[Andrew]

For those who are already in retirement, I am curious as to how you are managing the distribution of your assets to maintain the 4% withdrawal rate.

How do you do that without incurring a massive tax hit on that 4% especially if most of it is in a brokerage since most of us can’t access our retirement accounts yet.

[Aaron]

Unless your income is still VERY high in retirement, there really shouldn’t be any massive tax hit.

[Scott]

Keep an eye on what tax bracket your distributions put you in and if possible keep them in a lower one. Ideally you wouldn’t really have many tax deductions such as mortgage interest, medical bills, property taxes, etc. But those could help lower your AGI. You could do tax loss harvesting to also tweak it.

The type of account also matters, for instance from Roth vs. Traditional vs. Individual accounts.

The type of distribution also matters, for instance dividend income (and whether they’re qualified) vs. capital gains. In general a Roth distribution is preferred because there are no taxes.

Then try to maximize qualified dividends and long-term capital gains over other types from an Individual account.

Unfortunately all distributions from a Traditional IRA will be taxed as income, which is why so many people do the backdoor conversion, but that in itself could be a big tax hit.

Worth a look: What’s your favorite (and ideally, most accurate) safe withdrawal rate calculator?

[Dion]

The idea with the 4% rule is the average gain is 10% a year.

So it covers the 4%. Inflation. And the taxes on the withdrawal.

One of the main reasons I don’t own a stock. Not one. Lol.

Too confusing and too risky. (And would have taken 5 times what I invested to retire.

[Andrew]

Any dollar you’ve ever earned has had a likely worse “tax hit”.

[Andrew]

Define massive tax hit.

[Sean]

If it’s in a brokerage account why would it be a massive tax hit? You’ll pay capital gains tax only on the growth?

Also, this is a fire group, we generally don’t want to perpetuate the myth that you can’t access retirement accounts early.

For most non-fire people it makes sense to believe you can’t access those retirement accounts, and you have to save them for retirement. But in a group of people who may want to retire early, you should be aware of all of the ways to access it for early retirement.

Also, check out: How to catch up on retirement savings in your 40s?

[Brandon]

Not enough info here to give an opinion really.

[Author]

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