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re: Question re: 401k and future allocations.
Posted on 6/6/25 at 10:45 am to Whiskey Delta Actual
Posted on 6/6/25 at 10:45 am to Whiskey Delta Actual
4% rule of thumb is based on historical returns on something like a 60/40 stock/bond portfolio over 30 yrs. Tested against historic returns cases it wouldnt have run out. In fact most cases grew. Retirees' biggest risk is sequence of returns (down market early in retirement wrecks outcomes) and that isnt such a concern if your pension covers expenses and you can limit withdrawals in a down market. Recently the creator the 4% rule has modified it to 4.7% but only with a more diverse portfolio with small cap, international exposure etc...
4% may not be well suited for your case though. I'd look into other flexible safe withdrawal models such as guardrails. Higher withdrawal rates might be feasible if you can curtail them as needed. If you dont have a need for the $ to make ends meet and since inheritance isnt a factor you may very well find yourself under withdrawing only to get hit with large RMD and big tax bills later.
Early Retirement Now has some good background info if you want to read up on withdrawal strategies Safe Withdrawal Rate Series ERN
4% may not be well suited for your case though. I'd look into other flexible safe withdrawal models such as guardrails. Higher withdrawal rates might be feasible if you can curtail them as needed. If you dont have a need for the $ to make ends meet and since inheritance isnt a factor you may very well find yourself under withdrawing only to get hit with large RMD and big tax bills later.
Early Retirement Now has some good background info if you want to read up on withdrawal strategies Safe Withdrawal Rate Series ERN
2
Posted on 6/6/25 at 11:16 am to TorchtheFlyingTiger
Another consideration, if you pass first would spouse be dependent on the retirement nest egg withdrawals to make ends meet absent your pension and VA benefit? If so, a more conservative withdrwal strategy and portfolio allocation may be warranted for their sake.
Posted on 6/6/25 at 11:22 am to TorchtheFlyingTiger
I just happen to be listening to this podcast episode that came out today with the 4% rule founder discussing withdrawal rates and portfolio allocation. It's a good listen and does better explaining than I can Youtube- Bigger Pockets
This post was edited on 6/6/25 at 11:49 am
Posted on 6/6/25 at 12:23 pm to LSUtiger89
quote:
Because just passively taking what the market gives you is not a recipe for success.
Great point, thanks for the explanation.
Posted on 6/6/25 at 12:23 pm to TorchtheFlyingTiger
quote:
Early Retirement Now has some good background info if you want to read up on withdrawal strategies
Thank you for this.
Posted on 6/6/25 at 12:31 pm to TorchtheFlyingTiger
quote:
@Florida_Man1981 why not rollover to IRA instead of employer 401k? IRA has more investment choice and likely lower expenses and you can do Roth conversions.
Typically rollover to IRA is way to go. Only reasons I know to move to 401k would be to facilitate backdoor Roth without triggering prorata rule on traditional IRA, rule of 55 access or for better judgement protection depending on your state. You could even roll from IRA into 401k later if desired.
Thanks. Looking at all the different IRAs now comparing fees. My official retirement date isn't till 1 July even though I've been on terminal so not actually moving / closing out TSP until July.
Posted on 6/6/25 at 12:38 pm to Whiskey Delta Actual
Answer you via my context and approach:
Context - I am approaching mid 50’s and will retire in 6-18months (TBD). Our retirement nest egg reached target level 3yrs ago and is comfortable past it today. For example, financial model of significantly below market performance (worst case) in retirement to death still produces 150% of retirement expenses at 4% or less withdrawal rate. Blessed!
Approach - when reached “5year” window of retirement, moved mix to 56% stocks, 36% bonds, 8% cash equivalents. Objective was to protect the downside. Will move towards 40% bonds after entering retirement.
As always, your individual circumstances, retirement expenses (essentials and non essentials), risk tolerance, etc are required to get most accurate answer. Recommend you check out Boglehead website that is rich in this type of discussion. You can get deep analysis and feedback by subject matter experts if you provide your details (in the req’d format).
Good luck!
Context - I am approaching mid 50’s and will retire in 6-18months (TBD). Our retirement nest egg reached target level 3yrs ago and is comfortable past it today. For example, financial model of significantly below market performance (worst case) in retirement to death still produces 150% of retirement expenses at 4% or less withdrawal rate. Blessed!
Approach - when reached “5year” window of retirement, moved mix to 56% stocks, 36% bonds, 8% cash equivalents. Objective was to protect the downside. Will move towards 40% bonds after entering retirement.
As always, your individual circumstances, retirement expenses (essentials and non essentials), risk tolerance, etc are required to get most accurate answer. Recommend you check out Boglehead website that is rich in this type of discussion. You can get deep analysis and feedback by subject matter experts if you provide your details (in the req’d format).
Good luck!
Posted on 6/6/25 at 1:18 pm to Florida_Man1981
quote:
official retirement date isn't till 1 July even though I've been on terminal so not actually moving / closing out TSP until July.
If I recall, TSP takes awhile to update your status after service eventually notifies them you are no longer active. Probably wont be able to do rollover to IRA for few months since TSP doesnt allow in service rollovers. Just dont let it linger like I have. Congrats
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