Letters

Retirement Withdrawals

Comments on “Finding the Right Withdrawal Rate: One Key to Portfolio Sustainability,” by Maria Crawford Scott, in the July 2012 AAII Journal:

I’ve been retired for 20 years, running a portfolio of 60% equities and 40% fixed income. My expenses are covered by Social Security, a small pension and withdrawal from savings.

If you’re going to manage your own portfolio and withdrawal rates, you need to understand tax law, tax brackets and how required minimum distributions (RMDs) are calculated. Everyone is different, and one size does not fit all.

What worked for me was to control my spending (stick to a budget) and take more out of my tax-deferred accounts when the market was up, but only enough to keep me in the same tax bracket. This reduces your RMD when you reach 70½ and increases the taxable account that you can withdraw from without increasing your tax rate. Again, any standard withdrawal rate may be a starting point, but will probably not benefit most people. There is no substitute for knowing the tax law, having a diversified portfolio and

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