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How much would you spend down after tax investments
08-11-2009, 11:48 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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How much would you spend down after tax investments
The conventional wisdom is to spend down after tax savings before accessing those 401ks, IRAs etc, but how low would you let your after tax accounts go before topping them up from tax deferred? One, two, three years worth of expenses
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08-11-2009, 11:51 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Based on current tax rates, I probably wouldn't start tapping my taxable accounts (or Roths) for income until I exhausted my 10% and 15% tax brackets in withdrawals from conventional 401Ks and IRAs. Once the next dollars I take out of my conventional 401Ks and IRAs would be taxed at 25%, I'd start tapping taxable accounts and Roths.
Obviously the specifics might change in terms of brackets and tax rates by the time I retire, but strategically that's the sort of thing I plan to do.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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08-11-2009, 12:01 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by ziggy29
Based on current tax rates, I probably wouldn't start tapping my taxable accounts (or Roths) for income until I exhausted my 10% and 15% tax brackets in withdrawals from conventional 401Ks and IRAs. Once the next dollars I take out of my conventional 401Ks and IRAs would be taxed at 25%, I'd start tapping taxable accounts and Roths.
Obviously the specifics might change in terms of brackets and tax rates by the time I retire, but strategically that's the sort of thing I plan to do.
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Sorry, I'm assuming you leave the 401ks alone to grow and spend your after tax savings down to some point, I'm asking what that point would be?
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08-11-2009, 12:07 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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I would be looking at the results if i-orp.com and filling up my 0% tax-bracket with Roth conversions and withdrawals from tax-sheltered.
Eventually, I would be spending my taxable down to zero. After all, what else would I do with the money?
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08-11-2009, 12:25 PM
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#5
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Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by LOL!
I would be looking at the results if i-orp.com and filling up my 0% tax-bracket with Roth conversions and withdrawals from tax-sheltered.
Eventually, I would be spending my taxable down to zero. After all, what else would I do with the money?
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Pretty much what I thought of doing, but I'd probablystop when I got to one year's worth of expenses.
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08-11-2009, 02:25 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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Quote:
Originally Posted by LOL!
I would be looking at the results if i-orp.com and filling up my 0% tax-bracket with Roth conversions and withdrawals from tax-sheltered.
Eventually, I would be spending my taxable down to zero. After all, what else would I do with the money?
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This is what I did. Now at age 62 income is from pension, SS and IRA's. I'll use Roth withdrawals to limit taxes and for large purchases.
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“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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08-11-2009, 09:45 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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One other factor would be the RMD's at 70.5. You may want to spend down some of your tax deferred to avoid having to distribute larger amounts down the road and be forced to pay higher taxes on them.
DD
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At 54% of FIRE target
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