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View Poll Results: What is the percentage of taxable money in your portfolio?
0 to 10% 19 12.03%
10 to 20% 25 15.82%
20 to 30% 17 10.76%
30 to 40% 16 10.13%
40 to 50% 25 15.82%
50 to 60% 14 8.86%
60 to 70% 12 7.59%
70 to 80% 12 7.59%
80 to 90% 8 5.06%
90 to 100% 10 6.33%
Voters: 158. You may not vote on this poll

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Old 01-22-2013, 11:55 AM   #41
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When one has investments, it's a lot easier and can even completely control the investment process if you have money in tax deferred or untaxed accounts versus taxable (each and every year). As Ha mentioned above, it's all about that 1040 you have to do each year.

My investment approach would change a lot if I had to worry about yearly taxation of traded stocks/bonds. That tax deferral is huge to me.
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Old 01-22-2013, 12:14 PM   #42
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Originally Posted by Lsbcal View Post
When one has investments, it's a lot easier and can even completely control the investment process if you have money in tax deferred or untaxed accounts versus taxable (each and every year). As Ha mentioned above, it's all about that 1040 you have to do each year.

My investment approach would change a lot if I had to worry about yearly taxation of traded stocks/bonds. That tax deferral is huge to me.
+1. I do more rebalancing in my TIRA than I do in my taxable accounts (i.e. I have a smaller AA range in my TIRA), partly because I don't have to worry about any tax consequences. In fact, in 2011 for the first time since I began investing in taxable account mutual funds more than 20 years ago, I did not have to file a Schedule D because I made no exchanges or redemptions in any taxable account mutual funds.
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Old 01-22-2013, 12:22 PM   #43
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44% in taxable accounts. As dividends and CG from my taxable accounts +SS constitute all of my income I expect that percentage to decline over the next 8 years until I start RMD's
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Old 01-22-2013, 12:33 PM   #44
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Originally Posted by Lsbcal View Post
When one has investments, it's a lot easier and can even completely control the investment process if you have money in tax deferred or untaxed accounts versus taxable (each and every year). As Ha mentioned above, it's all about that 1040 you have to do each year.

My investment approach would change a lot if I had to worry about yearly taxation of traded stocks/bonds. That tax deferral is huge to me.
+1. In the past, that is.

For me, that was only true in theory. In 1999-2000, I loaded my rollover IRA with tech stocks (no dotcoms here, mind you), and had nice, darn nice gains. I could have sold and kept mucho money without any tax dues. Sadly, my fear did not conquer my greed and I did not sell until most of the gains had evaporated.

Anyway, with the tax-free dividends and cap gains for an early retired couple earning less than $90K (15% bracket+exemptions etc...) from taxable investments, for me that pretty much levels out the advantage of the deferred accounts. Some people here are truly rich and may exceed that threshold, but at a hypothetical dividend yield of 4%, that means $90K/0.04 = $3.6 mil in taxable accounts. That's many times more than what I have as principal in those accounts.

I will be sure to sell/buy-back more equities to "launder" them as much as my headroom in the $90K bracket will allow, to clean out any cap gains and to reset the basis. Who's to say Congress may not take this away in the future?
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Old 01-22-2013, 01:20 PM   #45
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+1. In the past, that is.

For me, that was only true in theory. In 1999-2000, I loaded my rollover IRA with tech stocks (no dotcoms here, mind you), and had nice, darn nice gains. I could have sold and kept mucho money without any tax dues. Sadly, my fear did not conquer my greed and I did not sell until most of the gains had evaporated.
Many of us have one of those "the one that got away" stories. Don't feel too bad.
Quote:
Anyway, with the tax-free dividends and cap gains for an early retired couple earning less than $90K (15% bracket+exemptions etc...) from taxable investments, for me that pretty much levels out the advantage of the deferred accounts. Some people here are truly rich and may exceed that threshold, but at a hypothetical dividend yield of 4%, that means $90K/0.04 = $3.6 mil in taxable accounts. That's many times more than what I have as principal in those accounts.

