Thread: TSP Withdrawal Plans

I have not, but will look at your link. Thanks, this should be an excellent start for debating allocations in retirement.

Do you care to share your current age, and age when you plan to retire?

If you take 100% of the extra's as you say then won't that leave you vulnerable if the market turns down for a couple of years. Just curious. I don't know anything about these things. As zbwmy says, this would be a great starting point for some discussions about retirement strategies and withdrawal strategies.

Dave

I just took a cursory look at the link you provided. It's over my head but it seems he is advocating taking a "fraction" of the extras which doesn't seem quite as dangerous.

Dave

Another good site to check your retirement withdrawal rate data is

http://capn-bill.com/fire/

Actually that's the point of the 4% level. Even if the portfolio decreases in value one year, you can still withdraw the 4% the following year. You can take more than the 4% minimum if the prior year returned more than inflation. The simulation (excel-based) examines decades worth of actual data to show that in the past this would have worked 95% of the time - i.e. there would have been some money left in your portfolio after 30 yrs. Run the simulation yourself and see. If you're interested in only a 20-yr survival, you can increase the minimum withdrawal to 6%. Of course there is always the caveat about the future not necessarily repeating the past-

Actually, the scenarios are sort of moot for me since I will likely be retiring before I turn 55. To avoid paying the 10% penalty, I will have to withdraw my funds in substantially equal payments based on the IRS life expectancy tables. This strategy will limit me to about 3% a year, at least for thye first few years.

This would be a good place for someone who knows more about this stuff to jump in and tell me a better way.

Dave

Inflation, inflation, inflation...if we only knew!

I've been unclear on this - you don't need to predict inflation to use this drawdown method. Example: in January 2006, you look at the inflation rate for 2005 (you can look at the January federal retiree cost of living increase for this). Let's say inflation was 3% in 2005. In Jan 06, you calculate 1.03 times your January 2005 balance. If your Jan 06 balance exceeds this, you take the excess. Otherwise you limit your withdrawal to 4%.

In answer to an earlier inquiry, I'm 55 and hope to retire in 2 years..

I posted the inflation thing without looking closly at the model.

Is there anything wrong taking out all your earnings each year,(minus inflation) and not touching principal? Or is this the same as the 1.03 thing?

How many people plan on leaving the TSP $ in the TSP after retirement? If not, do you plan on doing a rollover IRA to a mutual fund company or broker? Has anyone done this yet?

I think you're better off leaving the funds in TSP and arranging periodic withdrawals. The main reason is low cost - I think TSP management fees are less than 0.18% and you'll never do that well outside TSP. Of course with an IRA you have many more investment choices..