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Roth IRA vs brokerage
Old 04-17-2014, 06:01 PM   #1
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Roth IRA vs brokerage

My wife and I are at a point that we have enough money in our retirement accounts to grow for 28 years and provide a comfortable retirement at age 60. We'd like to retire at 50, though. I've been putting money into a brokerage account to fun age 50-60, but I hate the idea if paying taxes on my gains during growth years. Should I put the money into the Roth IRA instead and 72t it from 50-60?
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Old 04-17-2014, 06:07 PM   #2
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So... you say you have enough money in your retirement accounts, but you don't have IRAs already?

Edit: IMO, you should absolutely be fully funding Roth IRAs before opening taxable accounts, based on the limited information. If for nothing else than just using the limited tax shelter for your money! Forget the 72t, fund the Roth, then start funding your taxable.

- Pay down high interest debt
- Emergency Fund
- 401(k)/403(b) up to company match
- Fully fund 401(k)/403(b) and IRAs to annual limits
- Taxable

Pretty much in that order.
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Old 04-17-2014, 06:25 PM   #3
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Quote:
Originally Posted by frugalthirty View Post
My wife and I are at a point that we have enough money in our retirement accounts to grow for 28 years and provide a comfortable retirement at age 60. We'd like to retire at 50, though. I've been putting money into a brokerage account to fun age 50-60, but I hate the idea if paying taxes on my gains during growth years. Should I put the money into the Roth IRA instead and 72t it from 50-60?
Do a Roth first, but you can also invest in growth stocks (non-divident payers) and you'll pay no taxes on the holding until you sell shares.
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Old 04-17-2014, 06:51 PM   #4
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If the tax laws don't change, you will not pay any tax on the LT capital gain distributions in your taxable brokerage account, if you can stay in the 15% tax bracket, which today is $73,800 of taxable income for a married couple filing jointly.
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Old 04-17-2014, 07:01 PM   #5
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Quote:
Originally Posted by frugalthirty View Post
My wife and I are at a point that we have enough money in our retirement accounts to grow for 28 years and provide a comfortable retirement at age 60. We'd like to retire at 50, though. I've been putting money into a brokerage account to fun age 50-60, but I hate the idea if paying taxes on my gains during growth years. Should I put the money into the Roth IRA instead and 72t it from 50-60?
One thing for you to consider is that if your taxable income in ER is in the 15% tax bracket (total income of ~$94k for a couple in 2014 assuming MFJ and standard deductions) then any qualified dividends and LTCGs that are included in the $94k are tax free. So if you are living off your taxable accounts and your taxable accounts are mostly equities, it is conceivable that your federal taxes could be zero.

To see it for real go to https://turbotax.intuit.com/tax-tool...ors/taxcaster/ an put in $92,500 of dividends or long term capital gains. (The 2014 amounts are slightly higher because of inflation).

Even during the "growth years" qualified dividends and LTCG from your taxable accounts will be tax at lower tax rates than ordinary income unless your income is so high you are subject to AMT.
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