401K, IRA and Pension withdrawals

401K, IRA and Pension withdrawals

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  #11  
Old 07-03-2011, 08:43 AM
784caroline 784caroline is offline
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Either Dad did not need the money from his IRA or he really understood the principle of allowing your money to grow in a tax deferred environment for as long as you can. I think your dad knew what he was doing...and one of his reasons could have been you!

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Old 07-03-2011, 10:33 AM
iaudit iaudit is offline
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Quote:
Originally Posted by Russ_Boston View Post
To the best of my knowledge (I have done some research):

A tax deferred investment (401k, traditional IRA) you can start withdrawals at 59.5 y.o. Yes you will declare this as income at tax time. They will withhold 20% at withdrawl time and give you a statement at year end.

I believe the 20% withholding only applies to the 401k, not IRA distributions.
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Old 07-03-2011, 10:56 AM
BobKat1 BobKat1 is offline
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Quote:
Originally Posted by 784caroline View Post
Either Dad did not need the money from his IRA or he really understood the principle of allowing your money to grow in a tax deferred environment for as long as you can. I think your dad knew what he was doing...and one of his reasons could have been you!
That does sound like what dad may have been doing. Perhaps spending down personal savings (advised) which reduces federal and state tax liability, and letting the IRA grow until it's needed for income.
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Old 07-03-2011, 12:23 PM
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natickdan natickdan is offline
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There is a wealth of information here along with some very sound advice.

One of my biggest concerns is inflation and how it will impact our standard of living if the future. With that in mind, having access to a good financial planner is very important - for most, if not, all of us.
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  #15  
Old 07-03-2011, 09:35 PM
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Quote:
Originally Posted by iaudit View Post
I believe the 20% withholding only applies to the 401k, not IRA distributions.
Yes you are correct.

http://www.research401k.com/401k-direct-rollover.html

But let's remember - it is just a withholding. Since you will probably have some tax due on the withdrawal amount it doesn't hurt to have some tax withheld. But nobody wants Uncle Same using their money
  #16  
Old 07-03-2011, 10:11 PM
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rjm1cc rjm1cc is offline
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Inflation is a problem and guessing what it will be is impossible. For an overall rate I use 4%. I think the 3% we see a lot is a little low and I hope the 4% is a little high. But then I use 8% for medical costs. I think this is close to what history shows. Look at the increases for the medicare premium since it started. Then for utilities I use 6%. No basis for this other than feeling as we go green these costs will go up faster that historic inflation. The going green will also put pressure on the 4% number. I also used 2% for SS increases. Probably too low but the current inflation formula understates a seniors true costs. I also use a 5.6% return on investment. Might be low but just look at the last 10 years and current interest rates. The spread between the inflation rate and the return is the key number. Being conservative I am hoping the spread I have is too low so my actual results will be a lot better.
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Old 07-04-2011, 04:01 AM
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rjm1cc. Good plan. My biggest concern also is inflation. Our idiots running things have printed so much money in the last 3 years that it will have to have a devaluation impact at some point in the next 5 years. You may be safe with 4% if you are considering a 25 plus year window, but for the next 5 years you need to look at 15% to 20%. And even that will not cover what they must print just to cover interest on what they have spent. I guess the only up side for us who are retired, downside for everyone else, is that this will also drive unemployment and interest rates much higher then today and we will be able to hire cheap labor and hopefully we will not be borrowing more money.

It really saddens me that we have forced our children and grandchildren into a position of a lower standard of living for the future. It is criminal what has happened.
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Old 07-05-2011, 07:27 PM
Boomer Boomer is offline
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Hi Schaumburger,

While I realize that your questions here about retirement accounts are specific, I would like to offer a couple of general suggestions for you, in case they might help.

There is a book that I have talked about a few times here on TOTV. Making the Most of Your Money Now by Jane Bryant Quinn. It was published at the end of 2009 so it was written for this economy.

I like this book because if a money decision question comes up, I can go to this book, flip to the index, and almost always find an entry that will tell me what I need to know -- or at least help me to narrow my focus for further research.

It is not a cover-to-cover read. You will not need all the information in it. But it is a terrific reference. (There is lots of info on the different kinds of financial planners.)

The book is written in a conversational tone. Nothing esoteric about it. And for me, itís a lot faster start than wading through website after website looking for answers. I could say a whole lot more about why I like having this book around, but I am going to get lazy now and just put the Amazon link here. (The book is bargain priced right now. And I guarantee you will recoup your investment, and probably plus a few digits, if you decide to buy it.)

[ame]http://www.amazon.com/Making-Most-Your-Money-Now/dp/B0048ELE4U/ref=sr_1_1?ie=UTF8&qid=1309911328&sr=8-1[/ame]



Something else that has helped me is Kiplingerís Retirement Report. I have subscribed for years. The articles are short and timely and everything in every issue has something to do with retirement. This link will take you to the part of the Kiplinger site where if you scroll down the left side of the page, you will see the publication I am talking about. It is published monthly.

http://www.kiplinger.com/retirement/

I hope you do not feel like I am giving you a homework assignment. I promise there will not be a test. Really. Not even a pop-quiz. I promise.

It is just that when I read your questions, I thought about how I felt as I got closer to retirement. I thought it was like being in an airplane that was getting close to landing. Seatbelt fastened, I listened intently (sometimes tensely) for that beautiful sound of the landing gear dropping and locking perfectly into position. From your posts, it sounds like thatís where you are now. Listening for that landing gear. I wish you a smooth landing and a wonderful retirement journey.

Boomer
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  #19  
Old 07-06-2011, 06:48 AM
Ohiogirl Ohiogirl is offline
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I cannot tell you how many retirement income calculators I have completed, and I am also tracking expenses via a spreadsheet. Possibly I'm a little obsessive/compulsive? But - it eases my mind, particularly because we retired fairly early (60ish).

I agree with educating yourself and reading all you can, and having a trusted financial advisor, but in the end, YOU are the one who has to make the decision, based on your income, lifestyle, and risk tolerance.

In my situation I will have a couple of small pensions kick in at 63-1/2 and at 65. I'm divorced and was a trailing spouse for years - didn't start working regularly full-time until about age 50 so the SS options are a little different, if I understood the explanation correctly (I went in person to a SS office in Ohio). I can get half of my ex's SS at 66 (not 62 if you are divorced) and then get my own at 70. Appeared to be a much better option for me as the difference is several hundred $/mo than if I took my own reduced SS at 62 - the other option. This only works if you did not remarry until after age 60 and were married at least 10 years. If I have this wrong, somebody please say something and I'll go in again to SS. Got over a year to get it right as I am still 60.

I am finding it very hard to take money OUT of anything - much harder for me than putting it in was. So far, I'm just using cash savings or non-IRA investments, but the day is coming when I will probably need or want to start using IRA money - then I'll have to decide whether or not to use ROTH or standard - another agonizing decision!

A friend of ours said something to me this weekend that hit home also. His parents are in their 80s and failing mentally and physically. He referred to the retirement 60s and the "go-go" years the 70s as the "slow-go" years, and 80s as the "no-go" years. I'm trying to keep this in mind, and not be so afraid to start spending it. Regardless of how we feel, we will not live forever. A good reminder that I will never be younger than I am now, and to go for the gusto (as long as I stay under that 4% withdrawal rate .
  #20  
Old 07-06-2011, 03:21 PM
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Why do people keep using the 4% rate for withdrawal?

I'm no mathematician, and correct me if I'm wrong, if you made 7% this year on your investment and took out 4% wouldn't your nest egg actually grow?

Just sayin!
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