|
Taxes as percentage of portfolio value
02-07-2015, 04:19 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 1,085
|
Taxes as percentage of portfolio value
I am curious if anyone calculates their taxes as a percentage of their portfolio. So for tax year 2014, take your total taxes due for the year (federal, state, and real estate) and divide by your portfolio value on January 2014. I realize that income is taxed, not wealth, so it's not comparing apples to apples. Wouldn't this calculation yield the WR needed to pay taxes? What's a reasonable number to shoot for?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
02-07-2015, 04:31 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,819
|
There is no 'number to shoot for'. As you say, income is taxed, not wealth. Your NW might be in a tax deferred account that you are not yet drawing from, so not being taxed - another might be drawing from it, maybe even drawing it down, and having it all taxed as income.
Other than just curiosity over the number (which is fine, if that's all you're after), what is to be gained from this?
And then, we get into the 'fun stuff'. If someone has a pension, don't we need to calculate the 'phantom asset' value of that to determine NW? And so on...
-ERD50
|
|
|
02-07-2015, 04:37 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,509
|
Not here. The amount of taxes has a dependency on what you are invested in, activity during the year, how much is taxable and tax deferred accounts, how much you have in embedded gains, etc. Yes you do have to come up with $ to pay the taxes.. but this could even come from cash that may not generate much in the way of taxable income.
if you don't have too much income, but all of it comes from qualified income... you could end up with 0 federal tax... however you may be pulling 2 to 4% distribution.
I'm not sure this will have a good correlation in many cases.
Someone who pulls all their spending income from Roths may have 0 federal and state taxes.
|
|
|
02-08-2015, 11:59 AM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Posts: 12,597
|
Our pensions are taxed as ordinary income, so we have to regard our pension as the face amount minus taxes - just like a salary.
If we sell assets, we will be taxed on capital gains and (for deferred annuities) on deferred income. So again, the "face amount" of our assets is deceptive. They are only worth what we can get for them, minus taxes on gains and deferred income. When contemplating net worth, I generally subtract a third of the face value for taxes.
Amethyst
__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success – to be able to spend your life in your own way.’ Christopher Morley.
Even a blind clock finds an acorn twice a day.
|
|
|
02-08-2015, 12:13 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,006
|
I don't know what a reasonable number it is to shoot for. In the case where the retirement fund is all in taxable accounts, most folks might be able to stay under 0.5% of the portfolio value, but it totally depends on how tax efficient your mutual funds are. And this can be highly variable. Unfortunately mine went crazy last year and paid out large capital gains distributions.
__________________
Retired since summer 1999.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|