This Is The Only Withdrawal Strategy That Applies To An Early Retirement

Love the content Ari !! Huge fan and subscribed, can’t wait to see what more you post 💪💪💪💪💪

Need more realistic stock scenarios, like if you’re holding a bunch of losing stocks which are down 30%-50% inside the taxable brokerage but can only deduct $3000 a year, what do you do? Chances are a good portion of the highly appreciated stock gains were sold along the way, and the remaining holdings contain losers that you’re waiting for them to recover.

What is retire earlier for you? 60?!
Wake up folks, retire earlier is 50 or less. 55 is retire age. Over 55 it means you are retiring later.
You don't need millions of dollars to retire. Lower you life style and be free

Live off dividends in a Roth

I didn't realize this was a job...my parents taught me this growing up.

I was asked to leave my job earlier this year and have since started to contemplate early retirement. Your videos are very helpful.

My main goal as a soon-to-be retiree is to keep my 401(k) on track following a challenging 2023/2024. I've read about investors making up to $250k in this collapsing market, therefore I would greatly appreciate any advice on how to increase my ROI before I retire.

Really enjoying these videos. If you have 3 years of leaving expenses in cash but want to use the gap years to do Roth conversion, would you use some of the cash to pay the conversion and generate more cash from Brokerage for ex or use convert more money to conversion to support the conversion?

Maybe I'm just too simple. My "withdrawal strategy" is cost-based. I calculate my expected costs, add my one-time / splurge items, subtract my fixed income (Social Security, cash, equivalents), and withdraw only what I need to fill the difference. Everything else, regardless of percentage, stays invested. I maintain enough cash / equivalents to cover a couple years of expected withdrawals. With a different system, I could probably spend more. But why would I want to? I'm covering everything, including splurges

Most Americans find it hard to retire comfortably amid economy downtrend. Some have close to nothing going into retirement, my question is, will you pay off mortgage as a near-retiree, or spread money for cashflow, to afford lifestyle after retirement?

Could you please make a video on Risk Adjusted Guardrail Strategy.

Great video. We're in Australia but the principles and thinking you outline apply here too.

I like how you quickly moved past the tax implications on moving $280K from IRA to Roth IRA. 🤔

Good video. With regard to the “good timing” of doing a $280k Roth conversion there is actually no benefit to converting after a market decline. In fact you could make the opposite argument to say it is a less beneficial time to convert. That is because one of the primary reasons to convert is to lower future RMDs. If you have a $1m IRA and it drops by 20% that has the same impact as had you done a $200k Roth conversion prior to the market decline. Thus there may not be a need to do additional conversions depending on your individual circumstances. It’s only the tax rate that impacts Roth vs traditional decision. If tax rates are the same you end up in the same place and market gains or losses are irrelevant. Here is the math. $1m drops to $800k and you dont convert and it eventually doubles to $1.6m. If you pay 25% tax you end up with $1.2m after tax. If instead you converted the $800k and paid 25% tax and your $600k Roth doubled you end up with the same $1.2m. Had you instead converted when your account was $1m with same facts, you end up with $1.5m after tax whether you converted or continued to defer. Bottom line is the current vs future tax rate is the variable that matters not whether the account is up or down at any point in time.

Generating wealth is important, but protecting your capital is even more essential. Once lost, rebuilding financial stability becomes significantly more challenging. It's the difference between "missing an opportunity" and "losing everything" while new chances will always arise, losing your capital could bring your journey to an abrupt halt.

How well are you versed with expats that move to France?

I just turned 50 and I’m really stressed about my retirement withdrawal strategy. I have just over £300k saved up, but with market volatility and rising living costs, I’m worried I might outlive my funds

Ari, on the NUA example, if that individual stock was held in a pretax 401(k), wouldn’t you have to pay taxes on the basis first at time of withdrawal?

You drag the content too long

If only we had these tax levels in the U.K.! CGT is 18-24% on any gains over $3750. Income tax is 20% on everything over $15700, 40% on everything over $62800 and 45% on everything over $15600. It gets worse, for every $1.25 (roughly current exchange rate) you earn over $125,000 you also lose 67.5 cents of the nil rate band under $15700 meaning an effective tax rate of up to 60% on a proportion of that income when you go over $125000.
What really irks me is we have no joint married filing either so if you are mainly a one income family like we are, you are a lot worse off than a husband and wife each earning half the amount.

Does your software provide bumper numbers?

I’m so over my head with all of this. I just can’t seem to comprehend how to invest. So it just sits in a savings account not earning any interest

ROTH conversions are badly explained.

This only makes sense if the tax rate you’re paying in the conversion is lower than the rate you would pay otherwise!

Otherwise, you’re just paying no tax on an already taxed (proportionally smaller) amount. Basically you’re just changing the order of your multiplications, which has no impact at all.

Example:
Portfolio: 100k
Tax rate =20%
Market drops 30%
Market picks up: 70%

Tax at end (no conversion):
100k - 30% + 70% - 20% =95.2 K

Tax after market drop, before pickup:
100k -30% -20% + 70% =95.2 K

Same result!

if you only withdraw the initial amount on an investment, and leave the capital gains remaining in the brokerage account, do you still pay taxes on the withdrawal amount?

Best videos ever! Thank you for sharing your knowledge with us.

how does state tax, say, in California or New York, work for capital gain?

