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Old 10-20-2017, 09:33 AM   #1
bigdog
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Default Retirement money draw on 401k,IRA, Etc ?

Will be retiring this coming Spring, currently working at 68, drawing a Salary and taking Social Security for last 3 years.

At 70 years old the Federal Gov. requires you to start drawing down on your 401k, IRA, Etc investments.

Is there a formula on how much one has to draw each year ?
Is it based on current income, or on the total money saved in investments ?

I would like to keep as much money in investments after retirement, but the Feds want their money when you turn 70 ! Feedback and scenarios greatly appreciated !

On an unrelated subject... very sad day.... just put the boat into winter storage !

Thanks,
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Old 10-20-2017, 10:07 AM   #2
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Default Annuity

According to financial advisors, Rolling all your retirement money into an annuity is a way of drawing down your money without Uncle Sam taking a big hunk, even after 70.
There is all kinds of annuities with different investment structures. Beauty of annuities is that no matter what the investment strategy, your principal will never be touched by negative markets.
If you need money for home improvements, travel etc. find an annuity that will allow you to withdraw from the principal without penalty.
I can go on and on but you get the drift.

I currently have SP 500 point to point that offered 8% last anniversary.

The marina normally let me use the boat until mid December. The last boats to be winterized are those in covered slips. I had some great boating days in Nov and Dec.
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Old 10-20-2017, 10:38 AM   #3
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Yes there is a formula preset by irs. It is very gradual. It starts year you hit 70.5 but can be deferred until the next year . I havent heard about being able to avoid the tax .
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Old 10-20-2017, 10:41 AM   #4
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Default Annuities are expensive

Annuities are attractive for some people who need help budgeting and like the security of being on an allowance. But like all products recommended by financial advisors (who just so happen to sell annuities), they can be very expensive. So you should be careful before you move into one.

Your tax preparer or the investment firms where you have your retirement accounts can tell you exactly how much you need to withdraw each year to minimize your tax hit.

Good luck!
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Old 10-20-2017, 11:44 AM   #5
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It is called a "required minimum distribution". Do a search for that, lots of info however it all boils down the same IRS table.

Here is one explanation with a copy of the table:

http://www.bankrate.com/finance/mone...ons-table.aspx
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Old 10-20-2017, 12:14 PM   #6
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Quote:
Originally Posted by bigdog View Post
Will be retiring this coming Spring, currently working at 68, drawing a Salary and taking Social Security for last 3 years.

At 70 years old the Federal Gov. requires you to start drawing down on your 401k, IRA, Etc investments.

Is there a formula on how much one has to draw each year ?
Is it based on current income, or on the total money saved in investments ?

I would like to keep as much money in investments after retirement, but the Feds want their money when you turn 70 ! Feedback and scenarios greatly appreciated !

On an unrelated subject... very sad day.... just put the boat into winter storage !

Thanks,
Bigdog

The IRS requires an RMD (required minimum distribution) from your IRA's and 401k's. The annual minimum is roughly 10% of the current value of the plan when the distribution is made. As stated above this must begin in the year you turn 70.5. The taxable amount is determined by your financial institution and is based on the portion of the distribution that has not been previously taxed.
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Old 10-20-2017, 12:16 PM   #7
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Be very careful with Annuities. As someone else said, they are expensive. Do your research before jumping in.
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Old 10-20-2017, 12:19 PM   #8
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Annuities: The biggest drawback in my mind has been the substantial commission paid to the agent.
The IRS has the schedule for drawdown on their website. Figure on roughly taking 4%.
I don't know of any way to avoid the taxes by rolling over the pension. Some states do not tax pensions, private or government.
I rolled over my pension into an IRA just to avoid the yearly paperwork, which is not onerous but just a pain. Still not taxed in those states.
You have to take the RMD (required minimum distribution) starting at age 70 and must take it in the year you turn 701/2. Do not delay as you will have to take 2 years distribution the first year if you do. I was able to apply for SS and delay receiving taking until age 70. Thus there was an added % to the amount. That option I believe is now not available
Best to you and enjoy retirement.

I am a retired workaholic and continuing aquaholic.
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Old 10-20-2017, 12:39 PM   #9
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Be very careful with Annuities. As someone else said, they are expensive. Do your research before jumping in.
I absolutely agree. As a CPA when clients ask me to recommend and annuity I always steer them away. I am not a fan at all, they are expensive and the rate of return, especially now is very low.
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Old 10-20-2017, 01:41 PM   #10
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Agree with others about putting your 401K into an annuity. No one should advise to put all your money into this product. Annuities can be a useful piece of your retirement nest-egg or in some cases where there is not enough to last for a lifetime, the guarantee payments are meaningful. However the cost of the annuity may be equal to or greater than what you would pay the IRS for the minimum annual distributions.

