Long-time buyer, first-time seller 😜! Need some input before selling.

[Spmagennis]

I am preparing for military retirement in early 2027 and am in the stockpiling cash phase. As part of this, I am going to sell some shares of an ETF to take some gains from my taxable brokerage. Since I've almost always sold, I'm not savvy on all the implications of a sale and all the things I need to consider. Additionally, between my spouse's income and mine, we're in that $240-250k area which triggers net investment income tax.

Basics:
Estimated AGI ~$230k (includes W2 + 1099 + DIVs)
Contributed to traditional TSP and IRA this year.
Looking to sell between $50-100k from brokerage account, 23% is capital gains.

My questions are:
1. the amount above my basis will be added to my income? Meaning my AGI will go up and I'll need to ensure I pay some tax on that increase in income?
2. I'll pay 15% on LTCG?
3. If my income goes over $250k, I'll trigger the additional 3.8% in NIIT?

What else should I be considering?

Thanks!

 

[GoBirds]

What is your expected income for 2026? Maybe you want to delay the sale til then or split the sale so some hits taxes in 2025 and the other part hits taxes in 2026.

 

[Aerides]

Given you are military I presume that means you won't be shopping on the ACA exchange for health insurance? If I'm not correct, and you do need to buy off the exchange, and expect subsidies, for some years before Medicare, (either you and/or your spouse, as it is based on household income) then you'll want to avoid big income events while you need subsidies.

 

[imjustawarrior]

Welcome to the forum!

Why do you need to stockpile cash?

As you can see, there is quite the tax hit to sell. Why not just sell when you need the cash? Keeping money invested is normally going to result in more money.

 

[Al18]

You might want to collect your tax info for the year and estimate your taxes with and without 50K-100K stock sale at Tax Calculators

You would pay less taxes if you’re in a lower tax bracket ie. after you and/or your wife retires.

 

[Spmagennis]

What is your expected income for 2026? Maybe you want to delay the sale til then or split the sale so some hits taxes in 2025 and the other part hits taxes in 2026.

Similar income, maybe 2-3% higher.

 

[Spmagennis]

Welcome to the forum!

Why do you need to stockpile cash?

As you can see, there is quite the tax hit to sell. Why not just sell when you need the cash? Keeping money invested is normally going to result in more money.

Would like 2 years of disposable spend to soften any sequence of return issues that may arise. Looking to use a bucket strategy of pension + cash (when markets are down) + investment withdrawals (when markets are up).

 

[FlaGator]

You might want to collect your tax info for the year and estimate your taxes with and without 50K-100K stock sale at Tax Calculators

You would pay less taxes if you’re in a lower tax bracket ie. after you and/or your wife retires.

Do this, or go a step further and get tax software for ~$50 so you can iterate as you like and save different scenarios.

I understand the point above about waiting to sell until you need it. Expecting to be in the same bracket would mitigate that somewhat for me. Liquidity at a low tax cost when you need it (and I paid some taxes ahead of "need") provided options down the road that made life easier, perhaps at the cost of higher taxes when working and they were easier to accept.

My experience and recommendation is to let your comfort drive the decision at this early stage, not a few points on taxes.

 

[Aerides]

Would like 2 years of disposable spend to soften any sequence of return issues that may arise. Looking to use a bucket strategy of pension + cash (when markets are down) + investment withdrawals (when markets are up).

Since you aren't retiring till 2027, perhaps just save everything to cash this next year+

I'm a big fan of having 2-4 years in cash/liquid, but selling equities to achieve that in a big way seems counter productive. Do you have any lower hanging fruit?

 

[imjustawarrior]

Would like 2 years of disposable spend to soften any sequence of return issues that may arise. Looking to use a bucket strategy of pension + cash (when markets are down) + investment withdrawals (when markets are up).

You might want to research the bucket strategy some more.

 

[Spmagennis]

Do this, or go a step further and get tax software for ~$50 so you can iterate as you like and save different scenarios.

I understand the point above about waiting to sell until you need it. Expecting to be in the same bracket would mitigate that somewhat for me. Liquidity at a low tax cost when you need it (and I paid some taxes ahead of "need") provided options down the road that made life easier, perhaps at the cost of higher taxes when working and they were easier to accept.

My experience and recommendation is to let your comfort drive the decision at this early stage, not a few points on taxes.

Which tax software do you recommend? I tried a few online calculators, but couldn't find any that has more than just basic computations. I ran the scenario through a few different LLMs and seemed to get some decent replies and consistent across platforms.

 

[Al18]

Use the tax calculator I linked to in post #5

 

[YellowSubmarine]

This may be a good time to split the sale/income flow between 2025 and 2026. It may drop your tax bracket too. Only 23 days remain.

 

[Steelpony]

I am preparing for military retirement in early 2027 and am in the stockpiling cash phase. As part of this, I am going to sell some shares of an ETF to take some gains from my taxable brokerage. Since I've almost always sold, I'm not savvy on all the implications of a sale and all the things I need to consider. Additionally, between my spouse's income and mine, we're in that $240-250k area which triggers net investment income tax.

