Mystery no more: Po...
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Mystery no more: Portfolio allocation, income and spending in retirement

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Reputable Member Customer
Joined: 3 years ago
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Very good research report from JP Morgan:

The research reaffirmed some of our assumptions and in other ways proved surprising. Here are three key takeaways:

  • De-risking is commonplace: 75% of retirees reduce their equity exposure after they roll over their assets from a 401(k) to an IRA.
  • Required minimum distributions (RMDs) appear to be the dominant withdrawal “guidance.” The vast majority of retirees—particularly those with less observable wealth—do not take distributions before RMD age, and those older than RMD age choose to take only the RMD amount.
  • Income and spending in retirement are highly correlated. As income increases with the start of Social Security and RMDs, spending increases.

Basically people don't take money out of their IRA's until they have to (RMD approach) and the only additional increase in retirement spending is when Social Security starts. In summary, the RMD approach doesn’t solve for any specific retirement outcome. Indeed, it can fall short of meeting the goals for consumption and longer-term objectives, if applicable. In fact, the RMD approach tends to generate more income later in retirement and can even leave a sizable account balance at age 100

Thoughts?? 🙄

Reputable Member Customer
Joined: 3 years ago
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In most cases I've seen or worked, it's far more advantageous to work that money out of pre-tax accounts by doing Roth conversions and avoiding RMDs (and those late-retirement taxes) as much as possible. After all, we've seen countless examples in the last few years of folks that were waiting for those latter RMD and SS claiming years to "live it up" and never made it that far.

Definitely agree with derisking a 401k that was probably more aggressive due to being in accumulation phase while working, into a more conservative AA for spending phase. As long as the math and risk tolerance factors are still in line with that particular case.

PRC has some great tools to match spending with income, good to play around with.