Seek out a good professional to advise you. One place to start if you do not have one is to start at your credit union or bank.
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Old 10-20-2017, 01:53 PM   #11
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I absolutely agree. As a CPA when clients ask me to recommend and annuity I always steer them away. I am not a fan at all, they are expensive and the rate of return, especially now is very low.
I've been in the business for 35 years and I can tell you categorically you should NEVER annuitize an annuity. You are far better off keeping for $ in an inexpensive mutual fund (or other like kind vehicle such as etf, portfolio of stocks/bonds) and take an automatic withdrawal of say 4-6% per annum (lots of "discussion" about how much).

As already written you must start withdrawing $ from a retirement plan at 70.5 and it's based on life expectancy and is usually about 7% of portfolio value. This adjusts every year.

Tough to beat Vanguard for offering inexpensive index funds but Fidelity, Schwab and others compete well.

good luck!
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Old 10-20-2017, 02:07 PM   #12
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Originally Posted by rsmlp View Post
I've been in the business for 35 years and I can tell you categorically you should NEVER annuitize an annuity. You are far better off keeping for $ in an inexpensive mutual fund (or other like kind vehicle such as etf, portfolio of stocks/bonds) and take an automatic withdrawal of say 4-6% per annum (lots of "discussion" about how much).

As already written you must start withdrawing $ from a retirement plan at 70.5 and it's based on life expectancy and is usually about 7% of portfolio value. This adjusts every year.

Tough to beat Vanguard for offering inexpensive index funds but Fidelity, Schwab and others compete well.

good luck!

You are correct, they are many A+++ rated mutual funds that will yield substantially more income than an annuity.
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Old 10-20-2017, 02:52 PM   #13
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The first year is 3.6% with a gradual year to year increase. The 4% estimate was a good one, not 7% or 10% as had also been suggested. The link to the table was in post #5.

All of out IRA investments are low load mutual funds with equities at about 65% of the total. We do review the allocation mix yearly and make some minor adjustments. We will never annuitize any of our IRA holdings.
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Old 10-20-2017, 03:57 PM   #14
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You may be able to soften the tax by donating all, or some, of the RMD as a direct transfer to your college, church, charity. They can give you a proposal, and your CPA can evaluate it. Don't sign any agreement that won't allow you to change your mind if they bring in some wacko commencement speaker for an honorary degree.

Retirement is a great time to get involved with a charity. If you give them money, you may get on the board of directors and have some say in how your money is spent. I've been on the board for Meals on Wheels for many years. We serve 1500 meals a day and deliver smiles too.(Click HERE to close ad)
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Old 10-20-2017, 04:10 PM   #15
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As Descant mention you can reduce tax liability by donating. This comes directly out of your 401K to the whoever charity you pick. I did it this year because our Church had donation for elevators plus regular donations. Not a whole a lot of money but saved about half the tax liability. This is really for persons who have a lot of money but some is better than none.

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Old 10-20-2017, 06:10 PM   #16
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Im 63 and Im planning on retiring at 66 but Im not going to take my SS until 70. Thats a guaranteed annuity that will keep earning 8% risk free until I turn 70. My wiffe will take hers at 65 or 66 and of I pass she will be able to collect my higher pay out.


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Old 10-20-2017, 07:43 PM   #17
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One can donate to a non profit hospital in many cases: receive a deduction and also receive a percentage benefit from the hospital depending on the amount donated.
Sounds like a win-win.

I am a retired workaholic and continuing aquaholic.
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Old 10-25-2017, 05:22 PM   #18
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Default Ss

For anyone old enough to be thinking about SS, it is important to be well informed. It's my understanding that the government will payout a full 1/3 more (of the estimated age 66 payout) if the qualified recipient defers payments until age 70.

Tax liability varies, according to the recipient's work activities, but I'm talking about SS payout, only.

When I do the math, based on an age 66 annual SS payment of 25k, it seems it would take about 13 years (33.333k/yr.) to start "making a profit" v. the estimated 25k/yr, at age 66.

I understand that, if the spouse's expected SS will clearly be less, it might make sense to defer.

A question I would like to know the answer to is, if the person with the expected larger SS payments defers, but passes before the age of 70, is there anything to be gained?

Just wondering about all of this.
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Old 10-25-2017, 08:36 PM   #19
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Default Donate the RMD

The required minimum distribution (RMD) is difficult to avoid, but it can be given away. I found this today.

1. Qualified charitable distribution (QCD)
If you are at least 70 , the QCD rules let you divert up to $100,000 of your RMD to a qualified charitable organization. The amount given to the charity is not taxable, though there is no additional deduction for the charitable contribution. QDCs will lower your tax bite and allow you to fulfill your charitable intentions at the same time.

There are plenty of good local causes for philanthropic minded people over 70 that want to convert their RMD into a QCD. For example, a town's conservation fund.
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Old 10-26-2017, 07:15 AM   #20
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For anyone old enough to be thinking about SS, it is important to be well informed. It's my understanding that the government will payout a full 1/3 more (of the estimated age 66 payout) if the qualified recipient defers payments until age 70.

Tax liability varies, according to the recipient's work activities, but I'm talking about SS payout, only.

