Ready
Thinks s/he gets paid by the post
As people post their financial profiles it occurs to me that many people have a substantial amount of their investments in tax deferred accounts, such as an IRA or 401K. In evaluating your FI readiness, I'm curious to see how people compare a person with assets mostly in tax deferred accounts versus taxable. In my case, 85% of my investments are in taxable accounts, so aside from any future capital gains or dividends, I've already paid the tax bill on them.
So if you were comparing the FI readiness of two individuals, both with $1M in total net worth, but A has $1M in an IRA and B has $1M in taxable accounts, how much do you take into account the future taxes due on the IRA withdrawals in evaluating FI?
In my case, I would anticipate paying around 20% federal taxes and 8% CA taxes in retirement. I understand the rates will vary among different individuals. In my case, am I 28% better having $1M in taxable than if the entire amount was in an IRA? Or is it more complicated than that?
So if you were comparing the FI readiness of two individuals, both with $1M in total net worth, but A has $1M in an IRA and B has $1M in taxable accounts, how much do you take into account the future taxes due on the IRA withdrawals in evaluating FI?
In my case, I would anticipate paying around 20% federal taxes and 8% CA taxes in retirement. I understand the rates will vary among different individuals. In my case, am I 28% better having $1M in taxable than if the entire amount was in an IRA? Or is it more complicated than that?