Keep portfolio in balance as you take cash out

QMy wife and I are both in our early 60s and retired. I have a good pension and about $600,000 in my 401(k) in about eight to 10 mutual stock funds, bond funds, index funds and cash funds. My wife has about $60,000 in her 401(k), mostly in stock mutual funds. We have been able to live on my pension and have not applied for Social Security yet (but that is a question for another time). We have a $50,000 mortgage, have decent medical insurance and have long-term care policies. We have been thinking about taking small amounts out our 401(k) accounts for vacations and are wondering about withdrawal strategies. If we want to take, say, $10,000 to $15,000 out in a year, should we take it out of only one fund? Or should we take it proportionately out of all the funds?  

SARA AND KARL, SHOREVIEW

AIt really doesn't matter which 401(k) you withdraw the money from, assuming you're about the same age. That's the conclusion of Nate Wenner, a principal and certified financial planer with Wipfli Hewins Investment Advisors.

It would make a difference if there is a significant age difference, say, five years or more. In that case, you would withdraw from the 401(k) of the older partner first since he (or she) will reach age of required minimum distributions earlier (age 70 1/2). This way the money of the younger partner can compound longer.

When you do make withdrawals the more important issue is maintaining your desired asset allocation -- in other words, you want to maintain the kind of overall portfolio you're comfortable with. Still, the bottom line is that you're in good financial shape. "They can afford to take some vacations," says Wenner. Have fun.

QWhat is good way for a college student to build a good credit score? I have always paid the family credit cards in full each month and have stressed the importance of keeping debt at a minimum. But I know at some point in time, it is important to establish credit to have a good credit score. What other ways can students build credit?

KATHY

AMy perspective on credit cards and college students is this: It isn't necessary. It's far better to learn how to manage money with a debit card and a budget. Too many college graduates end up with a college diploma, student loans and credit card bills. However, your student should get a credit card in senior year. It's easier for a student to get a card while in college than it is after they graduate.

Chris Farrell is economics editor for "Marketplace Money." Send your questions to cfarrell@mpr.org.

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