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Old 11-14-2009, 09:22 AM   #21
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Originally Posted by mathjak107 View Post
.. i prefered to keep my contributions to the faster growing assets in the 401k and tira where i can convert them over to a roth once i get them .

i saw no point in low paying bonds and no paying money markets to be taking up money that could represent higher growing assets in my retirement money.

our goal is to eventually pass on the roths and pass on the capital gains stuff in the taxable. we are hoping to use little of those assets ...
MJ107......until this yr, this was my idea too. I just learned from LOL here and the bogleheads that this might be backwards. I have never done a simulation to compare the after-tax consequences of each strategy. Have you? My positions are probably like yours since I haven't done anything....still thinking and learning.

I know that if you have an annuity, the after tax returns are very strongly affected by rates of return, time in annuity, and tax rates.....that calculation I have done......but I never combined that w/ an allocation of fixed income.

......and you are completely correct that my late-at-night (my excuse) explanation was not worded clearly.....I left out non-capital taxable assets which might come before capital, unless of course you had a tax loss to exploit. Since I do specific shares sales, I could pick shares w/ no or minimal gains if I didn't have losses.
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Old 11-14-2009, 01:29 PM   #22
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kaneohe gave a good explanation. This is explained further in these white papers:
https://institutional.vanguard.com/i...P_TotalRet.pdf
http://www.vanguard.com/pdf/s556.pdf

And also at this link: Placing Cash Needs in a Tax-Advantaged Account - Bogleheads

mathjak's order of spending from Ed Slott is consistent with Optimal Retirement Calculator and Retirement Decision Support System . However, for tax efficiency if one can help it, one may not have any "taxable non-capital gains stuff" because you have all that in a tax-sheltered account. Some folks do not have enough space in tax-sheltered accounts to keep only tax efficient investments in taxable accounts though.

Anyways, it's a great idea to keep the CDs in a tax-deferred account even if under age 59.5 (or at any age).
OP here. This is what i was thinking and here's some more info on my situation. I'm 48 and the mortgage will be paid off in 4 years time. I own a two family and get $2000/mth in rent from the place.

I have $200k in after tax accounts that is mostly index equity funds, and $400k in tax advantaged accounts that is a mix of index bond and equity funds. My total asset allocation is a fairly conservative 50/50.

As I get closer to ER my plan is to set up a 4 year CD ladder in my tax advantaged accounts with $80k. The $24k annual rent and an extra $20k will cover my expenses. The rent will put me in the 15% tax bracket so I'll get a reduced dividend and capital gains tax rate (if things stay the same). In good years I'll take $20k in dividends and gains from my after tax accounts. In bad years I'll buy use one CD to buy $20k of equities in my tax advantaged accounts and sell the equivalent equity funds in my after tax accounts.

Am I doing this right? Thoughts? comments?
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Old 11-14-2009, 02:56 PM   #23
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In good years I'll take $20k in dividends and gains from my after tax accounts. In bad years I'll buy use one CD to buy $20k of equities in my tax advantaged accounts and sell the equivalent equity funds in my after tax accounts.

Am I doing this right? Thoughts? comments?
you may have meant this anyway but just to be sure I didn't lead you astray.....good yrs, 20K in divs & CG distributions and, if necessary, sale of assets (possibly selected to minimize gains)
.........bad yrs.........just be sure you don't violate wash sale rules.
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Old 11-14-2009, 07:25 PM   #24
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you may have meant this anyway but just to be sure I didn't lead you astray.....good yrs, 20K in divs & CG distributions and, if necessary, sale of assets (possibly selected to minimize gains)
.........bad yrs.........just be sure you don't violate wash sale rules.
Sure, I hope to be around $400k in after tax accounts when I ER so a good chunk of the $20k will come from distributions, but I'll have to realize some gains by selling too. The whole wash deal is a pain, but if I have to sell an S&P index fund I'll either wait a couple of months before I buy it again or buy something like an international index fund to avoid the "substantially identical" issue.
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Old 11-14-2009, 07:36 PM   #25
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The wash sale rules only come into play if you sell at a loss, so after this year, you probably won't have many losses. Also it is pretty easy to find a similar, but not substantially identical, replacement fund. For example, sell S&P500 fund and buy Vanguard LargeCapIndex fund.
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