No. of Recommendations: 0
As long as the tax rate on capital gains and qualified dividends is 0% for a large number of retirees (0% on the first $35,350 for singles, $70,700 for married), a taxable account is as "tax-advantaged" as a Roth IRA.

Thank you. That was my gut feeling, so what I was reading made no sense for our situation.

I took our current TIRA balance and calculated out it's value when DH turns 70, ran that through the RMD calculator. We've maxed out our tax advantaged savings since we started working and invested pretty aggressively, so the RMD if we don't draw down or convert will be way larger than we could possibly need. Obviously we don't need to spend that, but if we don't plan this out we are at risk for being in at least as high a tax bracket as when working, and absolutely much higher when one of us predeceases the other. It's a nice problem to have, but it is even nicer to avoid the tax end of that problem. Would have been even smarter not to max out our IRAs and keep more funds in taxable accounts, but we are able to retire early because we put our savings contributions on aggressive auto pilot, and that's water under the bridge. Will have to rethink that strategy when it comes to advising the kids.

And if you're taking a capital gain, some portion of the proceeds is likely to be a tax-free return of capital, so $70,700 will cover much more than a $1.78 million portfolio.

I hate to be so obtuse on this, but shifting gears from accumulation mode to spending mode means I have much to learn. When you take capital gains, doesn't that go towards your income base? So in other words, if we had $40,000 in TIRA witdrawals and $80,000 in capital gains, would the basis for the tax on capital gains be the $40K or the $120K? Or is what you are saying that by selling $80K in stock, the capital gains may only be $30K when you net out the initial cost of the stock, so we still only get taxed on the $40K in TIRA income, because our total income would only be $70K.

Hmmm, I can see where for the disciplined saver, one who is not tempted to spend just because it is there, it's probably not best to put funds in a TIRA. Of course, we didn't always have a choice, and we rolled a few 401Ks into TIRAs. The understanding is a little late for our accumulation phase, but will come in handy in advising the kids.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.