Here's How to Turn Your Savings Into a Paycheck You Won't Outlive
Video Overview & Insights
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New retirees have pre-tax (traditional), tax-free (Roth), and taxable? Not in my world. For most in my generation it all went into traditional, and the years around retirement is spent listening to conflicting advice about how to balance paying tax now vs. paying tax later. The most likely scenario for having a taxable brokerage account before RMDs is that you have already received a reasonably large inheritance.
Learn how to create a retirement withdrawal strategy that helps your savings last. We cover popular investment rules, sequence of returns risk, required minimum distributions (RMDs), tax-efficient withdrawal strategies, Roth IRA planning, retirement income planning, and bucket strategies designed to reduce risk and maximize retirement income.
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FYI here is what I did a little over 1 year before I retired on August 31, 2021 at age 66 and about eight months. This has worked out great for me so far, I am currently 71 years old and my wife is 70. I had rolled over most of what I had many years ago into a Fidelity IRA. I started taking all dividends and capital gains from my portfolio as they were paid out and placed them into my core account (SPAXX) inside my IRA. This allowed me to grow a cash cushion of over a 150K before we retired. On September 1 of 2021 I started withdrawing 6K a month from the SPAXX IRA account (you can withdraw any amount you feel comfortable with). Because it is inside my IRA any interest I earned is tax free. I simply pay taxes as the money is withdrawn and Fidelity does the paperwork and sends the money to the IRS. When you start drawing SS your income starts coming in like clockwork. You simply set up any amount you want to with draw every month and the date you want it from your IRA at Fidelity. You can set up your withdrawals as you like, if you want to take out less or more every month you just need to update your withdrawal request. The best thing about this setup is that your not selling anything when the market drops.Because the SPAXX account is a money market fund the share price stays stable at 1 dollar all the time and you gain interest paid once a month. This is like having a self filling money bucket that doesn't run dry. My mutual funds simply keep throwing off capital gains and dividends and I keep earning interest on the money I harvest off the funds.
We also had some accounts at Brighthouse and I agree they are very hard to deal with, I transfered everything over to Fidelity. I also highly recommend you open a Fidelity Cash Balance Account at Fidelity to do all your banking. I have been using a traditional bank for may years but after looking at what I was earning on my savings and nothing at all on my checking account, I may have earned about 50 dollars on my saving account at the bank. Currently SPAXX is paying about 3.28 percent on a saving/checking account. I estimate I could earn as much as 2K a year in interest on this account. Of course this interest rates does change but it's so much better than earning .3 percent. Just go on Fidelity's website at look at a cash balance account and you will see the benefits and the drawbacks. For me personally I can see no drawback for us.
We have no Roth accounts and I have no problem paying higher taxes because, 1. No one know what the future tax rates will be. 2. I believe that if I do convert to a ROTH and pay taxes upfront at my age, there's no way to know if I can live long enough to gain back enough to make it worthwhile. That's just my 2 cent's.
0:00 Introduction - Why Spending Is Harder Than Saving
0:13 Start With Your Goals, Not a Withdrawal Rate
Withdrawal, not withdraw. Withdraw is a verb only.
1:20 How Long Does Retirement Really Last?
2:06 Sequence of Returns Risk Explained
There is nothing in this podcast that tells people how to turn their savings into a paycheck.
3:36 The Retirement Danger Zone Around Retirement
4:06 The 4% Rule: What It Really Means Today
What about living entirely off of stock dividends for income?
6:03 A Different Approach: TIPS Ladders and Guaranteed Income
7:08 Using the RMD Method as a Spending Guide
Great video sir. Good information for people who are about to retire.
9:30 The Smart Withdrawal Order for Lower Lifetime Taxes
11:43 Bucket Strategies, Guardrails, and Staying Flexible in Retirement
Made it easier by not planning to ever retire. Started working at age 8 in 1974. The first 7 years getting my legs under me and my nose just over the winter snowdrifts in South Dakota, thus able to lug the massive newspaper totes house to house all year until age 12, then strong enough to push the mower in my neighborhood in summer and shovel driveways in winter, Last job will be at age 90 as grave digger at the local cemetery where I can keep an open grave and just roll into as rigor sets in calling it a good long useful life. 31 years to go.
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Stop with the 20 year time horizon! What about a more realistic 12 year time horizon? 8 years is a big deal for a 70 year old.
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So many variables, all things being relative to the specific individuals needs and resources in the end!
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Great video, Geoff…I enjoy learning something from each piece of content you put out. Cheers, sir!
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The IRS expects everyone to live til age 99?
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Of course it's not wise to withdraw from you IRA. But the government does not care at all, right? RMD will need to get pulled regardless the market situation.
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I need to learn the process. Like: call fidelity ask to speak to so and so. Tell them to sell 5000 dollars worth of shares and send me the money. Differences between once a year vs. Monthly withdrawals. Etc.i am guessing here. Creating a lay check from Ira savings. How to pay taxes on this money. Where on the forms do withdrawals go. This would be helpful to me. 1.5 years out from retirement. Want to be prepared. I just did a roll over from a old 447b into my Ira. It was a nightmare since brighthouse financial was indeed a nightmare to have to work with. Finally invested in Ira. So grateful.thanks
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Thanks for this video. Very useful information.
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Las Vegas will teach you how to spend it😂
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Geoffrey Schmidt, CPA Bio:
Geoff Schmidt is a CPA and member of the American Institute of Certified Public Accountants (AICPA). Geoff specializes in personal financial education for those approaching or in Retirement. Geoff spends 100% of this time on financial education through social media.
Always think your videos are very informative….I retired at 49…..discovered MLPs so I make stupid money now for 25 years paying almost no taxes until I sell..never selling..kids will get step up and the game starts again…
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