IndependentlyPoor
Thinks s/he gets paid by the post
My partner and I are 50 and 55 and have been retired for about 4.5 years. We aren't rich, but our finances are so different from the norm that common financial advice is hard to apply. Some commonly accepted rules of thumb might even be dangerous for us. The controversy about the 4% SWR is an example and this board has been great for discussing such topics.
Another difference is in taxable vs. tax-advantaged accounts. My partner and I have less than half of our portfolio in tax-advantaged accounts, and I imagine that is true for most early retirees. The limits on 401(k) contributions required us to put our additional savings into taxable accounts. Proceeds from downsizing also had to go into taxable accounts.
Folks like us fund the first years of their retirements by withdrawing exclusively from taxable accounts.
This is very different from the conventional scenario wherein a couple retires at say, 65 and starts drawing immediately from an IRA. Almost all of the investment advice one hears is aimed at this scenario.
My question is: what do forum participants think about the best way to distribute stocks and bonds between taxable and tax-advantaged accounts. It seems to me that there are at least three broad approaches:
1. Don't worry about it and maintain the same asset allocation in both type of accounts.
2. Overweight bonds in your tax-advantaged accounts so that the interest compounds tax-free, and use qualifying dividends and sales of share to fund your expenses.
3. Keep more bonds in your taxable accounts and use the interest to fund your retirement, rarely or never having to sell equities in a down market.
Whadayathink?
Another difference is in taxable vs. tax-advantaged accounts. My partner and I have less than half of our portfolio in tax-advantaged accounts, and I imagine that is true for most early retirees. The limits on 401(k) contributions required us to put our additional savings into taxable accounts. Proceeds from downsizing also had to go into taxable accounts.
Folks like us fund the first years of their retirements by withdrawing exclusively from taxable accounts.
This is very different from the conventional scenario wherein a couple retires at say, 65 and starts drawing immediately from an IRA. Almost all of the investment advice one hears is aimed at this scenario.
My question is: what do forum participants think about the best way to distribute stocks and bonds between taxable and tax-advantaged accounts. It seems to me that there are at least three broad approaches:
1. Don't worry about it and maintain the same asset allocation in both type of accounts.
2. Overweight bonds in your tax-advantaged accounts so that the interest compounds tax-free, and use qualifying dividends and sales of share to fund your expenses.
3. Keep more bonds in your taxable accounts and use the interest to fund your retirement, rarely or never having to sell equities in a down market.
Whadayathink?