I have built out a client retirement scenario showing income distribution being supported from pension, principal, and growth. The client has tax free Roth investments and pre-tax 401(k) investments. How do I determine how much from each investment bucket is being used to service the income need at retirement. Is there an investment distribution order in supporting the total retirement need?
Brad J. L.
Are you asking about the order that the investments are tapped?
If so, this is the order:
- Tax Free
- Non Qualified up to the Max Withdrawal Limit
with the exception that RMDs come out first once those start.
If you want to hold the Tax Free off until later, the only way to do that right now is to move it to a Cash Infusion and inject it into the plan in the future when they run out of money... sooooo remove the tax free from investments. Say they run out of money at 75. Then put the Tax Free Roth on Cash Infusions. You can still set the growth rate BEFORE it starts. Then inject into the picture at 75.