pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I early retired in late 2011 and have been living from taxable accounts in 2012. If I do nothing, my taxes for 2012 would be ZERO based on my income which is a little bit of vacation pay received in 2012, interest, dividends and capital gains less HSA contributions less itemized deductions for medical insurance, property taxes and contributions.
Option 1 is to do $x of Roth conversions which will result in taxes which are about 7% of the Roth conversion amount.
Option 2 is to make some sales and repurchases in my taxable account which result in $x of capital gains (wash sale doesn't apply to gains) and still pay ZERO in taxes, which would have the effect of increasing the basis of my taxable account holdings so when I use my taxable account for living expenses in later years my capital gains will be lower (and I could do the Roth conversions later).
I'm trying to think through the pros and cons of each alternative. I would probably lean to Option 1 since 7% tax cost seems pretty attractive especially when the earnings on the proceeds will become tax-free. I could easily do a mix of both.
Anything else I should consider?
Option 1 is to do $x of Roth conversions which will result in taxes which are about 7% of the Roth conversion amount.
Option 2 is to make some sales and repurchases in my taxable account which result in $x of capital gains (wash sale doesn't apply to gains) and still pay ZERO in taxes, which would have the effect of increasing the basis of my taxable account holdings so when I use my taxable account for living expenses in later years my capital gains will be lower (and I could do the Roth conversions later).
I'm trying to think through the pros and cons of each alternative. I would probably lean to Option 1 since 7% tax cost seems pretty attractive especially when the earnings on the proceeds will become tax-free. I could easily do a mix of both.
Anything else I should consider?