Is there any negative I should be aware of before I opt out of Fidelity's averaged cost basis?
I am retiring next month and hope to travel for two or three years, then after that I will need to really be frugal to have enough (barely) for the rest of my retirement.
For the next two or three years travel expenses, I think it would lessen taxes if I sold shares from my taxable account with as little taxable gain as possible.
Fidelity has defaulted to averaged cost basis for my taxable account.
The Fidelity webpage to opt out of using averaged cost basis sounds kind of scary warning people to consult a tax professional, but OTOH Wikipedia says using specific shares saves on taxes (assuming choosing higher-basis I suppose).
Do you think this rather scary warning on the Fidelity page is something to worry about, or just normal CYA?
Or maybe I will sell my house before I set out upon my travels and I guess then I could just use money from the sale and not need to sell from a taxable account.
I had allowed all the dividends this past half year to pile up in cash (not re-invest themselves), but now I realize they are all "income" if I take them out of my Traditional IRA, so I'm thinking I should re-invest those and sell high-basis shares out of the taxable account to fund my travel (unless I sell my house).
Opinions? Have most of you switched from averaged cost basis to specific id, have you had any negative surprises?
I am retiring next month and hope to travel for two or three years, then after that I will need to really be frugal to have enough (barely) for the rest of my retirement.
For the next two or three years travel expenses, I think it would lessen taxes if I sold shares from my taxable account with as little taxable gain as possible.
Fidelity has defaulted to averaged cost basis for my taxable account.
The Fidelity webpage to opt out of using averaged cost basis sounds kind of scary warning people to consult a tax professional, but OTOH Wikipedia says using specific shares saves on taxes (assuming choosing higher-basis I suppose).
Do you think this rather scary warning on the Fidelity page is something to worry about, or just normal CYA?
[FONT="]TERMS AND CONDITIONS[/FONT][FONT="] [/FONT]
[FONT="]You are changing the cost basis method for IRS Form 1099-B tax reporting purposes.[/FONT]
[FONT="]You understand that specific shares must be identified at the time of the sale (no later than settlement date), and unidentified shares will be sold based on the account level default disposal method. [/FONT]
[FONT="]Your change from the average cost method to the specific identification method will be prospective only. If you sold shares of a position in this account while it was set to the average cost method, shares acquired before converting to the specific identification method will retain their historic average cost basis going forward. Please consult your tax advisor if you do not understand the tax consequences of making this conversion. [/FONT]
[FONT="]By checking this box, I acknowledge my understanding of, and agree to, the foregoing [/FONT]
[FONT="]statements.[/FONT]
[FONT="]You are changing the cost basis method for IRS Form 1099-B tax reporting purposes.[/FONT]
[FONT="]You understand that specific shares must be identified at the time of the sale (no later than settlement date), and unidentified shares will be sold based on the account level default disposal method. [/FONT]
[FONT="]Your change from the average cost method to the specific identification method will be prospective only. If you sold shares of a position in this account while it was set to the average cost method, shares acquired before converting to the specific identification method will retain their historic average cost basis going forward. Please consult your tax advisor if you do not understand the tax consequences of making this conversion. [/FONT]
[FONT="]By checking this box, I acknowledge my understanding of, and agree to, the foregoing [/FONT]
[FONT="]statements.[/FONT]
Or maybe I will sell my house before I set out upon my travels and I guess then I could just use money from the sale and not need to sell from a taxable account.
I had allowed all the dividends this past half year to pile up in cash (not re-invest themselves), but now I realize they are all "income" if I take them out of my Traditional IRA, so I'm thinking I should re-invest those and sell high-basis shares out of the taxable account to fund my travel (unless I sell my house).
Opinions? Have most of you switched from averaged cost basis to specific id, have you had any negative surprises?