I will be sure to sell/buy-back more equities to "launder" them as much as my headroom in the $90K bracket will allow, to clean out any cap gains and to reset the basis. Who's to say Congress may not take this away in the future?
Good idea. I think we can count on several tax advantages going away in the future.

In case I gave the wrong impression, when RMD's kick in I will be forced into a high tax bracket because then the SS gets fully taxed. I will be paying at a hefty marginal tax rate I think. I will do my duty too.
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Old 01-22-2013, 01:40 PM   #46
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Since you didn't specify in your poll, I assume you want current percentages.

At the risk of being accused of quibbling (who, me?), my after tax % is considerably lower now after 7+ years of retirement than it was when I pulled the plug. Most of that money was used up funding our living expenses prior to age 59.5 and to allow for some Roth conversions.
Ditto. 49.5 to 69 lived largely off some cash, div stocks, RE and 1 yr or so temp work. Now under 10%. also took early (55) pension and SS(62).

Coming up on 70 1/2 and good old RMD.

Heh heh heh - Jump in Taxes will be an ouch.
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Old 01-22-2013, 01:43 PM   #47
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We have around 30% in taxable accounts. We have maxed out retirement accounts (IRA, 401k x2, 457), Health Savings Accounts, and 529 College savings accounts to the extent possible. I even had about 10% of our total portfolio in a former employer's ESOP plan which is being rolled into my IRA in equal annual installments over the next 4 years.

In spite of these tax deferred options, we always end up out of tax deferred savings options at some point during the year so we dump a decent amount into the taxable account. We'll probably spend it down first in ER along with a 72t or withdrawals from the 457. Having 30% of the portfolio in taxable accounts means it could fund 10-12 years of withdrawals if that were the only source of income for us.
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Old 01-22-2013, 02:01 PM   #48
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Many of us have one of those "the one that got away" stories. Don't feel too bad.
Good idea. I think we can count on several tax advantages going away in the future.

In case I gave the wrong impression, when RMD's kick in I will be forced into a high tax bracket because then the SS gets fully taxed. I will be paying at a hefty marginal tax rate I think. I will do my duty too.
For me there is something to be said in many cases for adding to taxable investment accounts even before you've maxed out your tax-deferred or tax-free options. (At least unless you are in a very high bracket now, and even then possibly so if you believe that taxes will be higher in the future.)

When you have all three types of investments -- traditional retirement accounts, Roth vehicles and taxable accounts -- it's more possible in retirement to "engineer" income streams in a way that gets you all the benefits of the lower tax brackets while adding more income that will not be taxed into the next bracket. For example, if the top of the 15% bracket were at $60K, you could withdraw from TIRAs and 401Ks in conjunction with SS and any pensions or tax-deferred annuities up to nearly $60K (locking in those withdrawals at low marginal rates), and if you needed another $20K, you can get that from taxable accounts and Roths. And if in some year you needed less than $60K, you might still withdraw as much as you could at a 15% tax rate and move the excess cash flow into taxable savings or investment accounts. This is even more true if you are looking at very large RMDs or if you have a large pension.
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Old 01-22-2013, 02:16 PM   #49
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Many of us have one of those "the one that got away" stories. Don't feel too bad.
No, not just one. They all got away! Most of them!

Anyway, back on taxable accounts, I spent a lot more time looking at my tax-deferred accounts because of that possibility of booking gains without paying taxes, and also loaded my taxable accounts with stocks that I hoped would be for longer term holding. Hence, when I thought about pulling the plug, silly me did not even know if I had to do 72t or not. Could you believe that?

But now, I am glad that I have some freedom to decide what to draw on. But, but, but this degree of freedom means that I may be spending a lot of time to optimize my taxes, to squeeze out a bit here and there, to play the shell game with the tax man.

See what Congress does to keep our mind busy?

