Join Early Retirement Today
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

Reply
 
Thread Tools Search this Thread Display Modes
How much of your nest egg is after-tax money?
Old 04-16-2007, 12:29 PM   #1
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
How much of your nest egg is after-tax money?

So I'm saving all this money in my 403b, 457, etc. and I realized that more than 93% of my FIRE money is in sheltered/qualified accounts. We are trying to save some after-tax money, but only after maxing out on the deferrals.

I'm not sure if this is good or bad, but it really pinches to have to "gross up" my goals by 20% or so to account for taxes after FIRE, then face minimal withdrawals later. Maybe transfer some to Roths in 2010... Any reason to save more after-tax money in lieu of maxing out the deferred opportunities?

Wondered if my situation is the exception or the rule.
__________________

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 12:33 PM   #2
Dryer sheet aficionado
 
Join Date: Oct 2006
Posts: 39
Re: How much of your nest egg is after-tax money?

I'm in the lower half of the range, probably about 40% tax-sheltered, 60% taxable (of approx. $1.1M net worth). I'm trying to tax-shelter every penny I can, but I guess I'm just saving too much!

- M
__________________

__________________
milmoose is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 12:36 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Re: How much of your nest egg is after-tax money?

Mine is > 80% post tax -I mean not tax advantaged like 401k or IRA.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 12:51 PM   #4
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by HaHa
Mine is > 80% post tax -I mean not tax advantaged like 401k or IRA.
Curious - was that your intent, or did you just not have the opportunity to defer more?
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 12:56 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,386
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by Rich_in_Tampa
Curious - was that your intent, or did you just not have the opportunity to defer more?
I became FI by trading, not working and saving.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:08 PM   #6
Thinks s/he gets paid by the post
free4now's Avatar
 
Join Date: Dec 2005
Posts: 1,225
Re: How much of your nest egg is after-tax money?

I'm someone who is approx 80% post tax. I would be more tax sheltered but I took the most risks with my 401k, putting it into some tech funds that tanked in the dotcom fallout. My 401k balance is around half what I contributed to it over 13 years.

I still think it's a good idea to max the 401k and invest it in the most volatile equities of your portfolio, because that should be the longest time-horizon money. But if I had it to do over again I would have probably put it into a small cap index rather than tech funds.


When I was working my net worth was mostly in unexercised NQ employee stock options, pre-tax. It was frustrating that the 25x rules didn't apply to me since my net worth would be reduced by almost half due to option exercise taxes as soon as I left work. It was more like 40x for me.
__________________
free4now is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:16 PM   #7
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by Rich_in_Tampa
I'm not sure if this is good or bad, but it really pinches to have to "gross up" my goals by 20% or so to account for taxes after FIRE, then face minimal withdrawals later. Maybe transfer some to Roths in 2010... Any reason to save more after-tax money in lieu of maxing out the deferred opportunities?
The military didn't start offering tax-deferred savings opportunities until the late '90s. So we were only able to put about 20% of our savings in IRAs.

It seems that you'd have to pay taxes now or pay them later. It would be an advantage to be able to defer taxes until you could pay them in a lower bracket, either via Roth IRA conversions or ER withdrawals (or if by some miracle the tax laws were changed to reduce taxes). So maybe "plusing up" by 20% is only necessary because you haven't had to pay those taxes along the way...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:27 PM   #8
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: How much of your nest egg is after-tax money?

Right now I'm about 2/3 after tax money.

I can see that is about as high as it's going to get. With a new house and kids (hopefully) soon I can see the writing on the wall that my days of banking 25% of my takehome gross plus banking my bonus are certainly over.

__________________
saluki9 is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:28 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
Re: How much of your nest egg is after-tax money?

I still have about 9 years to go before I hit my retirement goal, but right now I'm about 40% tax deferred, 60% after tax with my investments. Main reason is simply that I started investing in after-tax stuff before I got into 401k's, IRAs, etc. When I was younger, I was a bit scared about locking money up in an account that I couldn't touch until I was retired, which seemed a million years away at the time. But in retrospect, I kinda wish I had started putting into my 401k earlier. Especially in those early days when I started with McDonnell-Douglas, and their stock was going for about $20-30 per share. Since the early 90's, it did a 3:1 split, a 2:1 split, then a 1.3:1 split when it converted to Boeing, and nowadays goes for about $90 per share!

But, as they say, hindsight is always 20/20.
__________________
Andre1969 is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:34 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by saluki9
With a new house and kids (hopefully) soon I can see the writing on the wall that my days of banking 25% of my takehome gross plus banking my bonus are certainly over.
Welcome to the club, pal. Its OK, the rewards are generally well worth it.