When I do the math, based on an age 66 annual SS payment of 25k, it seems it would take about 13 years (33.333k/yr.) to start "making a profit" v. the estimated 25k/yr, at age 66.

I understand that, if the spouse's expected SS will clearly be less, it might make sense to defer.

A question I would like to know the answer to is, if the person with the expected larger SS payments defers, but passes before the age of 70, is there anything to be gained?

Just wondering about all of this.
Only that the spouse can collect the larger payment for the rest of their life. This is beneficial if there is a big difference in payouts between the two.
This is my plan, defer until 70 but my wife will start collecting at 65 or 66. My payout is almost double hers so if anything happens to me she can collect mine.
Even though I plan on retiring at 66 I am financially able to support my lifestyle for four years until I start collecting SS.
There is no perfect plan because the unknown is how long you're going to live. But if you're healthy you have to plan for a long life.
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Old 10-26-2017, 08:11 AM   #21
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Only that the spouse can collect the larger payment for the rest of their life. This is beneficial if there is a big difference in payouts between the two.
This is my plan, defer until 70 but my wife will start collecting at 65 or 66. My payout is almost double hers so if anything happens to me she can collect mine.
Even though I plan on retiring at 66 I am financially able to support my lifestyle for four years until I start collecting SS.
There is no perfect plan because the unknown is how long you're going to live. But if you're healthy you have to plan for a long life.
This is exactly my recommendation to my clients. (as long as they are reasonably healthy). Most situations the husband's payout is substantially higher, if funds permit have the spouse collect at 65 and husband hold out for as long as possible, again depending on health. This will obviously maximize the husbands payout and the wife if the husband passes first.
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Old 10-26-2017, 08:23 AM   #22
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This is exactly my recommendation to my clients. (as long as they are reasonably healthy). Most situations the husband's payout is substantially higher, if funds permit have the spouse collect at 65 and husband hold out for as long as possible, again depending on health. This will obviously maximize the husbands payout and the wife if the husband passes first.
We have to stop meeting like this.
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Old 10-26-2017, 09:08 AM   #23
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We have to stop meeting like this.
:cheer s:
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Old 10-26-2017, 09:20 AM   #24
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:cheer s:
You'll have to forgive my as I tend to paint all Long Islanders with the same brush. My son played for the NY Islanders for 4 years and Islander hockey fans were none too kind.
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Old 10-26-2017, 09:53 AM   #25
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You'll have to forgive my as I tend to paint all Long Islanders with the same brush. My son played for the NY Islanders for 4 years and Islander hockey fans were none too kind.
I am a Ranger Fan. My son does play travel ice hockey and Eric Boulton who just retired is one of the coaches in the organization, and my neighbor at the Lake had a cup of coffee with the Kings and Islanders.

If you don't mind me asking, what was his name (you can PM if you do not want to say publically)? If you don't want to say I completely understand.
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Old 10-26-2017, 10:02 AM   #26
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I am a Ranger Fan. My son does play travel ice hockey and Eric Boulton who just retired is one of the coaches in the organization, and my neighbor at the Lake had a cup of coffee with the Kings and Islanders.

If you don't mind me asking, what was his name (you can PM if you do not want to say publically)? If you don't want to say I completely understand.
What is your neighbors name?
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Old 10-26-2017, 10:45 AM   #27
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You'll have to forgive my as I tend to paint all Long Islanders with the same brush. My son played for the NY Islanders for 4 years and Islander hockey fans were none too kind.
Did your son play for New Hampton?
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Old 10-26-2017, 10:49 AM   #28
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Did your son play for New Hampton?
No, I'm from Ma.
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Old 10-26-2017, 11:13 AM   #29
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What is your neighbors name?
Derek Bekar
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Old 10-26-2017, 01:05 PM   #30
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I reread several posts and I still cannot see where we slipped from financial planning to hockey. Two minutes for delay of game and two minutes for too many players on the ice.

Back to game time: Several mentions about "If you are in good health". I believe if you are not in good health, i.e. you are collecting disability (SSDI), the SS administration will automatically switch you to social security at 65 (could be 66 now?), so I don't think you have a choice of delaying SS to age 70. Right or wrong?

For younger members, I'd think about two issues. Plan your debt so it is minimal after age 65. Doing a cash out refinance and extending your primary mortgage into retirement years is usually not a good plan. If you are investing in something that will generate cash flow (rental property) or something that can easily (emphasis on easily) be sold to retire the debt you might be OK. Not a vacation or a bigger boat.

Remember in the 90.s: Q. What's the difference between a Lakes Region Condo and Gonorrhea? A. You can get rid of the Gonorrhea.
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Old 10-26-2017, 01:12 PM   #31
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No, I'm from Ma.
I meant New Hampton School, which is a prep school in NH. I went to high school with someone (from Manchester) who played 3 or 4 years for the Islanders (and others).
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Old 10-26-2017, 01:29 PM   #32
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I meant New Hampton School, which is a prep school in NH. I went to high school with someone (from Manchester) who played 3 or 4 years for the Islanders (and others).
Not him, sorry.
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