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View Poll Results: At the time you retire(d) what percent of your investable nest egg was in after-tax investments (NOT
< 5% 8 5.26%
5-10% 10 6.58%
6-20% 28 18.42%
21-50% 41 26.97%
51-75% 36 23.68%
76-100% 29 19.08%
Voters: 152. You may not vote on this poll

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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 07:49 AM   #41
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Re: How much of your nest egg is after-tax money?

And deferred ordinary income is for example what is in traditional IRAs, 401K, etc.?

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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 09:33 AM   #42
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Re: How much of your nest egg is after-tax money?

I am just over 50% after tax. A chunk of that was from an inheritance. As we keep putting $$ into tax deferred, that balance will shift to a greater percentage there. Having the flexibility to access to those aftertax funds is good.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 11:45 AM   #43
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Re: How much of your nest egg is after-tax money?

Only 4% of our liquid net worth is in after tax accounts.

Since the early 80s, I have always put the maximum in tax advantaged accounts. My thought process was that I couldn't spend it if I couldn't get to it. I would use year end bonuses to fund IRAs. I have made the maximun IRA/Roth contribution every year, except once, since 1982. I have always done the maixmum on 401ks every year that they have been available to me since 1984. Now we are funding my wife's IRA as well.

It seemed that it was difficult to save much of anything after that. Something always seems to come up; like kid's college, major house repair, etc. I always wanted to have that 3-6 months of expenses for an emergency fund. On the other hand, I never had to wait to long for the other shoe to drop. I guess that is why it is an emergency fund.

I consider myself fortunate that I had the discipline to max out IRAs and 401ks. Those funds have done well. Otherwise I spent what I made.

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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 01:43 PM   #44
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Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by wab
I'm not sure I follow your logic. You'll only get taxed once when you withdraw. Those with taxable portfolios get taxed on every reinvested dividend or interest and on the gains after a sale, as well as on the originally invested income.
WAB, I think what Rich was saying is that when you have $50K you spend from a taxable account in retirement, you have $50K to spend. If it is coming from a pre-tax account then you have to subtract the taxes. So if the tax rate was 10% (effective), then you would have only $45K to spend. So $1M in a taxable account gives you $1M, but the same amount in a pre-tax account gives you less to actually spend, as you have to pay taxes on that amount. So to be in an "equivalent" level of prosperity, $1M in a post-tax account is worth more to you than the same amount in a pre-tax account.

One other effect that hasn't been mentioned is deferred capital gains. In my case I have about 75% of my money in post-tax accounts. They're set up to minimize capital gains (mostly in index funds). But as time goes on my deferred capital gains grow. When I finally RE I will still have some tax liability in my post-tax accounts, but not as much as from the traditional IRAs, 401Ks, etc.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 01:52 PM   #45
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Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by Surfdaddy
So $1M in a taxable account gives you $1M, but the same amount in a pre-tax account gives you less to actually spend, as you have to pay taxes on that amount. So to be in an "equivalent" level of prosperity, $1M in a post-tax account is worth more to you than the same amount in a pre-tax account.
But you still have to pay taxes on the gains from the taxable account when you sell. And on the interest. And on the dividends. And if you're reinvesting the interest/dividends/gains during your retirement, you get taxed twice: on the original distribution as well as on the new gains.

Over the long term, the tax deferred account should do better, and since we're ER's, the long term matters a lot.

And there's always a chance that you'll pay no taxes at all on your tax-deferred accounts. All you need to do is die before you get your first RMD. :P
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:16 PM   #46
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Re: How much of your nest egg is after-tax money?

I'm more like you Rich

My heaviest saving has always been in my 401K where I have contributed 15% and enjoyed a copany match of 5% for the last 25 years. For years while paying a mortgage, paying college tuitions, etc., etc., etc. I really wasn't able to save anything else. It wasn't until quite recently that I've been able to start saving anything outside of this vehicle. Currently I've got about 10% of my savings in non-qualified vehicles.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:20 PM   #47
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Re: How much of your nest egg is after-tax money?

We are currently 65% tax deferred, 35% after tax - we are maxing out as much of the tax deferred as possible as well as adding to the after tax - the after tax is going to be a supplement to our small pension until I hit 60, 62 and 65 respectively and get my pensions. Our tax deferred will stay in tax deferred for a long time - hoping to live totally off the small pension in 5-8 years and the after tax earnings (4% or less).
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:22 PM   #48
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Re: How much of your nest egg is after-tax money?

interesting poll ... being 3/4's real estate I voted in the last bracket. This is not to say I realized the taxes on those gains ... but it's not tax sheltered.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:27 PM   #49
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Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by tryan
interesting poll ... being 3/4's real estate I voted in the last bracket. This is not to say I realized the taxes on those gains ... but it's not tax sheltered.
Real estate has to be the best investment tax-wise. $500K tax-free cap gains every time you sell your residence. Depreciation allowance on rentals. 1031 exchanges. Who needs an IRA?
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:48 PM   #50
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Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by wab
But you still have to pay taxes on the gains from the taxable account when you sell.
No controversy about that. It's a planning matter, however, to the extent that ordinary income is taxed differently from gains, etc.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 02:52 PM   #51
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Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by Rich_in_Tampa
No controversy about that. It's a planning matter, however, to the extent that ordinary income is taxed differently from gains, etc.
Not even a planning matter, it's more of a speculation matter on current tax structure vs future tax structure. No way to really tell which way will be better in the end, but it's usually a pretty good bet that your overall tax bite will be lower post-retirement than pre-retirement.
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Re: How much of your nest egg is after-tax money?
Old 04-17-2007, 09:04 PM   #52
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Re: How much of your nest egg is after-tax money?

I'm 60% after-tax, but that should shift in the next 10 years. I am just starting off, but last year I did pretty well and the 401k just couldn't keep up.
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