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View Poll Results: What % of your networth do you still have to pay tax on?
<10% 12 11.32%
10-20 5 4.72%
20-30 17 16.04%
30-40 13 12.26%
40-50 10 9.43%
50-60 12 11.32%
60-70 11 10.38%
70-80 13 12.26%
80-90 6 5.66%
>90% 7 6.60%
Voters: 106. You may not vote on this poll

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Old 12-12-2016, 03:01 PM   #61
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Originally Posted by RunningBum View Post
That's how I've been doing it. It started when I had stock options that would throw me in the top tax bracket when I had to exercise them. I would be taxed nearly half the value, so it didn't make sense for me to think I had, for example, $2M when I really would barely come away with $1M after taxes. The option money was all tagged for retirement accumulation, so it wasn't part of my budget then, and I'd be forced to exercise them before retirement so using post-tax value to see if I had enough to retire made the most sense by far.

Once I set up my spreadsheet this way I realized my 401K/IRA would eventually be taxed as well, so I reduced those as well, and the cap gains followed. It just made sense to me to treat all my funds the same way, using post-tax value.

The stock options are long gone but I kept the system.
This is exactly how I came to have a similar viewpoint. The amount of taxes we paid when I cashed in stock options was staggering - if someone "forgot" about the taxes owed on those they'd be in for a big unpleasant surprise.

After years of viewing our assets that why I don't see any reason to stop. The taxes we owe on existing capital gains and tIRAs is well into the mid-six figures, so it's helpful (for us) to be well aware of it.

If we both get hit by a bus tomorrow and the kids get it all - with an updated cost basis - well, good for them. It's still not something I'm planning for...
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Old 12-12-2016, 06:16 PM   #62
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I guess if you plan on leaving it as a legacy and your assets on demise are under the $5.45 million exemption , your heirs would get a step up and no tax owing? But I'm not that familiar with your estate tax regime.

In Canada the second to die will owe cap gains tax, no exceptions. We generally don't make up personal names for institutions.
The step-up in basis applies only to after-tax assets. If we have any before-tax retirement funds left to my children, these will be taxed.

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Agree. But, I suspect most people simply treat their added tax as an increase to expenses...
Same here. But I still need to know how much that increase is.

Anyway, the concern over tax is mainly to see how much spending power I have, rather than that of my heirs. I am not that rich.
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Old 12-13-2016, 07:50 AM   #63
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The step-up in basis applies only to after-tax assets. If we have any before-tax retirement funds left to my children, these will be taxed.
What about imbedded cap gains in a taxable account. I thought these escaped taxation?
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Old 12-13-2016, 08:11 AM   #64
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What about imbedded cap gains in a taxable account. I thought these escaped taxation?
Yes they do. Heirs get stepped up basis.

Well - there is a Federal estate tax on estates with a >$5M exemption, but other than that.
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Old 12-13-2016, 08:42 AM   #65
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Yes they do. Heirs get stepped up basis.

Well - there is a Federal estate tax on estates with a >$5M exemption, but other than that.
Thanks. This is a very big benefit for heirs. In Canada, on death, there is a deemed disposition of capital property and cap gains tax would be owing. No estate or gift tax though. Gets a little complicated for Canadians owning assets in the US(vis a vis estate taxes).
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Old 12-13-2016, 03:30 PM   #66
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Very interesting question. My goal has been to hit retirement with my retirement accounts at 50% taxable. Its unlikely (I would need to overcome a current $180k difference in 6 years), but seeing that my net wealth has less than 50% to be taxed right now is great (I estimated only 45% of my net worth is taxable).
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Old 12-13-2016, 03:34 PM   #67
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I do not know about the tax system in Canada, but in the US dividends and capital gains have been given preferential treatments in recent years.

Let's take two extreme cases where married couple A gets $100K/yr from their 401k/IRA, and couple B gets the same from long-term capital gains and/or dividends from their after-tax savings.

Couple A: $100K income, $11,438 Federal tax
Couple B: $100K income, $675 Federal tax

The difference is $10,763. Take this up to $150K, and the difference widens to $15,763.

Couple A: $150K income, $23,938 Federal tax
Couple B: $150K income, $8,175 Federal tax

The above numbers are accurate for 2015, and do not include state taxes. So, one can see that the tax bites are significant, and differ depending on where your money is.

So, obviously it is better in retirement to have more of your stash in after-tax accounts. Sadly, this is less and less true for me, as I have been spending my after-tax money while waiting to the age of 59-1/2 to tap my IRA/401k.

PS. Note that dividends were taxed as ordinary income prior to 2003. Will we revert to that? Who knows?
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Old 12-13-2016, 03:37 PM   #68
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This poll is the flattest "curve" I've ever seen. Straight line.
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Old 12-13-2016, 03:45 PM   #69
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I asked for the same info in a poll almost 4 years ago, and the distribution was also relatively flat.

See: http://www.early-retirement.org/foru...lio-64714.html.
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Old 12-13-2016, 03:49 PM   #70
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I asked for the same info in a poll almost 4 years ago, and the distribution was also relatively flat.

See: http://www.early-retirement.org/foru...lio-64714.html.
Thanks for the reminder. I answered 60-70% back then. Now at 24% so good progress, and we've still got 8 years to do conversions before RMDs.
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Old 12-13-2016, 03:54 PM   #71
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I asked for the same info in a poll almost 4 years ago, and the distribution was also relatively flat.

See: http://www.early-retirement.org/foru...lio-64714.html.
Funny, the biggest outlier so far, 10-20% only having 3% (3/100) votes as I post this, was tied for the top at over 15% (25/158) last time. The rest are a lot closer and the distribution in both is pretty flat.
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