PS. Oh never mind. The IRS has Xray vision and can see right through the shells, and even my cupping hands covering them, to see what is in each shell.
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Old 01-23-2013, 11:03 AM   #50
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Just spotted this arithmetic error. $90K/0.04 = $2.25 mil, which is still a lot more than what I have in taxable accounts.

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...Some people here are truly rich and may exceed that threshold, but at a hypothetical dividend yield of 4%, that means $90K/0.04 = $3.6 mil in taxable accounts. That's many times more than what I have as principal in those accounts.
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Old 01-23-2013, 06:37 PM   #51
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More than 90%.
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Old 01-23-2013, 07:07 PM   #52
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I might be reading this wrong, but I consider everything for retirement other than my primary residence and 529 accounts. If it came down to it, we could downsize our residence for more retirement funds and 529 account could be shifted if life happens. It really would be a crisis for us to not use 529 funds for our kids' education, but that's a good 12 years away.

28% Taxed
34% TIRA/Roth/HSA
38% Investment Real Estate

So should I answer the poll with 28% or 66% (28% + 38%)? I'm not good with polls!
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Old 01-23-2013, 07:34 PM   #53
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And most of us are not good at making polls!

The motive for my question was to see how much a retiree he can tap at his discretion without paying taxes and penalty. This is important for an early retiree who must live off his savings, has not yet gotten SS, and cannot tap his IRA/401k until he reaches 59-1/2 without going through the straight-jacketed 72t. That would be me.

Another reason was that people who get less than $90K/yr from qualified dividends and cap gains get a free ride on the income tax, but if one has no or little taxable accounts, he cannot make use of this "generosity". Again, I am lucky to make use of a bit of that.

What is interesting is that because our tax laws are so complicated, there are more than just two simple types of assets as I originally thought of in my simplistic model.

If I have any investment RE and need to liquidate it to survive, the basis will not be taxed, but the cap gain will be. If this taxable cap gain is exempted from taxes for people under the $90K/yr income, then it would be like the stocks in my brokerage accounts. I do not know if the rent thrown off that RE gets good treatment like my stock dividends, but it probably does not. So, is investment RE just like taxable accounts, or just somewhat like it?

Gosh! See how people getting the same income can pay all different taxes, depending on the source?
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Old 01-23-2013, 08:11 PM   #54
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If I have any investment RE and need to liquidate it to survive, the basis will not be taxed, but the cap gain will be. If this taxable cap gain is exempted from taxes for people under the $90K/yr income, then it would be like the stocks in my brokerage accounts. I do not know if the rent thrown off that RE gets good treatment like my stock dividends, but it probably does not. So, is investment RE just like taxable accounts, or just somewhat like it?

Gosh! See how people getting the same income can pay all different taxes, depending on the source?
I'm not a CPA, but I believe at the current moment, the RE gain would be taxed at a higher rate than your stocks, unless 1031 exchange is used or passed on to the kids. Also, in the future I might make the property my personal residence for a few years, then sell. Everything is subject to change

For us, if things remain the same, the real estate net income will cover 95% of our retirement budget putting limited impact on taxed and tax deferred savings. It'll be my part time job, after I drop my full time job.

Ok - I voted 20 - 30%.
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Old 01-23-2013, 08:40 PM   #55
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I faced a lot of barriers to putting money in tax-deferred accounts. Shortly after I was doing well enough to max out my 401K, there were limits on how much the higher-paid employees could put in their 401K. And thereafter I didn't qualified for a tax-deferred IRA either, let alone for a Roth IRA when they came along. So, I saved as much as I could after taxes - I had no choice.

And my stock options were bought with after tax money then that was all she wrote........
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Old 01-23-2013, 08:51 PM   #56
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Cash 10.2%

Taxable 26.4%

Roth 26.2%

Tax Deferred 37.2%

I have hit it right (nearly). Social security, pension, and 5% draw on tax deferred will put me to the top of 15% tax rate. The rest is taxed at ltcg or is in a Roth. After the rates that I have been paying, I am amazed.
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