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Old 04-27-2014, 08:11 PM   #21
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Originally Posted by RunningBum View Post
Like I said yesterday, you can sell stocks in your taxable account to raise cash, while at the same time trading bonds for stocks in your tax-deferred account. The net effect is that you've sold bonds for cash, with the tax advantage of keeping income-producing bonds in a tax deferred account.
Let's dig a bit deeper and continue my example.
You are now 41. You spent 50K in cash plus dividends from the $950K portfolio. We had another 2008. Equities dropped 37% leaving you with $599,000 in your taxable.
In your IRA. The stocks are $315,000 and the bonds are up %7 or $535,000 Leaving you with $1,449,000 in total assets

For 2009
You decide to decrease spending $50K + ~2% dividends from the portfolio.
At the start of 2009 your taxable portfolio 50K cash $549K equity
IRA 500K equity, 340K bonds.
Overall 75/25

But here is the problem you are planning on withdrawing ~$60K a year for the next 17.5 before you can easily tap into the IRA. While your overall withdrawal rate of 4.1% is a bit high for long retirement. The 60K withdrawal (10.9%) from a $549,000 taxable portfolio looks downright crazy. The Firecalc success rate is 14.4% for 18 years

At this point I'd be heavily researching 72(t), I know I did back in early 2009.

I'd think that any tax advantage of having bonds in your IRA would be more than negated by needing to use a 72(t)

So in theory I can understand why have bond in your IRA is good idea, in practice I think it doesn't make much sense a lot of time.
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Old 04-27-2014, 08:28 PM   #22
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I'd be happy with today's low income bonds in a taxable account. A perfect fit for the OP case?

Bonds in Taxable Account or tIRA - Spreadsheet Answer
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Old 04-27-2014, 09:11 PM   #23
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So in theory I can understand why have bond in your IRA is good idea, in practice I think it doesn't make much sense a lot of time.
I don't know about "a lot of time", but yes, it can happen, and 2008 would've been scary. As it turns out, we've probably bounced back well enough from 2008 that as long as you stayed the course you'd probably have been ok, but it would've been gut check time.

Just out of curiosity, what does Firecalc say if you put bonds in the taxable account instead in that situation? It's a pretty interesting question, does keeping bonds in tax deferred only optimize a winning hand (meaning it helps when returns are decent), but bonds in taxable help in more extreme (bad) situations when you want to survive on taxable for a number of years? I'd be willing to sacrifice a bit of gains on ideal situations to insure against a bad run. In my own case though, I've got a lot more than 50% in my taxable accounts, and just 7 years to go.
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Old 04-27-2014, 10:34 PM   #24
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Originally Posted by RunningBum View Post
I don't know about "a lot of time", but yes, it can happen, and 2008 would've been scary. As it turns out, we've probably bounced back well enough from 2008 that as long as you stayed the course you'd probably have been ok, but it would've been gut check time.

Just out of curiosity, what does Firecalc say if you put bonds in the taxable account instead in that situation? It's a pretty interesting question, does keeping bonds in tax deferred only optimize a winning hand (meaning it helps when returns are decent), but bonds in taxable help in more extreme (bad) situations when you want to survive on taxable for a number of years? I'd be willing to sacrifice a bit of gains on ideal situations to insure against a bad run. In my own case though, I've got a lot more than 50% in my taxable accounts, and just 7 years to go.
I think you analysis is probably exactly right. Reversing it and having bonds in the taxable account has you start 2009 with 50K in cash, 410K equities 347K bonds. This gives a 55% chance of success for 18 years at 60K. Not wonderful but hell of better than 15%.

You are right 2 great, 2 good and one flat year after 2008 meant staying the course is was just fine and probably this year he could start moving spending back to $70K+

I started off at 40 with twice as much in taxable as IRA. A modest amount of GNMAs in the taxable, and 35% bonds in the IRA. Now I am 47/53 taxable/IRA and with 5.5 years to go and I don't care so I am happy to have all my bonds in my IRA and just CDs in taxable.

I think the moral of the story is that folks retiring before 50 with significant tax deferred assets, really need to treat the pools separately. Make one run until 59.5 and make sure it is reasonably survivable before loading up the bonds in the IRA. Be prepared for some mid course corrections.
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Old 04-27-2014, 10:38 PM   #25
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Like I said yesterday, you can sell stocks in your taxable account to raise cash, while at the same time trading bonds for stocks in your tax-deferred account. The net effect is that you've sold bonds for cash, with the tax advantage of keeping income-producing bonds in a tax deferred account.
That's exactly what I do. I sell bonds in my taxable account to increase my cash and then sell bonds and use the proceeds to buy stocks in my tax-deferred account. The net effect is to sell bonds and generate cash since the stock trades offset.
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