Your invested assets: taxable vs TIRA/401k vs Roths

[Ready]

16% tax free
16% tax deferred
68% taxable

I'm surprised at the number of members with little or no tax free investments. Have municipal bond funds become undesirable lately?

 

[haha]

16% tax free
16% tax deferred
68% taxable

I'm surprised at the number of members with little or no tax free investments. Have municipal bond funds become undesirable lately?

I never thought of this interpretation. The way I meant the question had nothing to do with the investment chosen, but only the IRS classification of the account type.

My guess world be that of the many people with mostly taxable money, municipals would be very popular.

Ha

 

[dtbach]

Good topic! Made me do some calculations and my breakdown is:

26% taxable, 54% IRA and 19% ROTH

I have 10 years to 70 (and deferred SS) so am taking all my income out of my IRA's to deplete them rather than the other 2 pools of money. Since I still have a mortgage and teenagers, I have some decent deductions against the ordinary income this produces. My Fidelity advisor is aghast at the percentage I'm taking out of my IRA (about 12%/year) but I keep having to explain that my overall WR is only 3.6%

 

[RetireAge50]

Taxable 0%
Tax Deferred 85%
Roth 15%

 

[Andre1969]

Taxable: 55.3%
Tax Deferred: 35.9%
Roth: 8.7%

 

[aja8888]

Taxable = 23% (soon to be higher due to sale of a paid off house).
Tax deferred = 77% (% will drop after house sale above)
No Roth accounts

Pulling first RMD this year.
Full SS to cover most expenses.

 

[ERD50]

My breakdown is:

29% taxable, (very roughly 80% cost basis)
61% TIRA, and
10% Roths.

I did a quick estimate before I ran some quick formulas on my NW spreadsheet, I was close, but estimated my tax free much lower, so this is good.

The cost basis of that taxable is important. $1M in taxable with a $1M cost basis is a whole lot different than $1M with a $500K costs basis (I realize this can't all be captured easily in a simple post question - just throwing it out there for thoughts).

I also didn't think of the recent post issue - but I currently have no munis.

Good exercise. I knew roughly, but good to review. And now I have the formulas in my spreadsheet!

-ERD50

 

[coalcracker]

67% taxable
7% Roth IRA
26% 401k

 

[arky]

40% taxable
52% tax deferred (401K)
8% tax free (ROTH IRA)

Would do 401K to ROTH IRA conversions but am already in the 25% FIT bracket.

 

[dtbach]

My breakdown is:

29% taxable, (very roughly 80% cost basis)
61% TIRA, and
10% Roths.

I did a quick estimate before I ran some quick formulas on my NW spreadsheet, I was close, but estimated my tax free much lower, so this is good.

The cost basis of that taxable is important. $1M in taxable with a $1M cost basis is a whole lot different than $1M with a $500K costs basis (I realize this can't all be captured easily in a simple post question - just throwing it out there for thoughts).

I also didn't think of the recent post issue - but I currently have no munis.

Good exercise. I knew roughly, but good to review. And now I have the formulas in my spreadsheet!

-ERD50

Great point on the cost basis. I took a look at mine and I'm about 60% so actually only 40% of every dollar I take is taxable. Excellent observation!!

 

[Theseus]

Taxable 7.5%
Tax Deferred 92.4%
Tax Free 0.1%

 

[Animorph]

Taxable: 42.0%
401k/tIRA: 41.1%
Roth: 16.9%

Equities: 80.4%
Cash/incidental bonds: 19.6%
(cash will be spent over the next few years to return to nominal 100% equities)

That's adjusted for excess Roth conversions that will be recharacterized after taxes are filed.

 

[someguy]

Current Balances
taxable 52%
tax deferred 45%
tax free 2%

Current/Ongoing Contributions
taxable 67%
tax deferred 33%
tax free 0%

I imagine a higher current balance of taxable positively and strongly correlates to a higher income level, at least among those of us with earned income.

 

[TallTim]

I imagine a higher current balance of taxable positively and strongly correlates to a higher income level, at least among those of us with earned income.