Basics:
Estimated AGI ~$230k (includes W2 + 1099 + DIVs)
Contributed to traditional TSP and IRA this year.
Looking to sell between $50-100k from brokerage account, 23% is capital gains.

My questions are:
1. the amount above my basis will be added to my income? Meaning my AGI will go up and I'll need to ensure I pay some tax on that increase in income?
2. I'll pay 15% on LTCG?
3. If my income goes over $250k, I'll trigger the additional 3.8% in NIIT?

What else should I be considering.

1. Capital gains invested in what?

2. How about liquidating part in 2025, 2026 and 2027 instead of a lump sum. This keeps your MGI and AGI lower.

3. You use Federal and State vouchers to pay any estimated “extra taxes” or just send in an amount greater then the previous years taxes. Your forms are online.

4. No matter the taxes capital gains taxes max out at 20% always lower then your apparent tax bracket.

Don’t let the tax tail wag the dog. No matter what the outcome there’s not much disincentive to paying taxes and fees. The net is almost always much higher.

Divide your last years taxes by your gross income for your effective tax rate. With substantial income I get to keep 90% of my generated income. It’s a nice problem to have considering the alternatives.

 

[FlaGator]

Which tax software do you recommend? I tried a few online calculators, but couldn't find any that has more than just basic computations. I ran the scenario through a few different LLMs and seemed to get some decent replies and consistent across platforms.

I use Turbo Tax, anything that has current tax law should work.

 

[Nords]

My questions are:
1. the amount above my basis will be added to my income? Meaning my AGI will go up and I'll need to ensure I pay some tax on that increase in income?
2. I'll pay 15% on LTCG?
3. If my income goes over $250k, I'll trigger the additional 3.8% in NIIT?

What else should I be considering?

Thanks!

Those are all correct!

You could run TurboTax (or its Taxcaster website) to roughly estimate your 2026 and 2027 income-tax bills, but you might be able to sell enough in 2027 (after you retire) to avoid the need to hammer yourself with even more taxable capital gains in 2026.

If you get above the 15% threshold for Married Filing Jointly (~$306K in 2026) then you’ll pay at the 20% for additional long-term capital gains:

Capital gains tax: Definition, rates, and ways to save | Fidelity

Capital gains taxes are taxes you may pay on investments when you sell them for a profit. Your capital gains tax rate depends on your income and how long you held an investment.

www.fidelity.com

Topic no. 559, Net investment income tax | Internal Revenue Service

Topic no. 559, Net investment income tax

www.irs.gov

Most brokerages have the ability to let you specify which shares of your funds you want to sell, which helps you minimize your capital gains.

If you’re trying to raise two years’ expenses in cash before you earn your last paycheck (due to sequence of returns risk), keep in mind that your military pension (and any VA disability compensation) means that you’d only want to have two years’ *net* expenses in cash.

It’ll hurt to sell shares to raise the two years’ net expenses in cash, and it’ll hurt even more to pay all of those income taxes, but this is the price of self-insuraing against SORR. You’d want to balance the pain of paying taxes now against the pain of retiring just as the stock market hypothetically drops 30% in a recession.

 

[haloFIRE]

Fellow military retiree here.

Good possibly you will qualify for VA disability benefits. They are tax free and depending on the amount of your benefit you may not need to sell anything because you may no longer need to dip into your investments.

If you haven't done so already I highly recommend you find a Veteran Service Officer from one of the great agencies supporting our retirees. I used Wounded Warrior Project. Started working with them about 15 months before I retired. They prepared my claim for me, made recommendations on gathering further documentation and gave me a ball park estimate of what I might receive based on my records. Their estimate was exactly right.

Start this process now for a 2027 retirement. It's much easier to get the care and documentation you need while on active duty to file your claim.

On another note, my VA care is excellent. I prefer it to Tricare (and my Tricare network is actually very good).

Hope this was helpful to you

P.S. Nords is the gold standard for advice in my opinion. He's helped countless military retirees over the years. Read his posts, and check out his book.

P.S.S. Thanks Nords!!

 

[COcheesehead]

Don’t forget state taxes.

 

[planuntilthefisthits]

I am preparing for military retirement in early 2027 and am in the stockpiling cash phase. As part of this, I am going to sell some shares of an ETF to take some gains from my taxable brokerage. Since I've almost always sold, I'm not savvy on all the implications of a sale and all the things I need to consider. Additionally, between my spouse's income and mine, we're in that $240-250k area which triggers net investment income tax.

Basics:
Estimated AGI ~$230k (includes W2 + 1099 + DIVs)
Contributed to traditional TSP and IRA this year.
Looking to sell between $50-100k from brokerage account, 23% is capital gains.

My questions are:
1. the amount above my basis will be added to my income? Meaning my AGI will go up and I'll need to ensure I pay some tax on that increase in income?
2. I'll pay 15% on LTCG?
3. If my income goes over $250k, I'll trigger the additional 3.8% in NIIT?

What else should I be considering?

Thanks!

Not your question, and don’t know your neighborhood , but consider approaching your neighbors and see if they want to purchase your property. I did that and saved a ton of money by having an attorney handle the sale, rather than a realtor.