Diversification of Accounts Between Taxable, Tax Deferred, and Tax Free

[IBWino]

33% tax deferred
67% taxable

Our income is currently too high to contribute to a Roth, but we intend to start shifting assets into Roths after we (hopefully) retire in 5 years.

 

[FurBall]

69% taxable
31% tax deferred
0% tax free

This year the tax rate may finally be low enough due to ramping down part-time consulting to allow starting some Roth conversion.

 

[powerplay]

42% tax deferred
18% tax free
40% taxable

This has been an interesting thread.

 

[ronin]

24% Taxable Equities
32% Munis in the taxable acct
32% 403b/TIRA
12% Roth IRA

Still contributing to TIRA from early retirement incentive buyout (5 yr. payout rolled to IRAs). Probably begin Roth conversions in Jan.

 

[haha]

42% tax deferred
18% tax free
40% taxable

This has been an interesting thread.

Very large distibution/allocation/differences among members!

Ha

 

[rockyj]

Of investments and cash earmarked for income in retirement:

Tax deferred 33.00%
Tax free (Roth) 18.37%
Taxable 48.63%

Does not include personal real estate or other items not earmarked for income. Also, for perspective, the above will be used for between 40 and 50% of retirement income -the rest from pension.

Like many others, I will likely fill up lower tax brackets when possible with Roth conversions to incrementally take money off the tax table, perhaps reduce future RMDs, and position better for estate purposes.

 

[LOL!]

We saw on the Roth-conversion thread that many folks have tax-deferred assets that are really tax-free assets since those assets will be accessed via the 0% tax-bracket.

 

[Alan]

48% Tax Def.
3% Roth.
49% Taxable

This year was first time ever able to either contribute or convert to Roth.

 

[JohnDoe]

88% Tax Deferred (e.g. TIRA's).
11% Tax Free (Roth's)
1% Taxable

Almost identical...

88% Tax Deferred
9% Tax Free (Roth's)
3% Taxable

I just don't have the income to increase the taxable yet.

 

[sn2792]

95% Tax Deferred
5% Taxable

Retired in July and DH's last day is this Friday, so next year will be first year to withdraw from investments. Should be in 15% tax bracket which is much lower than what we are now.

 

[yakers]

76% tax deferred (IRA/TSP)
8% tax free (Roth IRA)
8% taxable stocks
8% cash (credit union)

piddling amounts in ibonds & gold coins

DW retired 4 years ago & I retired 2 years ago, total portfolio finally back up to its high in 2007

 

[scrinch]

64% tax-deferred
36% taxable
<1% tax-free

We've been in the 33% bracket for a while and so haven't contributed to a Roth in a long time...and no conversion either. I'm thinking of going back to w*rk full time again for another 5 years, and am considering contributing to a Roth 401k this time instead of pre-tax money.

 

[jayc]

48% tax
48% tax defer
4% roth

No plans to convert to roth, just yearly contributions.

 

[TromboneAl]

Taxable: 19%
Tax-deferred: 73%
Roth: 7.6%

Note that, unlike asset allocation (stocks/bonds/cash), this distribution is largely involuntary. That is, most of us put as much as possible into tax-deferred investments.

Those of us with the highest tax deferred percentages, are probably those with access to SEP-IRAs or other special retirement vehicles.

 

[REWahoo]

Note that, unlike asset allocation (stocks/bonds/cash), this distribution is largely involuntary. That is, most of us put as much as possible into tax-deferred investments.

+1

The percentages are largely a function of individual employment circumstances and what saving/investment vehicles are/were available to you.

 

[ronocnikral]

Those of us with the highest tax deferred percentages, are probably those with access to SEP-IRAs or other special retirement vehicles.

Or those that are "really young." I've only recently started my taxable investments. The one thing I have learned from this thread is, expect the % of taxable accounts to increase substantially over the next 2 to 3 decades.

 

[FUEGO]

Note that, unlike asset allocation (stocks/bonds/cash), this distribution is largely involuntary. That is, most of us put as much as possible into tax-deferred investments.

I had the same thought. My taxable vs tax-favored savings are completely driven by how much I can defer at a maximum, then saving whatever is left over in taxable accounts.

 

[scrabbler1]

60% in taxable
30% in tax-deferred (TIRA)
10% in tax-exempt (muni bond funds in taxable account)

 

[haha]

60% in taxable
30% in tax-deferred (TIRA)
10% in tax-exempt (muni bond funds in taxable account)

The reason I tried to specify this as by account, rather than as by investment is that things like munis are electively tax free-you can go from them to stocks, or taxable bonds or whatever. Also, under various circumstances capital gains on these may be taxable. I have various partnerships, which at times are essentially tax deferred, but they are in a taxable account so I count that entire account balance as taxable money.

Some members live essentially tax-free lives, since their investments tend to be loss-making. At least while this continues, all their accounts are tax free. Others achieve the same tax free status by living very cheaply, thus being income-poor. But that is not what I was trying to investigate in this thread.

Ha

 

[Bestwifeever]

All of ours is tax-deferred.

 

[hankster]

Good thread Ha. "Tax diversification" has been on my mind lately. We are:

75% tax deferred
25% taxable

Up until this year, our income was higher because DW was still working full-time. My 401k has always been traditional.

Now that she semi-ERed, our income is lower. It also looks like I will soon be able to make my retirement contributions to a Roth 401k at work. These two factors have us seriously considering the developement of a tax-free component in our portfolio due to future RMDs and the desire to leave leftover funds to our children.

 

[bbbamI]

52 and 56 years old, both retired with a pension.

Accounts.....

82% tax deferred
18% taxable

 

[SomedaySoon]

52 yrs and counting down 6 more months.......

7.5% Tax Free
25.5% Taxable
67% Tax deferred

 

[DoingHomework]

We are about

75% deferred
25% taxable

This is down from a much higher % taxable before buying a second home a couple of years ago. Plus we are now vested in a government pension with a high phantom worth.

I'd love to read the article referred in the original post. I did not see a link. Anyone have one?

My theory has always been that the huge pile of money accumulating in tax deferred accounts is going to be an increasingly attractive source of tax revenue in the future. When every worker has to pay enough SS to support half a retired person there will be enormous political pressure to get at tax deffered savings.

The easiest way to do that is through high tax rates since we all already know we have to pay taxes. No one has told us how much though! Seems like a pretty clever marketing technique. We've bought the car and are waiting for the salesman to tell us how much. When I look at historical tax rates in the US it is worrisome. Rates were well above 50% and went into the 90% range in the 50s and 60s. While I'm not a doom and gloom type and can't imagine them going that high in my lifetime, I do think we could see 50-60% again.

My view on the economy is that we are headed into something like post war era - low inflation, low interest rates, basically boredom and a "geezer boom" just like we had a baby boom. In that context I don't think escalating tax rates to the 50-60% area is a dire prediction. They were higher the last time we had similar debt and economic conditions.

I'd rather have most of my money in something I can (legally) pick up and move if taxes start to go up. I can do that with my taxable money. I have no desire to leave the US and become an ex-pat someplace but I also don't see how the upcoming situation can be funded without greatly higher tax rates. I want to be as immune as possible from that.

 

[Free To Canoe]

3% Tax Free
58% Taxable
39% Tax deferred

Free to canoe