You know When it is Time

[Purslane]

Op, well done on taking your lessons, learning from them as you say, and thriving financially. I'm a couple of years younger and your numbers are amazing, especially given the losses you say you had via your FAs! I totally agree, by the way, a good FA is very, very hard to snare so why not trust in yourself. You've put in the work, obviously.

Best of luck!

Thank you. I wish I knew then what I know now. But the past is the past or, as the Lady Chablis said, that's two tears in a bucket m*therf*ck it.
You may only be a few years younger than me but it counts. Time is the great equalizer.

 

[RetMD21]

I am doing something similar. I have too much in state and federal tax free short term municipals in my taxable account and I am gradually selling the REITs in my IRA and moving the fixed income there,

 

[Purslane]

As recommended by the Forum, I am ready to start making my accounts more tax efficient. There is some good information above but I want to pose the question(s) anew.

I have 3x more cd/mm/tbill dollars in my brokerage account compared to the roll over IRA. Both accounts are at Fidelity.
My understanding is that this should be reversed to make the brokerage account more tax efficient.

What is the best way to do this? For example, can I just sell 100K of FSKAX in the IRA and rebuy 100k of FSKAX in the brokerage. If I put the buy and sell orders in at the same time I should not lose any money in the switch, right? Is this the best way to get the switchover done?

 

[TickTock]

Any sales from the IRA result in ordinary taxable income. So you'd lose in taxes.

ETA - any sales from the IRA to the taxable account result in ordinary taxable income.

You could purchase broad-based equity funds with the brokerage $$ and sell FSKAX in the IRA to purchase cd/mm/tbills in the IRA.

 

[Purslane]

I don't want to take any money out of the IRA. I am not 59.5. I don't need the money right now and I don't want to pay a penalty.
I just want to get my FSKAX position out of the IRA and into the individual account. I have the money in my individual account to do this because I have a maturing CD. I will buy another CD with the money from selling FSKAX in the IRA.
Does that seem right?

My understanding is this would decrease my tax liability in my individual account (lower taxes on dividends vs higher ordinary income tax from CDs), but does not affect taxes in the IRA because that money will be taxed at ordinary income tax rates when I start taking it out, no matter what I hold in it.

I got a rude awakening this tax season. Trying to learn the lesson.

 

[TickTock]

You got it right.

Also, not only will you have lower taxes for qualified divvies from FSKAX, but also US total stock market divvies are lower than cd/mm/tbill rates. Double bonus for your tax liability.

You can also buy (in the taxable account) bonds on the secondary market with low yield % (not zero-coupon bonds though, due to imputed income). You will have to pay ordinary income on the discount amount when it matures, so it defers income but doesn't erase it.

You can also buy a MYGA. This also defers income until you realize it. Standard 10% penalty applies for pre-59.5 withdrawal, though.

 

[indiajust]

I now have 2 SPI robotraded accounts with Schwab that auto rebalance/reindex/tax loss harvest. The bulk of my taxable equity position is in these 2 accounts. I keep dividends in the Roth. That leaves my personal taxable account as the last source of taxable income.

 

[Purslane]

I now have 2 SPI robotraded accounts with Schwab that auto rebalance/reindex/tax loss harvest. The bulk of my taxable equity position is in these 2 accounts. I keep dividends in the Roth. That leaves my personal taxable account as the last source of taxable income.

I might ask you more about this later when I am ready for that lesson.

 

[pb4uski]

Any sales from the IRA result in ordinary taxable income. So you'd lose in taxes.

ETA - any sales from the IRA to the taxable account result in ordinary taxable income.

You could purchase broad-based equity funds with the brokerage $$ and sell FSKAX in the IRA to purchase cd/mm/tbills in the IRA.

If the OP sells FSKAX in the IRA it is NOT a taxable event. The OP just has cash instead of FSKAX in the IRA. A taxable event is only when there is a withdrawal from the IRA (in the form or cash or shares).

Also, there is not such thing as a sale from an IRA to a taxable account. You can transfer shares from an IRA to a taxable account but is it really an in-kind withdrawal and is valued at market value at the time of transfer.

