I inherited a non-spousal IRA in 2021. My approach has been to plan on withdrawing a bit over the fractional share for the given year (1/10th at the start, then 1/9th, 1/8th, etc. as the remaining time reduces), spread out in monthly installments, in order to spread out the tax hit over the ten years. We use the annual withdrawal to offset full funding of DW's and my Roth and HSA each year, plus send extra principal payments on our mortgage monthly.
I set things up to consist of three "chunks":
1) the current year's withdrawals in VUSXX (money market fund, currently 5.28%)
2) three-year, rolling Treasury ladder for the next three years of withdrawals (all around 4.5% YTM)
3) remainder invested in a 75/25 mix of stock/bond funds (VTSAX, VSIAX, VBTLX) to create some growth for this longer duration chunk
Each year, I fund the next rung of the Treasury ladder by selling a proportionate portion of chunk 3.
Next year, I will convert the VBTLX (interm bond fund) to either VSBSX or VTIP (shorter duration bond funds), since the remaining time on the third chunk will slip below the duration of VBTLX.
Doing everything I can to ensure the money is there each year is important to us, since we are using the Inherited IRA annual drawdowns to fund other retirement goals. My balance to start was around $500k, though--considerably more than what you are playing with--so this strategy may be more complicated than you need.
I set things up to consist of three "chunks":
1) the current year's withdrawals in VUSXX (money market fund, currently 5.28%)
2) three-year, rolling Treasury ladder for the next three years of withdrawals (all around 4.5% YTM)
3) remainder invested in a 75/25 mix of stock/bond funds (VTSAX, VSIAX, VBTLX) to create some growth for this longer duration chunk
Each year, I fund the next rung of the Treasury ladder by selling a proportionate portion of chunk 3.
Next year, I will convert the VBTLX (interm bond fund) to either VSBSX or VTIP (shorter duration bond funds), since the remaining time on the third chunk will slip below the duration of VBTLX.
Doing everything I can to ensure the money is there each year is important to us, since we are using the Inherited IRA annual drawdowns to fund other retirement goals. My balance to start was around $500k, though--considerably more than what you are playing with--so this strategy may be more complicated than you need.
Statistics: Posted by FriedOkra — Thu Jul 11, 2024 8:07 am — Replies 9 — Views 625