Percentage of Taxable Money in Portfolio

[mickeyd]

I'm guessing that I have less than 10% in my taxable accounts. I have always understood that I was creating a future taxable event (or should I say, events) but I appreciate that I have had the benefit of deferring taxes on a sh**load of money so far. I'm prepared to pay Uncle Sam his part of my stash when I begin making w/d in a couple of years.

Maybe Obama will have a change of heart by that time and lower the FIT rates .

[haha]

I assumed that by "% of money in taxable accounts", you mean $ value of all invested assets in taxable accounts. 2 very different things, but likely if you meant money per se you would have made that clear.

Ha

[Original Wally]

I am intentional about building an after tax portfolio so there will be a ready pool of funds for big ticket items... cars, and so on. It is a like a ballet - keeping the pre-tax and after tax portfolios projected out. And a nice, even, steady stream of incoming cash. Imagine doing it without spreadsheets and such.

[Shawn]

Taxable 54%
Tax Deferred 29%
Roth 17%

I'm 53 and still working. For the most part, I've maxed out contributions to my retirement accounts throughout my working career. The Roth account has been funded primarily with backdoor contributions, including in-service after-tax 401k to Roth conversions.

[Bikerdude]

Quote:

Originally Posted by REWahoo Since you didn't specify in your poll, I assume you want current percentages. At the risk of being accused of quibbling (who, me?), my after tax % is considerably lower now after 7+ years of retirement than it was when I pulled the plug. Most of that money was used up funding our living expenses prior to age 59.5 and to allow for some Roth conversions.

+1. After 13 years of retirement my after tax amount is 0%.

[Alan]

60% after tax at present.

[Surewhitey]

I put the wrong amount in...more like 60%, not 20-30...

We're living off the divy's of taxable currently.

[Lsbcal]

Quote:

Originally Posted by Bikerdude +1. After 13 years of retirement my after tax amount is 0%.

That is hard to do. You don't have a checking account? OK, I'm probably quibbling a little here.

Our after tax amount is around 2% if I don't count the Ibonds which are tax deferred for another 20 years. Also I'm not counting the SS which flows into our checking accounts and is taxed.

[packrat44]

I find this thread confusing regarding what falls under the definition of "taxable". It appears many classify 401k and IRA funds as "non-taxable". The OP goes as far as classifying his ROTH account as "taxable".

My definition of "taxable" is any investment where taxes are or will be due. I consider investments in 401k and IRA accounts as "taxable" because they will be taxable once they are liquidated. Granted, some may pay no taxes due to their tax bracket. But that is the same for "taxable" income for someone in a low tax bracket.

My definition for "non-taxable" is any investments where no further taxes are due. Investment in a ROTH account would fall under this definition.

This poll might be more useful if it asked for percentage of investments in "taxable"; "tax-deferred"; and "non-taxable".

[NW-Bound]

Quote:

Originally Posted by audreyh1 We have additional investments in taxable accounts that we don't count as part of our retirement portfolio.

Perhaps you have money set aside for charity or other purposes.

As for me, everything I have can and will be spent if I need to stay afloat in retirement. However, I do not plan to die broke, and surely hope to leave money behind, plus my real estate.

Quote:

Originally Posted by REWahoo Since you didn't specify in your poll, I assume you want current percentages. At the risk of being accused of quibbling (who, me?), my after tax % is considerably lower now after 7+ years of retirement than it was when I pulled the plug. Most of that money was used up funding our living expenses prior to age 59.5 and to allow for some Roth conversions.

I was not thinking of the situation of people who have been retired for a while. I was indeed thinking only about the starting portfolio when one's retirement starts. For me who just stopped working, the two are the same. I should have been clearer and say "starting portfolio" so that we can compare apple and apple.

However, the partitioning of the current portfolio is relevant too. It makes the difference of whether one gets to enjoy the 0% tax rate on dividend and cap gains for the 15% tax bracket.

I do expect to spend down the taxable accounts first, but then I will also be doing Roth conversion. I have no plan yet, nor done any calculation to see what my accounts will look like in the future.

Quote:

Originally Posted by photoguy Just over 50%. I think it would be easier with a higher percent in taxable as then i wouldn't need to worry about 72t distributions. But the deferred tax benefit is so great, it wouldn't make any sense not to max out retirement accounts.

We always maxed out our retirement accounts. However, the years when I was doing independent consulting work, I could have sheltered a bit more money by doing solo 401k. But as my income was so erratic, and the expenses were high with college tuition, I thought I would not have that much money to save. I could have deferred some more money instead of paying much taxes some years.

Quote:

Originally Posted by Lsbcal I am guessing that you are doing Roth conversions while spending the after tax money. That's a good tactic. Running ORP can help a little to show what income streams to draw from. The tax picture is not at all obvious and is difficult to generalize. ORP is not that strong at considering the tax picture. What I've done is to run TurboTax with various scenarios and created my own tables showing marginal rates. I don't want to let our IRA's grow too much and force large RMD's at the same time as having SS income. So it can be a good thing to pay taxes up to at least the 15% bracket. SS income is not taxed at the state level.

This is my 1st year of ER, and I will look to do Roth conversion in the future, but have not figured out all the details yet. The bitty Roth accounts came from the few years when the income was such that we happened to qualify to put away a few Ks (already maxed out 401k, and made too much for IRA, but not too much for Roth).

