Moemg
Gone but not forgotten
I don't need $200,000 but I would enjoy having the option for a year or two !
often people have little to no understanding how drastically taxes can be reduced in retirement. .
The main point of my question is not to criticize the spending--but criticize the calculation..with no major debt, I have to wonder if the math is wrong. often people have little to no understanding how drastically taxes can be reduced in retirement. Or they include school tuition as an ongoing expense instead of the limited obligation it represents. Without details it is impossible to know if $200k is the right amount--right in the sense of correct- not morally. This is why I asked for details. As you pointed out, by showing more details we can all learn more about what it will be like for us, boosting spending in some areas over what others might spend, and eliminating or drastically reducing spending in other specific areas.
I took this point on and ran a 'simulation' via 2013 turbo tax for a hypothetical couple with a $5MM after tax portfolio generating 5% capital gains per year, $22,000 property tax and state income tax (Oregon, admittedly a high tax rate). 'Schedule A' deductions are the real estate tax plus standard deduction. No other income or SS or pensions.
$5MM x 5% = $250000 per year gains.
I dont think it is fair to say that you can tax loss your way out of capital gains as eventually the tax man will have his due, either that or you are not growing your net worth to offset inflation and withdrawals.
Tax Simulation Results
If 100% long term gains (low case) State Tax $20475 Federal Tax $20269 Total Tax $40744
If 100% short term gains (high case) State Tax $20475 Federal Tax $44873 Total tax $65142
Still a hefty amount.
Wow, this thread continues! After mulling it over a bit, I can answer how one couple is planning to spend 200K+ in early retirement years, with a slight backoff as we age. And I have no illusions at all regarding taxes, which will be amazingly less in retirement, as that item presently is the majority of all our spending. (not just the biggest item, but the majority).
I agree on the tax front. I got criticized by a few here when I first posted months ago, because I indicated that I hoped to spend $320k per year off an $8 million asset base. I realize that's a lot of spending, but $80k of the budget is allocated to big travel and $32k for charitable contributions (and that still leaves a lot of flexibility to reduce spending if needed based on market performance). With about $7 million of the assets in taxable (accumulated mainly over past 10 years), there is a lot of tax basis to use - my estimate is that federal income tax will be less than $20k in first few years (actually even less than that right at first, due to tax loss harvesting that we did in 2008 and 2009). I don't feel badly about prospectively paying so little in taxes, given the staggering amount of taxes we have paid over the past 10 years.
Wrong.
Your calculation makes a fatal error assuming you are cashing out capital gains all the time. There is no reason for that and you should still have an appreciating portfolio to offset inflation.
If I mean to slam a house for being excessively huge or extravagant, I don't call it a McMansion; I call it "A Monument to Oneself". Sometimes when we are on pleasure drives through the neighborhoods, one or the other of us might point and say, "OMG, look at that! What a monument to oneself!!!"