We are at about 50% taxable. We were on a track to be more lopsided in taxable, but the one gigantic homerun I hit in the portfolio was mostly in tax deferred accounts. I imagine that we will become increasingly weighted to taxable money unless I decide to pay off the mortgage early.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:40 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,646
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by Rich_in_Tampa
I'm not sure if this is good or bad, but it really pinches to have to "gross up" my goals by 20% or so to account for taxes after FIRE, then face minimal withdrawals later. Maybe transfer some to Roths in 2010... Any reason to save more after-tax money in lieu of maxing out the deferred opportunities?
Rich. We are about 2/3 in pre-tax accounts but more like about 4/5 if we count my mostly taxable pension. So we will be in a high bracket. In years past when I did guestimates of the tax hit in ER I always assumed they would be very high. But due to DW's complicated situation we use a accountant and really were just guessing. Based on a mention on this forum a few months back I downloaded the free version of H&R Tax Cut this year and have run a number of scenarios based on estimated withdrawals after DW stops working. I was pleasantly surprised to see that total taxes will be quite a bit lower than what I anticipated - even when I calculate them only pre-tax withdrawals. The marginal rates are still high but they hit a limited number of dollars. Have you run actual numbers through Turbo Tax or Tax Cut to see what the results are?
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:43 PM   #12
Full time employment: Posting here.
 
Join Date: Apr 2005
Posts: 577
Re: How much of your nest egg is after-tax money?


Mine is 85% after tax, mostly because I did not have access to a 401k.
__________________
kat is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:46 PM   #13
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by donheff
I was pleasantly surprised to see that total taxes will be quite a bit lower than what I anticipated - even when I calculate them only pre-tax withdrawals. The marginal rates are still high but they hit a limited number of dollars. Have you run actual numbers through Turbo Tax or Tax Cut to see what the results are?
Don,

Haven't run the numbers, but with a plan to work part-time, I won't likely get down in a low enough bracke to save a whole lot. Nice problem to have, I guess. Given the uncertainties, I figure my best option is to watch the Roth regulations and when the stars align some time before full SS retirement age, make my move as a rollover in years I don't work much.

So far, it looks like there are quite a few with big bundles of already-taxed money in hand.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:52 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
Re: How much of your nest egg is after-tax money?

It seems we have always invested in after-tax investments about the same amount as we put in tax-deferred investments. So we have about 50% on each side of the fence.
__________________
LOL! is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 01:55 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Location: Los Angeles area
Posts: 1,432
Re: How much of your nest egg is after-tax money?

I retired at 48 last year with 87% in IRAs, mainly because my job
from 1983-1997 offered a very good 401k plan (I put in the max
10%, they put in 15% even if I put in nothing) which was rolled over
into an IRA where the money performed well for the last 10 years.

I have already started 72t'ing, using the easy-to-calculate way.
__________________
learn, work, save, invest, fire
CyclingInvestor is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 02:00 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: How much of your nest egg is after-tax money?

~8%
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 02:22 PM   #17
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
Re: How much of your nest egg is after-tax money?

I think this is two issues

1) how much net worth is in post tax investments? Should be more than 50% for FIRE, IMO.

2) How much nest egg is held in a taxable account? 25-50% is what I am shooting for.

within 5 years I plan to stop deferring $$ to 401k and start upping taxable contributions based on FIRE goals.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 02:40 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,321
Re: How much of your nest egg is after-tax money?

80%

401k and deductible IRAs are available to us and I plan to keep it at the same percentage. Why pay more taxes now?
__________________
Corporateburnout is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 02:40 PM   #19
Recycles dryer sheets
 
Join Date: Mar 2007
Posts: 121
Re: How much of your nest egg is after-tax money?

We've maxed out the 401K for years with an additional 9% going in from my employer plus at 50 I maxed out the catch-up election, therefore 80% is in the 401k. With 2 years to go to FIRE we've also been trying to put more $$ aside in aftertax. The thought being that even with a pension, we will need to fund additional expenses for 1.5 years before I turn 59 to avoid the 10% penalty. Don't want to go the 72t route either since the minimum time for that is 5 years and I prefer not to be locked in. Much rather have flexibility. I know I will have a hard time spending that aftertax money for 1.5 years being that I've been in the accumulation stage all my life. I'll have to recondition my brain.
__________________
hogtied is offline   Reply With Quote
Re: How much of your nest egg is after-tax money?
Old 04-16-2007, 02:46 PM   #20
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How much of your nest egg is after-tax money?

Quote:
Originally Posted by jIMOh
I think this is two issues

1) how much net worth is in post tax investments? Should be more than 50% for FIRE, IMO.
Not sure I can identify a "should" or "shouldn't" here. Seems highly dependent on individual circumstances as we've seen here. For example, in one case it's post tax because shelters were not available, while in others it's huge gains that happened to be on post tax investments. Perhaps in other cases, their post tax holdings would have been a lot higher had they been qualified holdings.

At any rate, one way or another I guess you have to "discount" deferred holdings when you sell them compared to post-tax holdings to account for the tax implications. But their pre-tax earnings over the years might have benefitted you more than the tax implications will hurt you.
__________________

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Cracking the nest egg FlogBlogger FIRE and Money 3 03-13-2007 10:17 PM
money matters for overseas retirees nun FIRE and Money 43 08-09-2006 10:38 AM
Please Don't Show Me the Money! REWahoo FIRE and Money 19 03-27-2006 01:45 PM
Emergency Money razztazz FIRE and Money 17 08-04-2005 04:28 PM

 

 
All times are GMT -6. The time now is 02:42 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.