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Help me understand asset allocation in later years
Old 04-28-2007, 12:26 PM   #1
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Help me understand asset allocation in later years

Hello All

I'm currently saving as much as possible for eventual FIRE at around 50 (I'm 31 now). I"m 100% equities at the moment and see myself being that way until around 45 to maximize earnings as I am OK with the added risk. I have maxed out my tax deferred accounts (RRSP's in Canada) and am now starting to invest in non tax deferred accounts - mainly in low cost index funds and ETF's that have minimal annual distributions. When I FIRE I want to have nearly a 100% dividend portfolio due to the extremely beneficial dividend income tax rules here in income (basically you can have up to 50K of income from dividends without any taxes payable here).

At some point between 45 and 50 I will have to dispose of all of my investments into the desired 50+ portfolio. At that point, would I not have a massive amount of taxes to pay on my non tax deferred account? Assuming I can put away 500K during that period and the investments are sold for $1Million, that is $500K of capital gains I would have to pay when I allocate to another "basket" of investments. How is this problem avoided?

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Re: Help me understand asset allocation in later years
Old 04-28-2007, 01:42 PM   #2
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Re: Help me understand asset allocation in later years

Do the allocation a little over time. It does not have to be a large step adjustment approach. You can do microsteps over the years to spread out the cap gains over time.

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Re: Help me understand asset allocation in later years
Old 04-28-2007, 01:58 PM   #3
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Re: Help me understand asset allocation in later years

You could non re-invest dividends at ~45 and start allocating new money towards bonds. Also, I am assuming you are investing money over time, not putting it all in in year 1. So, you can use LIFO and sell your least appreciated shares first.
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Asset Allocation

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