tag:blogger.com,1999:blog-5621914599310831423.post441552562762377863..comments2024-03-01T03:44:39.796-08:00Comments on The Retirement Café: Wanna Pay a 50% Penalty on Your Retirement Account?Dirk Cottonhttp://www.blogger.com/profile/05616143752082768155noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5621914599310831423.post-27141196423274578142014-08-20T07:45:55.294-07:002014-08-20T07:45:55.294-07:00Brad, as you are probably aware, I believe SWR stu...Brad, as you are probably aware, I believe SWR studies have major flaws and I take them with a grain of salt. I don't believe our limited historical stock returns data is adequate to predict future withdrawal rates, Pfau, et. al., believe future SWR's will be significantly lower than in the past, the SWR rates calculated only worked in the US market and, to quote Pfau, may well be an anomaly of U.S. history, and that's only the start.<br /><br />Having said that, Bengen's book, Conserving Client Portfolios During Retirement, deals extensively with portfolio allocations. In general, SWR's plateau for 30-year retirements between 45% and 60% stocks and drop off significantly at both ends.<br /><br />In your terms, SWR increases as you add stock up to about 45%, flattens out until you reach about 60% stocks, and then declines.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-72671506475295608962014-08-20T07:29:50.780-07:002014-08-20T07:29:50.780-07:00Hi Dirk, one thing I think would be interesting i...Hi Dirk, one thing I think would be interesting is to see SWR in combination with different asset allocations. I would assume the SWR might increase with less volatility (lower stock allocations) up to a point where you don't have enough in stocks to have enough growth for a given SWR. BradAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-32032435999337865692014-08-11T10:54:30.161-07:002014-08-11T10:54:30.161-07:00Thanks so much for this post. You’ve shared so muc...Thanks so much for this post. You’ve shared so much insight and information that is greatly appreciated.Rexmnhttp://rexmn.com/noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-47070339872970137182014-07-21T14:27:54.986-07:002014-07-21T14:27:54.986-07:00I don't believe that "didn't happen&q...I don't believe that "didn't happen" is a fair general assessment. I've been retired for ten years, for example, and my taxes have been far lower than when I contributed to an IRA.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-69227238044715779212014-07-21T11:58:16.640-07:002014-07-21T11:58:16.640-07:00Indeed, you're correct that she has not done t...Indeed, you're correct that she has not done the math to determine which, ultimately, was "better." When she and I set up these IRA's, however, the selling point was that you were more likely to have a lower income and, thereby, lower taxes at the time of withdrawal. Didn't happen. Another instance of "truthiness," to expand on our former President's vocabulary. It's a minor issue for both her and me, and thank heavens we both have some time to do the transfers (me more than her, and my wife more still). Something to be aware of if you retire with "enough," though. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-89999932971234509532014-07-19T15:33:28.114-07:002014-07-19T15:33:28.114-07:00I'm doing the same with my IRA's. In fairn...I'm doing the same with my IRA's. In fairness, though, you can't look at one end of the transaction and call it a burden. Neither of us knows, given the information you provide, whether she would have been better off paying taxes at the time she made those contributions than she is paying taxes now. During my peak earning years, the tax deferrals were pretty sweet, and I've had decades to work on the tax problem of withdrawals.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-51537810277970662942014-07-19T14:54:15.651-07:002014-07-19T14:54:15.651-07:00I appreciate Mr. Gray's admiration of traditio...I appreciate Mr. Gray's admiration of traditional IRA's, but if you're like me and have a pension (a rarity, I know, but the Feds still offer them to employees), having a bunch of traditional IRA's at the time you hit 70.5 can be a real tax burden. I know this isn't so much a problem as it is what might better be called an "issue," but there it is. <br /><br />I'm in the process of transferring over as much of my traditional IRA and 401K accounts as possible each tax year by filling out my tax bracket annually with such transfers. When I hit 70.5 in 5y (Allah, God, or Ganesh, whomever, willing), I don't want to be in the same situation as a colleague of mine who's paying huge tax bills on funds that she doesn't need at this stage of her retirement. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-5168678060067049582014-07-19T08:48:56.554-07:002014-07-19T08:48:56.554-07:00I'm very happy with my traditional IRA decisio...I'm very happy with my traditional IRA decision, as well. I got great tax deductions when I needed them. And I've been able to tax-efficiently convert much of the savings to Roths since i retired.<br /><br />I will point out though, that if you're taking increasing percentages of a dwindling account balance, never running dry will soon become a point of semantics, like that old story about the frog that covers half the distance to a well with each leap and never gets there. Calculus works that way; real life, not so much.<br /><br />Thanks for writing!Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-61034848237225966682014-07-19T08:38:07.341-07:002014-07-19T08:38:07.341-07:00Hi Dirk,
I never did open a Roth IRA; we only hav...Hi Dirk,<br /><br />I never did open a Roth IRA; we only have traditional IRA(s). My reasoning is/was that I'd prefer to contribute before-tax dollars now, to provide a larger foundation for appreciation and to reduce my current income tax. Later, when I need to withdraw from the IRA, if my tax rate is low (because I don't have much other income) then, it is what it is. And if my tax rate then is high (because my taxable investments are throwing off all sorts of wealth) well, I won't care much because I'll be able to afford it! <br /><br />Anyway, the other observation about minimum withdrawals is that they are (as you pointed out) a percentage of the value of the account at the start of the year. So if you don't need more cash from the IRA then, by definition, it'll never run dry. <br /><br />I think IRAs are a wonderful thing. Anonymousnoreply@blogger.com