college, for instance, child support ends in 2 years at age 52.  Or it could go until I'm 55.  Will I get married again?  Even if I do, are we going to share money?

I suspect by age 59.5 you will have enough.  It will be interesting to see, though, if you want to retire.  I'd be happy keeping my job into my 60s, except it would be nice not to have start my day at 6:30 am lol.  Funds-wise, I don't have a clue yet when I'll be ready.  And also, if I really only start keeping my whole paycheck at age 55, I may want to do that for longer than just 5 years.

[fenders53]

(02-08-2023, 02:55 PM)ken-do-nim Wrote:

(02-07-2023, 08:32 PM)fenders53 Wrote: And this is stressful at first. I know I won't starve to death no matter what I do but I want to dodge the market downdraft on the port at least once.

Yeah, if you can manage to withdraw just as much as your port is growing, or less, then you never have to look ahead to the age at which you run out of money.  I have lots of respect for each of you that just retired into this mess.

My option income skills came in handy.  During the few times the market was bubby n 2022,  I trimmed whatever ran and hedged up some so I couldn't get hurt too much.  I won't hit homeruns doing, that but I didn't need to try when the market was extremely likely to continue struggling to some degree.

[ken-do-nim]

I just learned about the "rule of 55", and my entire 401k is with my current employer, since I have been there for 27 years. Coincidentally, at age 55, child support ends for sure.

*If* the next 5 years are extremely lucrative - and that's a big if - then it gives me an interesting option.

Ages 50-55: Accumulate!
Age 55: Retire!
Age 55-59.5: Draw down pre-tax 401k to live on while continuing to accumulate in the taxable and ROTH IRA accounts
Age 59.5: Roll ROTH 401k into ROTH IRA. Move this combined ROTH IRA into high dividend payers. Move remaining 401k into standard IRA. Taxable should be 100% DGI at this point as well. Draw dividends from all 3 sources to live on as needed, reinvest the rest.

Mostly a thought exercise at this point, but it's good to have options!

[rayray]

(07-17-2023, 02:20 PM)ken-do-nim Wrote: I just learned about the "rule of 55", and my entire 401k is with my current employer, since I have been there for 27 years.  Coincidentally, at age 55, child support ends for sure.

*If* the next 5 years are extremely lucrative - and that's a big if - then it gives me an interesting option.

Ages 50-55: Accumulate!
Age 55: Retire!  
Age 55-59.5: Draw down pre-tax 401k to live on while continuing to accumulate in the taxable and ROTH IRA accounts
Age 59.5: Roll ROTH 401k into ROTH IRA.  Move this combined ROTH IRA into high dividend payers.  Move remaining 401k into standard IRA.  Taxable should be 100% DGI at this point as well.  Draw dividends from all 3 sources to live on as needed, reinvest the rest.

Mostly a thought exercise at this point, but it's good to have options!

Yea, a lot of people don't know about the "Rule of 55" concerning kplans--I'll only do it if forced into it--if not I won't do it--because for us we have to "leave" the funds in plcae--I'm not crazy about our company's kplan choices--they just got rid of my best (by far) performing fund--great thanks a lot--drives me NUTS