+1 to this. For many still working income and/or AMT tax treatment make most IRA and Roth options unavailable. 401k has a (relatively) low contribution limit in percentage terms for high earners ... so taxable is the easy other choice.

I realize you can do things like buy large $$ whole life policies to divert cash - but I have always viewed those returns as pretty tough to accept and the structure (if you don't die and want the $$) are too much like annuities for me.

Only other thing I have seen that is viable is a deferred compensation program - which not all companies have. We had one at my corp for the SR Execs, but ended up dropping it in view of the costs of the program and the very low participation rates.

 

[panhead]

Excluding Investment Real Estate:

taxable: 70%
deferred: 29%
free: 1%

 

[rodi]

We skew far too much to the tax deferred side of things.

No Roths - this will be the first year we start converting since DH is retiring and our income is dropping.
About 15% in taxable accounts.
About 25% in an inherited IRA subject to RMDs
The remainder in TIRAs or 401ks.

Oops - I just realized I left out the 529's... those would be tax free, right? So add in 8% in tax free... But I tend to exclude the 529's from my net worth calculation since the money is allocated to non-retirement goals.

 

[youbet]

+1 to this. For many still working income and/or AMT tax treatment make most IRA and Roth options unavailable.

Is there an upper income limit on doing non-deductible TIRA contributions followed by a back-door Roth conversion?

I thought that was available regardless of income.

 

[Shawn]

54% - Taxable (approximate cost basis 70%; 6% of total portfolio in muni's)
29% - Tax Deferred (401k, 401a, 403b, 457b, UC Capital Accumulation Provision)
17% - Roth (almost all backdoor, mostly with in-service conversions of after-tax 401k contributions)

I started an HSA last year. I am not sure how it should be classified (if at all), although it is only a fraction of a percent so it does not really matter.

 

[someguy]

Is there an upper income limit on doing non-deductible TIRA contributions followed by a back-door Roth conversion?

I thought that was available regardless of income.

I don't think there is, but why would a high earned income person who LBTM want to do that? You'd be paying FIT at your high marginal rate now in order to avoid paying FIT on a lower marginal rate* later.

* I realize no one has a crystal ball, but if you are making $500K now but live on $100K, it's hard to imagine that in 20/30/whatever years the tax rate on $100K will be more than 40% (current marginal rate on 500K+).

 

[someguy]

+1 to this. For many still working income and/or AMT tax treatment make most IRA and Roth options unavailable. 401k has a (relatively) low contribution limit in percentage terms for high earners ... so taxable is the easy other choice.

Only other thing I have seen that is viable is a deferred compensation program - which not all companies have. We had one at my corp for the SR Execs, but ended up dropping it in view of the costs of the program and the very low participation rates.

Depending on your situation, another option is to see if you can get some of (what I assume is) your W2 income to be 1099 instead. Then you set up an i401(k) and contribute as much as $50K tax deferred (total -- including any 401k via W2 deductions). Or $100K if your spouse contributes substantially to the 1099 income/business.

 

[neihn]

78% tax deferred
20% roth
2% taxable

 

[target2019]

82% tax-deferred
11% roth
07% taxable - very little cost basis

 

[Animorph]

I don't think there is, but why would a high earned income person who LBTM want to do that? You'd be paying FIT at your high marginal rate now in order to avoid paying FIT on a lower marginal rate* later.

* I realize no one has a crystal ball, but if you are making $500K now but live on $100K, it's hard to imagine that in 20/30/whatever years the tax rate on $100K will be more than 40% (current marginal rate on 500K+).

High income types can run out of tax deductible contribution possibilities really quickly. They've paid the FIT already. The backdoor Roth contribution takes a little bit from the taxable account and puts it into the Roth with no other taxes due.

 

[tmm99]

taxable: 29%
deferred: 67%
Roth: 4%

 

[dvalley]

21% taxable (cash, brokerage)
75% tax deffered (401k + T-IRA)
4% tax free (ROTH IRA)

age: 38
target retirement age: 48 (giving myself 10years)