1.6% tax in retirement

[seraphim]

I appreciate this thread - I really have to look at tax laws for my taxes beginning next year. Everything's starting to change, in our circumstances.

 

[Gatordoc50]

Our tax code is in love with passive income. So much so, it is quite possible for a retiree living off of a large portfolio to pay almost nothing in taxes. Consider the case of a married couple with a $10MM portfolio, split evenly between muni bonds and individual stocks yielding 3% a piece. That portfolio will generate $300,000 in annual income and a tax payment of just $8,970 . . . for an effective tax rate of 2.9%.

And then the market goes down 30% and you pay 8 grand in taxes in each of the next ten years until you "break even". lol

 

[Koolau]

That's one of the things that makes the example a tad far-fetched.

DW wondered what made me chuckle as I was reading this thread. When the $10M port was mentioned, I sorta flashed back to the old Steve Martin bit about not paying taxes on $1M. It was something like: "First, get a million dollars. Don't pay the taxes. If the IRS ever comes asking about it say 'I forgot.'"

On a bit more serious note, I think all of this discussion points out the reasons one needs to carefully plan one's retirement savings BEFORE they get close to the big day. Having a lot in deferred accounts makes it difficult to avoid taxes in retirement. The other side of that argument is that you will pay more taxes when w*rking. So, as someone mentioned, they get you one way or the other. True, you can play lots of games through out your life to avoid taxes, but none of us gets out of here without being skinned to some extent. If the gators don't getcha, the skeeters will. YMMV

 

[Gone4Good]

And then the market goes down 30% and you pay 8 grand in taxes in each of the next ten years until you "break even". lol

Or it goes up 30% and I still pay $8K . . . not sure what the point is.

 

[Gatordoc50]

Or it goes up 30% and I still pay $8K . . . not sure what the point is.

I didn't read your post very well. I now see where you stated investment in individual stocks not stock mutual funds. My bad. Nonetheless, it seems unfair to tax someone taking that much risk that much just to keep pace with inflation.

 

[Gatordoc50]

I didn't read your post very well. I now see where you stated investment in individual stocks not stock mutual funds. My bad. Nonetheless, it seems unfair to tax someone taking that much risk that much just to keep pace with inflation.

And someone with 10 million in savings would have most likely paid 5 million in income taxes getting there.