- Joined
- Sep 10, 2006
- Messages
- 4,089
Yes, you got it. It dawned on me that after I turned 59 1/2 that is better to tap tax-deferred accounts to reduce future RMDs and let taxable account investments grow and potentially get a stepped up basis so the embedded gains never get taxed. Unfortunately, I didn't have that epiffany until 2018 when I turned 63, and as a result of annual rebalancing had over 3 years filled about $100k of headroom with LTCG that could have been better used to reduce tax-deferred balances.
We didn't have the complication of managing income for ACA subsidies.
Got it. That complication of managing income for ACA subsidies is actually the only reason I'm looking at tapping the 401K before using all of our taxable account up. I would have done the same thing you did - fully tap the taxable account first - that seemed to be the standard advice I was reading everywhere.
Thank you for sharing your mistake as it is helping me learn more about tax stuff/RMD's - which I have been putting my head in the sand about for a while now. Taxes are not my forte!
The stepped up basis thing - that just applies if you are giving $ to your children, right? I looked it up and didn't see that it applied to any other situation. We don't have children so I'm thinking this isn't something that could apply to our situation.