Question On Closing/Selling Off Stock Investments

[Drake3287]

I plan to talking with my investment consultant about this but I'm just curious what other's might think.

I have an investment account with a brokerage firm that I opened year's ago as sort of a hobby account because I had some extra money at the time. I have about $50,000. invested in this account with various stocks but it's worth around $125,000. now, so yes, a $75,000. gain.

I'm 59 and also have a generous pension that I easily live off plus I have a large 457 account that I need to withdraw from before I'm 70 1/2. Just no need for it yet.

I was thinking of slowly selling off/closing this brokerage account and taking maybe $1,000. per month until it's gone. I fully realize I 'll have to pay taxes on the gains though. Any suggestions on doing this slowly so I minimize my tax burden? I assume this must be a fairly common issue with people in my situation.

[ERD50]

Enter your numbers in a 2018 tax year program. You are able to take capital gains at 0% rate up to a certain income level ($77,200 for Married/Joint). That's $77,200 taxable income (after deductions). Deduction s are $24,000 for MFJ, so you can have income of $101,200 and still be at zero % LTCG.

If you can get it all at 0% between now and 70 1/2, that should work for you. Andit's only 15% above that, so not so bad.

Try:

https://www.mortgagecalculator.org/c...calculator.php

[bingybear]

so do you pay a fee to sell? If you are charged to sell, then doing many small trade my be more expensive than just the gains. Also if you have LTCGs and are in or below the 12% bracket, you may not have to pay tax on the LTCGs.

[Drake3287]

Thanks. I will be paying a fee when I sell so yes, that'll have to be something to consider and unfortunately I'm guessing we won't be able to stay within the 2018 12% tax bracket which I believe is below the $77,400. amount when filing jointly.

Like many retirees, no longer having a mortgage has it's drawbacks.

[pb4uski]

A little more info would be useful. One option might be to sell just enough to bring your 2018 taxable income to $77,400.... then any dividends and LTCG would be tax free... and do the same in 2019 and 2020.

However, if your taxable income is already close to $77,400 in 2018, 2019 and 2020 then perhaps you should just sell in 2018 and pay the capital gains tax.

[bingybear]

can you move the assets to a less expensive broker?

[RunningBum]

If you just want to close that specific brokerage, it is easy to transfer the stock to where you want it. It probably works best to initiate it from the receiving end as they are motivated to help, as opposed to the firm losing your business.

If you want to sell the stock, I would not want to do $1000 at a time and pay 125 separate sales fees. Even if you can't stay within the 12% bracket, LTCGs are only 15% until you hit the 3.8% NIIT. You could probably sell it over 2 years and stay under that. At the very least do $12,000 in one shot rather than spread out over 12 month, IMO.

If you don't really need or want to ever sell, if you keep it until death, your heirs get a stepped up basis, meaning if that happened today the new basis would be $125,000.

You may look at donating some of the stock instead of cash. You get the full deduction of the stock value without having to take a capital gain. A pretty simple way to do that is with a donor advised fund. Search the forum for that term, or DAF. You transfer the stock to your DAF, it gets sold and cash put in your account, which you can then invest with their options. The money is committed to being donated somewhere, but you can do it when and where you please, as long as it's a recognized charity. Just watch limits on how much you can deduct as a % of your income.

[Drake3287]

Thanks for the idea's and suggestions. I live in California so that $77,400. figure is pretty easy to go over. Seem's like a lot until you live out here.

I'll have to talk with my brokerage rep and see what she might suggest and of course if I'm not comfortable with what she say's I'll find a second opinion.

[Lakewood90712]

Quote:

Originally Posted by Drake3287 I plan to talking with my investment consultant about this but I'm just curious what other's might think. I have an investment account with a brokerage firm that I opened year's ago as sort of a hobby account because I had some extra money at the time. I have about $50,000. invested in this account with various stocks but it's worth around $125,000. now, so yes, a $75,000. gain. I'm 59 and also have a generous pension that I easily live off plus I have a large 457 account that I need to withdraw from before I'm 70 1/2. Just no need for it yet. I was thinking of slowly selling off/closing this brokerage account and taking maybe $1,000. per month until it's gone. I fully realize I 'll have to pay taxes on the gains though. Any suggestions on doing this slowly so I minimize my tax burden? I assume this must be a fairly common issue with people in my situation.

I believe you must only BEGIN withdrawing no later than 70 1/2 , not complete by 70 1/2. Others more knowledgeable chime in.

You can also roll into a Roth IRA , after paying taxes, and then continue building wealth.

Beware of brokers trying to get you to buy a variable annuity with proceeds from a tax advantaged account upon withdrawal.

[Drake3287]

Correct, I realize I only have to start withdrawing from my 457 before 70 1/2, not close it. As for being aware of brokers trying to sell me on an annuity or something else, I realize many are glorified car salesman and will try anything. I've had my share of those over the years.

[corn18]

Since you don't need the money, have you considering donating the highly appreciated shares or putting them in a donor advised fund (DAF)?

[Drake3287]

Quote:

Originally Posted by corn18 Since you don't need the money, have you considering donating the highly appreciated shares or putting them in a donor advised fund (DAF)?

I maybe F.I.R.E. but it's not like I'm wealthy, especailly living here in California. Except for traveling a lot more I still live the same basic life style. I can always find good uses for the money plus I have 3 younger adult kids to help out if needed.

[audreyh1]

I'm trying to understand your goals.

Why not leave it invested? Or are you trying to convert it to something lower risk?

You can transfer assets to any discount brokerage without tax consequences as long as you do it "in kind". You might benefit from lower sales commissions, plus the new brokerage will take care of the transfer for you.

[TwoByFour]

If I understand your situation, the account currently is 60% cap gains, the other 40% is already taxed, yes? So for every $1000 chunk you spend you will owe $90 (60% x 15% x 1000). That isn't that bad. I would just pay it. Or leave it invested as a nice rainy day fund.

[Drake3287]

Thanks, that helps. Although I'll have to talk with my rep, maybe taking a big chunk each year for a few years might be the way to go and just pay the capital gains. I always knew I'd be paying taxes on it so it's certainly not a surprise.

Although I don't need the money at this point I figured that slowly selling it off and putting it in a CD might be the simplest way to go seeing that eventually I'll also have my good size 457 account that'll have to do the same with.

Withdrawing both this smaller stock portfolio and along with my 457 account at the same time would really make for a tax hit, especially with have a decent size pension I have.

Trying to stay in a lower tax bracket might be difficult, especially once SS kicks in down the road.