What percentage of your portfolio is tax deferred

[Midpack]

I’m dumbfounded - though it’s my own unfounded assumption. I’m at 30.5% tax deferred (0% tax free, though that’ll most likely change over the next 6 years) and I assumed we had above average deferrals even here! And in turn how little taxable $ many here have. Puts a whole new perspective on the many Roth conversions threads I’ve read here for years. I (still) learn something every day...

I was surprised at how many here are SIRE vs FIRE too, though I learned that years ago.

 

[Midpack]

Another good question to ask is how much of your taxable account is cap gains?

That would make a good poll too. About 20% of our portfolio is unrealized cap gains (about 40% of all taxable), subject to market swings of course. And with 30% in tax deferred, tax management is important for us.

 

[DrRoy]

A little over half.

 

[MichaelB]

Tax deferred for us is less than 5%, including IRAs and HSAs. The rest is in taxable accounts.

 

[racy]

88% in tIRAs. I won!
I'm 67 & retired; DF is 65 and still working. We're taking 1.1% out of my tIRA annually for spending needs & wants. We're both planning on taking SS at 70. DF seems to want to keep working, so not sure we'll get any low income years to convert to ROTH.

 

[Dtail]

88% in tIRAs. I won!
I'm 67 & retired; DF is 65 and still working. We're taking 1.1% out of my tIRA annually for spending needs & wants. We're both planning on taking SS at 70. DF seems to want to keep working, so not sure we'll get any low income years to convert to ROTH.

Well you won out of the posters, but not the voters. lol
It will probably end up being a first world problem for you.

 

[REWahoo]

88% in tIRAs. I won!

Sorry racy, 97% in tIRAs here.

 

[Gumby]

It seems that we are the quintessential "401k Millionaires" the financial press writes about.


https://www.cnbc.com/2019/06/25/how-to-become-a-401k-millionaire.html

Although the young wife and I never had a company match in all our years of working.

 

[REWahoo]

It seems that we are the quintessential "401k Millionaires" the financial press writes about.

Exactly.

 

[RunningBum]

Tax deferred for us is less than 5%, including IRAs and HSAs. The rest is in taxable accounts.

I didn't consider HSAs, because I should be able to withdraw them tax free for medical expenses. Even if I did include them I'd still be with you.

 

[donheff]

We are at about 80% because DW's law firm enabled multiple tax deffered avenues. We also both have pensions and DW has SS so any Roth conversions would be at 24% as are my RMDs and DW's in a few years. Based on the optimization thread I suspect that we could still eke out some advantages for our heirs by converting up to the top of the 24% bracket but I am not convinced it is worth the effort.

 

[El Jacinto]

We are currently at 32% Roth, 60% traditional, and 8% HSA, but I expect that number to change pretty drastically. Only about 12% of our contributions are going into Roth accounts.

We should probably do more into Roth, but I can't resist the tax savings today.

 

[retire48in2018]

We're at about 30% traditional, 40% Roth, and 30% taxable accounts

 

[Lewis Clark]

We're about 25% tax-deferred. 23% tax free, 52% taxable.

 

[NgineER]

I voted wrong in the poll as well, I thought I was at 40%. A recent outlay for a fixer upper rental property leaves us at 48% tax deferred and 46% tax free.

 

[jollystomper]

64% tax deferred (401K, tIRAs), 2% tax free (Roth + HSA), 34% taxable

The taxable includes municipal bond funds which are mostly tax free... If I count them as tax free, then our tax free increases to 6% and taxable decreases to 30%.

We opened Roth IRAs primarily to go through the mechanics of the conversion (analysis so far looks mostly a wash). Also DW still has earned income this year and probably next year, so we figured why not.

 

[LRDave]

89% tax deferred. The very-interesting Roth conversion thread has me thinking very hard about a radical strategy change in the next few years (gulp).

 

[tb001]

This is an interesting thread—great topic. And helpful to understand why some of the tax issues brought up are very different for us when I run the numbers. Like midpack, I’m surprised to see the results, but it makes sense.

