How can I maintain my current retirement income?

I retired in February of this year at the age of 66. I was earning six figures. I have a 401(k) with $410,000 in it. Sixty percent of it is allocated to bonds and the rest is in stocks (mostly an S&P 500 index fund). I am receiving retirement funds from the Air Force Reserve and a railroad retirement plan. I have been pulling $1,500 a month from the 401(k) to supplement my income, but I have more money in the 401(k) than when I started retirement in February. My monthly income is about $6,100, and this covers all of my expenses. I seem to generate money most days the market is open, although I know that the market could take a downturn anytime. What should I do to maintain this income stream? Is the allocation of my 401(k) advisable?

Retirement, 401(k), Mutual Funds, Stocks
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First of all, I must assume (since you don't mention it) that you have no meaningful savings put away outside of your retirement account.  If this is true, it looks as though you are able to cover expenses with pension income plus $18,000 per year (pretax) in withdrawals from the 401(k).  $18,000 is 4.4% of the value of your account, so the withdrawal rate is sustainable, more or less.

If you do have a savings account, take the $1,500 per month from it and not your 401(k) (which you should roll over to an IRA at some point).  401(k) withdrawals are taxable and withdrawals from savings are not.  Let the assets in the retirement account grow as long as possible, and take them only when you have to -- at age 70-1/2 and after.

But I have to mention that I think 60% bonds is too much.  You are subject to "the risk of safety" in that your retirement assets may feel safe, but are unlikely to grow much.  Even an extra 2% per year, over the next 20 years, can make a big difference in your lifestyle.  I know markets are at highs and that has everyone worried, but I think a 66-year-old who needs less than 5% of his assets in any given year can consider himself a long term investor.  I would hold 65-70% equities.  Also, consider preferred stocks as an alternative to bonds.  I can give you more information on this if you are interested.

Now, don't go changing all at once.  We are bound to get a selloff and when it comes you should consider it a buying opportunity.

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