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Strategies For All Taxable Income
Old 12-28-2011, 07:14 PM   #1
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Strategies For All Taxable Income

Unlike some folks who have large collections of Roth funds, cash or taxable funds, rental properties, privately owned businesses; almost all the income my wife & I have is taxable. We have taxable pensions, mine Federal my wife was a teacher, my wife could take SS for the years she taught in parochial schools but it is a small amount, maybe $200 a month because of her state teachers pension. We have IRAs which are taxable on withdrawal. About 10% of our assets are in cash (credit union) and 10% in a taxable investment account which is actually growing a bit. We have started to draw down our IRAs to bolster our pensions and converted a small amount ($5K) into a Roth, but not go into the next tax bracket. I am not sure when RMDs come in 6 years that they will be significant, we would naturally be drawing down at the RMD level at least in the first few years.
So all the discussions about delaying SS, converting traditional IRAs to Roth for those with 0% or 15% tax rates, drawing down taxable funds to delay IRA withdrawals, all seem to not apply to our situation. No matter what we do pretty much everything will be taxable now and forever.

Wonder if I missed anything and looking for ideas about optimal approaches to retirement funding for this situation.

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Old 12-28-2011, 07:38 PM   #2
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10% in a taxable account means that you should not have much income on Schedule B and Schedule D.

To wit: use tax-efficient investments, tax-loss harvest, have no interest income, no bond income, only unrealized cap gains and realized cap losses, as well as only qualified dividends.

Perhaps put your int'l index fund in taxable in order to get the Foreign Tax Credit. The FTC will offset any taxes due to income listed on Schedule B and Schedule D should always show at least a $3000 loss.

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Old 12-28-2011, 08:11 PM   #3
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Similar situation for me since well into the 25% tax bracket.

Although not a large impact since limited to $3,000 annually against ordinary income, I try to book tax losses whenever possible (have a carryover balance to last a few years). Starting in January, I am switching to a HDHP so I can contribute to a HSA until I am 65 (10 yrs). These two together will reduce my fed taxes a bit over $1500 a year -- not a huge amount but helps a bit.
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Old 12-28-2011, 08:23 PM   #4
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We are not too far from Yaker's situation. We will always be in 25% brackets due to taxable income (yeah, that is not actually a bad situations to be in) so most of what we read about Roth conversions, delays, etc don't work for us. We pull annual withdrawals from taxable for now but eventually that will run out and everything will be "income" from a FIT perspective.
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Old 12-28-2011, 09:38 PM   #5
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Many people are in this situation . Tax efficient index funds might help.
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