On Wed, 29 Dec 2021 16:38:16 EST, JoeTaxpayer wrote:
> Adding to what Ira said - The 4% number is unrelated to the RMD. 4% is
> what advisors typically consider the 'safe' longterm annual withdrawal
> rate for a retiree.
For people facing or in retirement, I strongly recommend Jane Bryant
Quinn's /How to Make Your Money Last/. Among many valuable chapters,
she explains where the 4% figure came from, and under which
circumstances it is safe to go a bit higher or prudent to go a bit
lower.
> The RMD, changing each year, will exceed 4% quickly,
> at age 73, in fact.
That's true under the old table. For folks turning 73 in or after the
year 2022, the divisor is 26.5 at age 73 and 25.5 at age 74, so we
don't exceed 4% until age 75, when the divisor is 24.6.
> One should set aside any excess withdrawal for future growth, not
> just go with that number at the number to spend each year.
This is excellent advice. We cannot, alas, simply roll the unneeded
money into a Roth and let it grow tax free; but we can add it to our
taxable portfolio.
Something else to look at:
If you intend to make a substantial donation to charity, you can
almost certainly direct your IRA custodian to send your contribution
directly to the charity. (It must be a 501(c)3 charity, among other
requirements.)
The benefit of that is that the amount you donate directly does not
count as part of your IRA withdrawal on line 4 of form 1040, so you
don't pay income tax on it,(*) but it still counts as part of
fulfilling your required minimum distribution. This arrangement is
called a Qualified Charitable Distribution (QCD), and in essence it
lets you make a larger contribution than if you wrote a check
yourself, without being more money out of pocket.
(*) I haven't checked the forms, but I believe the QCD money is also
excluded from the computation for how much of your Social Security
benefit is taxable, and whether you are subject to the IRMAA
surcharge on your Medicare premium. If I'm mistaken, I'd welcome
correction on this point.