The last part is correct. OP can sell FSKAX in the IRA and use the sales proceeds to purchased fixed income and do the inverse in the taxable account, sell CD/MM/Tbills and uy FSKAX. Or they could just buy FSKAX as CDs and TBills mature in the taxable account and in the IRA sell FSKAX and reinvest the proceeds in fixed income.

 

[TickTock]

For example, can I just sell 100K of FSKAX in the IRA and rebuy 100k of FSKAX in the brokerage. If I put the buy and sell orders in at the same time I should not lose any money in the switch, right? Is this the best way to get the switchover done?

If the OP sells FSKAX in the IRA it is NOT a taxable event. The OP just has cash instead of FSKAX in the IRA. A taxable event is only when there is a withdrawal from the IRA (in the form or cash or shares).

pb4uski,

I get it. Look at the OPs post again. It says sell in the IRA and rebuy in the brokerage, not sell in the IRA to cash/settlement account/whatever in the IRA and sell in the brokerage and buy in the brokerage. That implies selling in the IRA and buying in the brokerage. I was trying to clarify.

 

[Purslane]

Yes—Wanting to sell FSKAX in IRA to buy cd in IRA, and at the same time use cash in brokerage to buy the same amount of FSKAX in the brokerage account that I sold in the IRA.
I want to basically swap where the FSKAX lives.

 

[pb4uski]

pb4uski,

I get it. Look at the OPs post again. It says sell in the IRA and rebuy in the brokerage, not sell in the IRA to cash/settlement account/whatever in the IRA and sell in the brokerage and buy in the brokerage. That implies selling in the IRA and buying in the brokerage. I was trying to clarify.

I interpreted "sell 100K of FSKAX in the IRA" as the proceeds going to the IRA settlement account and "rebuy 100k of FSKAX in the brokerage" as using cash from the brokerage settlement account. And, presumably in order to "rebuy 100k of FSKAX in the brokerage" they would have had to previously sold any CDs/MM/TBills in the brokerage account. And once they "sell 100K of FSKAX in the IRA" they would have money in the IRA settlement account to buy CDs/MM/TBills.

 

[Purslane]

I should have been more clear. Apologies.

 

[steady saver]

The trick is to join everything you might be even remotely interested in. You never know unless you try it. Even if it turns out you don't love the activity, that's where you find your new friends. If you love the activity, all the better. If you don't, you just quit that activity, no harm done.

How do I know?

When we retired DW and I moved 750 miles to a state we'd never lived in, to a city we'd never even visited, where we didn't know a single person. But we did know from experience what we wanted/needed in terms of climate, COL, culture, shopping, attractions, proximity to larger metro, health care, etc. We are not extroverts in any sense. We've been here for over 5 years, and we love it! We both made it a point to join activities and say yes to every invite, and it has paid off. We actually have more friends now than we did while working. I thought I would make my new friends through sailing, and DW thought she would make her new friends with various fitness activities. Neither panned out - but it led us to other activities where we did find good friends!

Best of luck.

Good advice.

 

[brett]

I knew when it was time. It crept up suddenly. The chance of a good severance package enhanced those feelings.

So I went at 58/59. Loved my job, had a great employer. Was a bit of a workaholic according to DW. Lots of business travel.

DW did not believe that I would do it and be so happy about it. She firmly believed that I would be back at it within six months.

She was wrong. I walked away 13 years ago and never once looked back or regretted the decision.

I knew it was time. The only suprise to me was that it crept up on my so quickly.

 

[Koolau]

I knew when it was time. It crept up suddenly. The chance of a good severance package enhanced those feelings.

So I went at 58/59. Loved my job, had a great employer. Was a bit of a workaholic according to DW. Lots of business travel.

DW did not believe that I would do it and be so happy about it. She firmly believed that I would be back at it within six months.

She was wrong. I walked away 13 years ago and never once looked back or regretted the decision.

I knew it was time. The only suprise to me was that it crept up on my so quickly.

Excellent.

Yes, I made my decision over a week-end when they changed my assignment and I didn't want to do it.

When you know, you know.