If you have $10 million in AAPL stock in a brokerage account, you are getting about $50k in dividends each year. That is the money to spend before selling any of the stock.

what if you're 57/58 and have spent your cash and investment accounts? Would you draw next from pre tax 401k and pay a 10% penalty or from roth contributions with no penalty? Or maybe take out a 401k loan and pay it back in full when you are able to withdraw without penalty?

Can you please share the excel which has tax bracket numbers and other details. 💰

Timing the market and time in the market are both helpful. I hate that some people only do the one or the other and hate the one that they don't like.
Roth is goated. Pretax/traditional is trash.

But isn’t the first 45,000 tax free anyway? Then you get taxed 15% on the remaining amount to get 80,000.

This just makes me appreciate no capital gains tax even more💰💰💰

So, withdrawal strategies for early retirement—what’s the best way to ensure your money lasts? I’ve read about the 4% rule, but it seems like there are mixed opinions on how reliable it is.

You're talking and I'm trying to follow but you're losing me...all I heard was if you're willing to be dynamic... yada yada

This is a long winded way to recommend the Boggleheads Variable Percentage Withdrawal.

Need advice. Married, 52 years old. Lost senior level Manager position in small town. Need $150,000 to clear expenses to adjust to new opportunities in job market. Should I pull from 401k?

Thought? Why not take less when markets are doing well and the market is "re-funding" your portfolio with a much needed infusion of growth?
Conversely, when the market is down, take more?

'Sequence of Returns' as well as withdrawal rates (discussed) go hand-in-hand. I'm not suggesting taking greater sums on drawdowns or cutting back during spectacular gains...so much so that in either situation the withdrawal rate changes significantly impacts your quality of life. I'm focused on sustainability and think there are guardrails, as you mentioned, that we can think about as the markets always return to the mean.

why not increase your cash holding when the market did good and spend it down when the market is not so good so its not feast or famine?

Cost of fund Vs Projection and Capital Composition ( Equity & borrowed ) ~ future outlook!! That sums up everything.

@Ari. I see your CFA. Good, brief alternative. I have level 3 options permission. 1 million account and only use SPY. I sell 25 delta strangles and that generates 5% premium on a 360 expiration date. Each January I deposit $50,000 free money from that strangle premium into my checking account and leave SPY to grow its normal 10% value using Ibbotson Study results. While not CFA, I do have MBA in finance and 859 FiCO score. Please comment from your view. Thanks!

Had no idea you could pay 0% on capital gains if your income is low enough. Definitely plan on looking into that when I retire. Thanks for the tip.

Can I open a roth IRA for my children and contribute money into it when they start earning income if I still claim them on my taxes as a dependent?

I recommend that new investors adopt a strategy of purchasing and holding high-quality stocks. It is prudent to disregard market forecasts and opinions, as they are frequently more entertaining than genuinely beneficial.

Really appreciate all your information.. 1 issue I'm dealing with is that I'm 62 and taking advantage of the ACA tax credits, with that my limits of withdrawals is roughly 85-90k. That number also affords me to stay under the 12% federal tax bracket after deductions, moved to Nevada shortly after retirement so no state income tax, left California, but kept home there as a rental. So I'd built up a good amount of cash prior to retirement so I've got a good safety net. But how do i adjust based on markets if I take/need that $90k annually to do that while were doing our retirement plan, traveling full time, rented both our homes, so minimal expenses beyond our travel lifestyle. Any advice how to balance the ACA tax credit income limits? We have just north of $2.1m in net worth, $600k+ homes equity(still have about $300k left to pay it off, with a 2 75% loan, $1.6m in brokerage(half or so being managed by an option team I work with, balance is balanced 60/40, IRAs, 401k mid risk and about $350k in a 4% managed account that I can do a cash lump sum withdrawal or turn it into an annuity anytime(what's your call on these options). I've also chosen to start social security in January, my logic is that SS grows at 5-6% annually and everything else is growing at north of 12% annually except the pension fund. Any bullet points? Lastly, where should I be drawing from first? Thanks Ari!

THIS. This is what I have been asking financial advisors and they won't give me a straight answer. Thank you

How can you move 280k into a Roth IRA? I thought Roth is capped at $7000 per year???

I have a question...if you always draw below what your total portfolio earned in a year, won't you always make money. Example, let's say it's a good year and your total portfolio earned 8%. If you take out 5 or 6% your portfolio is still growing. Is this a correct assumption?

Great content. Even the 4% rule by itself seems silly. Is it 4% of the starting amount? Is it 4% of each years' balance? Even worse is all the people who were saying to go to fixed income securities when you retire. But "When I retire" my time horizon is still many decades. That means, keep a large portion of it in the market. Looking at what you did the year before to help determine your withdrawal amount is ideal. One picky point, You didn't say it wrong, but people may have missed it in your presentation. When they sold and withdrew their Microsoft stock and didn't pay capital gains taxes because they didn't have other income and their capital gains were less than the 94K, it is still important to note that even though they had 90K in capital gains, they still withdrew 100K. The difference is more pronounced if they only doubled their money ("only"!). If they had 200K in stock that had started as 100K, they could withdraw 180K, with 90K in capital gains, still be below the 90K capital gains level and they would have 180K in their hand.

have million cash on hand before you retire-have 5m invested or converted into gold-definitely not crypto as Trump plans to ban all crypto next year.

I am currently in my 50s and This is no time to taper retirement savings. I want to max out my retirement contributions and I also have another $200k in a savings account that i want to invest in a non-retirement account. Where should I invest it now?