401k Withdrawal Strategy
Hi Terry,
I am 67 years old and planning to semi-retirement beginning in July. I have 3 401k plans and am interested in a withdrawal strategy. I do not immediately need my money and was interested in the “3 bucket” method.
Would you kindly advise options and considerations?
Thanks in advance for your assistance.
Best Regards,
Robert
Terry Says
First of all, unless there are some “special” investments (such as company stock) in your 40l(k) plan, this is a good time to do rollovers directly to a ROLLOVER IRA at Fidelity, Vanguard, or T. Rowe Price. That’s because investments in a 40l(k) plan are primarily designed for younger workers in the accumulation stage of investing. Even the “safe harbor” Target Date Funds in these plans may be too aggressively invested in equities for a retiree.
Once you do a rollover, you’ll need to decide on a conservative investment plan, perhaps about 50% in an equity/income fund, and 10-15% in TIPS (Treasury inflation adjusted bonds fund) and even some cash for emergency withdrawals.
Next comes a withdrawal plan. There are no firm rules for that — except to say that the longer you delay taking money OUT, the better your chances are to make it last your lifetime. You MUST start withdrawals at age 72.
And you need to coordinate with Social Security. You’ll want to delay that as long as possible as well. That will give you a higher base for future inflation adjustments.
So, I’m glad you’re “semi” retired now. You should plan for the other half — the “semi”-working half — to continue earning enough to pay your basic expenses for another 3-5 years! If you can do that, and invest the rollover conservatively, you can re-figure your withdrawals on a more realistic basis.
That’s the do-it-yourself model. But if you’d like FIDUCIARY advice from someone who charges only a fee, and no hidden commissions, go to www.Wealthramp.com where you will be matched with a carefully vetted financial planner.
