Recent Posts

1

General Discussion / Re: Retiring beyond 55

« Last post by gopherguy on May 27, 2020, 06:14:26 PM »

Hi Jeremy,
I just saw your reply yesterday. Thank you again for your feedback and sending the link to your service, I wasn't aware of it. I'll be in touch. Thanks again, John

2

Taxes / Re: Short Term Capital Gains Tax

« Last post by ann1act on May 24, 2020, 06:24:43 PM »

Thanks. That was my thinking also, but I know there are much better experts here than I am. Was hoping I might have missed something.

3

Taxes / Re: Short Term Capital Gains Tax

« Last post by gocurrycracker on May 23, 2020, 01:00:13 AM »

Nothing that I'm aware of

4

Taxes / Short Term Capital Gains Tax

« Last post by ann1act on May 22, 2020, 06:59:28 PM »

I've been doing some day trading (more like week or month trading), but still falls under the short term capital gains tax. Besides doing this trading in a Roth (which is rather small and so limits my ability to trade), is there another way to avoid the taxes? I've been doing very well recently, and I don't mind contributing to roads, education, etc, but I would like to explore ways of keeping a little more. Currently, being taxed at 32% federal. Thanks for ideas!

5

General Discussion / Re: BAckdoor roth question

« Last post by Holly on May 19, 2020, 10:56:46 AM »

THANK YOU!

6

General Discussion / Re: BAckdoor roth question

« Last post by gocurrycracker on May 19, 2020, 01:32:43 AM »

A backdoor Roth is a Roth conversion.

Each Roth conversion has its own 5-year wait period.

7

Taxes / Re: how much traditional/Roth/Taxable?

« Last post by Kzulon on May 18, 2020, 01:23:42 PM »

Jeremy,

Thank you for the detailed response and link to the article! I really appreciate the feedback, it makes me feel more confident in my current plan

I will continue to put enough in traditional to get some tax savings today and with the goal of filling the bottom of the brackets at retirement to take advantage of the standard deduction and qualify for the ACA subsidies in the future. The health insurance planning can make things tricky but doable, wonder what health insurance may look like in 20 years ! 

I'm gonna stick to the plan, some Roth, some traditional, and some taxable to have that flexibility.

Thanks again for the response and the great content you provide. Have a nice day and stay safe.

8

General Discussion / BAckdoor roth question

« Last post by Holly on May 18, 2020, 06:59:12 AM »

I have searched everywhere, yet I cannot seem to get a solid answer to this specific roth question. Backdoor roth articles give a to-do list, and usually start with "Open a Roth." one of the final steps is that you have to wait 5 years for the backdoor contribution to "season." As I understand it, all Roths must season for 5 years before one can withdraw any contributions, and we have had our Roths open for well over 10 years now. So my question is: since our Roths are already seasoned, if we should begin a backdoor Roth ladder this year, do these backdoor contributions have to season for five MORE years... or not? TIA.

9

Taxes / Re: how much traditional/Roth/Taxable?

« Last post by gocurrycracker on May 17, 2020, 10:54:54 PM »

Hey Kzulon

Sounds like you have a great grasp on this. Planning for early retirement 15-20 years in advance is commendable.

There is no right answer to the perfect pre-tax/post-tax/taxable split. You need to make an educated guess about your future tax rates and then try to find a balance. Tax law can change, health insurance law can change, etc...

12% tax is a pretty low tax rate to pay, especially when all future growth is tax-free as with a Roth. But if you can pay 0% or 10% later, then why pay 12% now?

An example of finding the balance is in this (and the following 2 or 3) posts:
https://www.gocurrycracker.com/going-back-to-cali/


The following is just a quick mental dump:

If we look at this with the goal of early retirement, then in 20 years you are spending $40k/year from investments.
If those funds come 100% from 72t withdrawals from a Traditional IRA, assuming no changes in tax law then you will pay about $1500 in federal tax (MFJ.) That is a marginal rate of 10% and an effective rate of ~4$. Both are less than 12%. Traditional is better.
https://www.gocurrycracker.com/federal-income-tax-calculator/

However, you would also presumably be paying for health insurance. Maybe that is via the ACA, in which case your income from 138% FPL to $40k is "taxed" at 15% (about $17k * 15% = ~$2,500.) Now you have a marginal rate of 25% and an effective rate of 10%.

That is still better than 12%, so no harm done, but you are paying 25% tax rates instead of the 12% you saved years earlier. Roth is better.


If you put 100% of retirement savings into Roth now, at 10% and 12% tax rates, then you have no/minimal income in retirement and pay zero tax. But that also means you lose any benefit of the standard deduction and will not have qualifying income to get ACA subsidies at 138% FPL (so will be on Medicaid, probably.)...


So the right balance is probably to have enough in Traditional accounts so you can have income of at least 138% FPL, enough in Roth and/or taxable long-term gains to have spending power without going over 400% FPL (or better 250% FPL.) Pay some tax at 10-12% now to avoid 25%+ later. Some Roth, some Traditional, some taxable.

10

Taxes / Re: how much traditional/Roth/Taxable?

« Last post by Kzulon on May 13, 2020, 01:40:22 PM »

One more important detail I forgot to add is we currently live in Florida so we pay no state income tax!