Quote:

Originally Posted by Independent Fascinating poll response. There are 10 categories. The 54 responses in the first five hours are spread almost uniformly across them. Most polls with even buckets would show some sort of a bell curve. Like some others here, we burned off most of our taxable assets early in retirement.

I would expect a bell curve too.

Perhaps a lot of younger early retirees were able to do so with non-qualified stock options and still have much in taxable accounts, while the older retirees might have spent theirs and the after-tax savings, and only have 401k or rollover IRA's left. That spreads out the two tails of the curve, and flattens it out.

Quote:

Originally Posted by haha I assumed that by "% of money in taxable accounts", you mean $ value of all invested assets in taxable accounts. 2 very different things, but likely if you meant money per se you would have made that clear. Ha

Yes, I meant "asset values" rather than "money". The latter might be confused with cash, which was not what I meant. Most posters seemed to understand what I meant.

Quote:

Originally Posted by packrat44 I find this thread confusing regarding what falls under the definition of "taxable". It appears many classify 401k and IRA funds as "non-taxable". The OP goes as far as classifying his ROTH account as "taxable". My definition of "taxable" is any investment where taxes are or will be due. I consider investments in 401k and IRA accounts as "taxable" because they will be taxable once they are liquidated. Granted, some may pay no taxes due to their tax bracket. But that is the same for "taxable" income for someone in a low tax bracket. My definition for "non-taxable" is any investments where no further taxes are due. Investment in a ROTH account would fall under this definition. This poll might be more useful if it asked for percentage of investments in "taxable"; "tax-deferred"; and "non-taxable".

I have always called my 401k and IRA "tax-deferred" or "pre-tax" accounts. There's no confusion there.

But the other part of the assets, what I like to call "after-tax", I found that many posters here called it "taxable", hence the latter was what I used.

Both "after-tax" or "taxable" descriptions are ambiguous. My "after-tax" money has already been taxed, yes, but that applies only to the principal. The dividend and cap gain portions are yet to be taxed. I guess that's why people call it "taxable".

[panhead]

I'm right around 70% in taxable. A little over if you include my rental real estate value, a little under if you don't. I'm working hard to retire early (45ish) so this is necessary as I would rather not do the 72t deal, tho I am and have been maxing out all of my deferred options.

[truenorth418]

17% in IRAs.

[donheff]

We only have about 20% taxable (after pulling for a few years). DW had a lot of different options for squirreling away after tax dollars and the deductions were valuable. But we will pay the piper in ten years or so when all our withdrawals become regular income. Coupled with my fully taxed pension that will keep us in nose bleed brackets. But I guess that isn't such a bad problem to have.

[H2ODude]

About 50-50. Interesting how evenly spread the poll shows the respondents.

[Midpack]

Quote:

Originally Posted by packrat44 I find this thread confusing regarding what falls under the definition of "taxable". It appears many classify 401k and IRA funds as "non-taxable". The OP goes as far as classifying his ROTH account as "taxable". My definition of "taxable" is any investment where taxes are or will be due. I consider investments in 401k and IRA accounts as "taxable" because they will be taxable once they are liquidated. Granted, some may pay no taxes due to their tax bracket. But that is the same for "taxable" income for someone in a low tax bracket. My definition for "non-taxable" is any investments where no further taxes are due. Investment in a ROTH account would fall under this definition. This poll might be more useful if it asked for percentage of investments in "taxable"; "tax-deferred"; and "non-taxable".

I acknowledged the issue in my earlier post. But it would take too much time to break out the various levels of taxation my 8 accounts will get hit with. It's normal convention for folks to count 401k's and IRA's as sheltered. Everything is taxable, just a matter of when/how...

[NW-Bound]

Quote:

Originally Posted by Midpack Everything is taxable, just a matter of when/how...

... except for Roth accounts, which have been taxed, and whose gains and incomes will not be taxed. Well, until they find a way to do it, or to change the law.

And the deferred accounts are only "sheltered" until you try to spend it.

I wonder if other countries' tax laws are as convoluted. Is this the way politicians muddy the taxes and divert people's attention, so people can't tell what is coming or going, and spend so much time shuffling their money around to minimize their taxes that they forget about other problems?

[pb4uski]

My 42% was higher than what i would have thought off-the-cuff.

[haha]

Quote:

Originally Posted by packrat44 My definition of "taxable" is any investment where taxes are or will be due. I consider investments in 401k and IRA accounts as "taxable" because they will be taxable once they are liquidated.

Although your reasoning has much to recommend it, unless you can commandeer communication channels, few other people will know what you are talking about, as "taxable" has a long history of being accepted as meaning “in this account if you get income subject to taxes, and if you are a taxpayer, you will pay taxes annually on this income, subject to the details of your own 1040 and schedules, and the laws in force during that year".

Ha

[Koogie]

97.3% in taxable accounts. Or double taxable. Or triple taxable. Depends on your point of view.

[jclarksnakes]

The results are getting quite a bit heavier for the lower percantages. This just confirms what we already pretty much assumed which is that a lot of us on this forum have a sizeable percentage of our assets in tax deferred accounts. My post over in another thread is probably what precipitated this thread. I will just say that I am highly thankful for what a good deal tax deferred savings have been for us.