We’re around 15% tax deferred and the rest taxable. Taxable has about a 50% cost basis. The market has been good to us.

 

[Which Roger]

I’m dumbfounded - though it’s my own unfounded assumption. I’m at 30.5% tax deferred (0% tax free, though that’ll most likely change over the next 6 years) and I assumed we had above average deferrals even here! And in turn how little taxable $ many here have. Puts a whole new perspective on the many Roth conversions threads I’ve read here for years. I (still) learn something every day...

I'm surprised, too, but in the opposite way that you are. I always assumed that most people saved like megacorp-types (including myself): Max out the 401k tax-deferred, and only if there's anything extra to invest, put it somewhere else, like a taxable account. The result is the vast majority of the portfolio being tax-deferred.


I'm interested in hearing more about how the people have only a low percentage tax-deferred got there.

 

[gerntz]

Not sure why taxable cap gains is important since they only get taxed if you take them & go away with either gifting or death.

 

[Cassius King]

Great thread.

86% tax deferred, 2% tax free and 12% taxable.

 

[Vacation4us]

90% in 401 k, 10% in Roth. I don’t count my emergency fund. I am one of those investors mentioned above. After maxing out 401 k and paying extra toward the mortgage there wasn’t anything left to invest after tax.

Since my new husband has a nice pension I doubt I will be converting to my Roth once we retire. Waiting for the tax torpedo at 70.

 

[MichaelB]

I'm interested in hearing more about how the people have only a low percentage tax-deferred got there.

I worked overseas and for most of my career wasn’t eligible for an IRA (didn’t make enough). I did have a local employer plan similar to a US type 401k, but it wasn’t eligible to be rolled over into an IRA, so when I quit my job it was fully cashed out and taxed then. That was painful - not so much a tax torpedo, more like a tax nuclear bomb.

 

[scrabbler1]

I think it would be interesting to see the poll's distribution by age group. That is, those of us like me who retired very early need to have a larger share of their portfolio in taxable because we can't easily access our tax-deferred accounts yet (Rule 72t notwithstanding).


I know it's just me, but Roth IRAs were always a bad fit for my investment strategies. When I had the money to invest in them (in the late 1990s, during my peak earnings years), tax rates were high. When tax rates dropped in the 2000s, I began working part-time and had far less excess money to invest beyond my 401k. And once ER became more prominent, I realized I needed to concentrate on taxable more than tax-deferred. In my last 17 months of working, I stopped contributing to my 401k - I became ineligible for the company match, and had further reduced my weekly hours worked.


Despite all those things going on, the percent in tax-deferred, which had always been in the 45%-55% range since 1990, rose in the mid-2000s to 62% mainly because of the exploding value of the company stock (ESOP) which began in 1997. By the time I ERed in late 2008, the stock had grown to 50% of my 401k, so when I liquidated it (to greatly boost my taxable account), the remainder, which became a rollover tIRA, was only 29%.

 

[tb001]

I'm surprised, too, but in the opposite way that you are. I always assumed that most people saved like megacorp-types (including myself): Max out the 401k tax-deferred, and only if there's anything extra to invest, put it somewhere else, like a taxable account. The result is the vast majority of the portfolio being tax-deferred.


I'm interested in hearing more about how the people have only a low percentage tax-deferred got there.

We maxed out the tax deferred every year possible, though for me that didn’t happen until mid 30s due to school. A combination of high income/bonuses, lbym and a few lucky events let us put a lot into taxable accounts.

My compensation was heavily bonus based (>50%), so we made it a point to live on salary and save ~80+% of bonus every year. The company DH worked for was acquired when he was in his 30s and he received a nice payout, so that got put in the taxable investment account as well. Basically ~20% of salary and almost everything outside of base salary was treated as savings.

We also met when we were older, so delayed having kids. That let us have the extra to put towards savings and it had time to grow. Now we’re hemmoraging $ on nannies and schools and college savings, but at least starting from a nice cushion.