Originally Posted by coltsfan53
Kramer - I really appreciate your feedback on my ER query. Since I fired my financial planner and went to a simple indexing investment approach, I guess I need to ask how one knows if the portfolio is "structured correctly" so that our tax bill can be $0. I honestly had no idea that this is even a possibility. My impression is that 15% is the lowest a person can pay, given any reasonable income.
It depends on where your income is coming from.
If you take most out of tax deferred accounts, that all gets taxed like ordinary income...the taxes were deferred not avoided.
If you take dividends and cap gains up to about $90,000 a year they can be taxed at 0% (federally, married file jointly) so if say $50000 is dividends and $40,000 is capital gains you subtract your standard deductions and your federal income tax bracket is under $70,000 so you owe ZERO to the federal government. Your ACTUAL money to spend will be over $90,000 because if you have $40,000 in capital gains, it means you made money above the principle investment. If your gain was conservatively 3% per year for 20 years then you got a $40,000 cap gain by selling out $66,667 of assets. So you would have an "income" of $116,667 which while not extraordinary has to be considered reasonable. Some of it will have to be used to pay state income taxes, but in most states that still leaves a reasonable income on a yearly amount on which you paid far lower than 15%.