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1) Anything you eventually withdraw  above your deposits will be taxed at your ordinary income tax rate.

If you just invest in a taxable account, any capital gains will be taxed at only ZERO to 20% depending on income. Qualified dividends will be taxed at capital gains rate also.

I realize you said for what sounded like liquid funds  but you can either invest in some high dividend stocks / ETFs  or hold some cash / short term bond funds in your retirement account.
General Discussion / Bank on yourself
« Last post by Toofuzzy on July 19, 2022, 10:31:23 AM »
I have read about various over funded whole life methods where you can borrow funds from yourself  and the various benefits of doing so.

But I can make no sense of it.

If the policy both pays you 6% and charges you 6% ( or charges you more than it pays you ), you eventually have to pay that borrowed money back and pay taxes on that increased amount ( interest ) as opposed to just pulling the money out of savings.

How are these policies better than just buying term and saving the difference.
General Discussion / Re: Guidance for One Getting Started Very Late
« Last post by Toofuzzy on July 19, 2022, 10:16:01 AM »
I would contribute the maximum to work retirement accounts to the extent they are matched
Then I would max out ROTH IRA. Both spouses can have one even if only one is working.
Lastly I would contribute to a taxable brokerage account but try not to trade in that account. Do any trading in retirement accounts.

If you want $50,000 in today's dollars and know you will get $20,000 from SS then yo will need $30,000 x 20 ( or 25 ) = $600,000

If you multiply present savings by 7% compounded  and subtract that from the $600,000 that will give you how much additional you will need.

From there you can take a yearly savings amount and compound it and figure out how much you will need to save.

The above has a fudge factor in it as it assumes you never spend the principal.
General Discussion / Re: Guidance for One Getting Started Very Late
« Last post by gocurrycracker on May 21, 2022, 09:14:10 AM »
Paying off a house and sending 4 kids to college is a heck of an accomplishment, congrats!

The difference with a later starting date is you have less time for compound interest to do its thing. Otherwise the principles are all the same.

Key principle: If your expected withdrawal marginal tax rate is higher than your current tax rate, then it is better to contribute to Roth accounts. If the opposite, then contribute to Traditional.

Most of your SS income will be tax-free. (I assume the $2,200/month is for both of you, either from spouse's own benefit or 50% spousal benefit.)
That puts a tax rate of 0% on a large chunk of other income due to standard deduction. 0% tax space shrinks a bit when the inevitable happens (switch to single from MFJ.)

With 0% tax rate in the future and 12% tax rate now (MFJ, $50k gross income) that says to contribute to Traditional accounts (take the tax deduction now), e.g. 403b

8% is a bit optimistic for real returns for 20 years, I'd plan for a percent or two lower - which means more of your nest egg needs to come from direct savings.

General Discussion / Guidance for One Getting Started Very Late
« Last post by mjwillyone on May 19, 2022, 11:40:19 AM »
Hello all!

I would love some suggestions for my particular situation and one which I am sure many older people who have stepped into the FIRE zone can attest to:  Starting late to investing enough.

My question is:  what investment accounts are best used for someone who is NOT planning to retire early but wants to pay $0 in tax??  When I retire I do plan to retire .. no further income other than what comes in from social security and my investments.

I am 54 (almost 55) and have about $19,000 in retirement accounts.  My house will be paid off in December and my wife and due to our excellent health our renew for 20 years of term life (even at our ages) is a mere $45 for $300,000 of coverage.  We have no debt and my credit rating is 790.   I have just received 3 credit cards in an attempt to make use of sign-on bonuses for travel that we would like to do (Chase Sapphire Preferred, Southwest Rapid Rewards business card and Southwest Rapid Rewards personal card - I am about to get the companion pass with the amount of sign-on bonuses I will soon be getting.)

My question is this:  My plan is to retire at 67.  I want to live on $50K each year from investments.  I will draw $2,200 each month ($26,400 yearly) from social security.   This leaves $23,600 to take care of on my own.  At an 8% rate of return for 12 years, and needing $590,000 ($23,600 x 25) I need to set aside $2,437 each month. 

What's the best investment location for me?  I have access to 403(b), Roth 403(b), IRA, Roth IRA, and a standard investment account.

It is unfortunate that I didn't come across those in the FI community sooner (Go Curry Cracker, Mr. Money Mustache, J.L Collins, etc.)  I chose, instead, to pay for all of my 4 children's college educations (with them working to do the same) and to pay off my house and keep other debt as zero while making about $50,000 per year. 

Thank you to all who can give insight on this issue.


PS ... I would love to see spreadsheets created in the FI community that would address these type of questions.   I have created a spreadsheet that can help some .. but I don't have enough of a handle on the particulars of when one type of investment would be better suited to someone (based upon age, or other criteria) to build a spreadsheet that would actually give me greater clarity.
Taxes / Re: Minimizing tax
« Last post by gocurrycracker on May 09, 2022, 01:10:17 AM »
Congratulations on your big gain!

Unfortunately there isn't much you can do here beyond paying the tax and moving on.

Taxes / Minimizing tax
« Last post by aswam on May 08, 2022, 02:23:42 PM »

I have a large amount in one stock that I wanted to move to VTSAX.  If I sell all that stock at once  I will be netting ~300K capital gains on top of my 250K W2. I am in a 7% state tax. Also, I don't want to wait for a long time. What should be my strategy?

Thanks in Advance.

Taxes / Re: Spiked or smoooooth income for ACA?
« Last post by theupperwestmike on May 07, 2022, 02:33:49 PM »
Taxes / Re: Spiked or smoooooth income for ACA?
« Last post by gocurrycracker on May 05, 2022, 01:49:02 PM »
Thanks Mike

I don't plan to do this ever again. It was a 1-time thing as we transitioned from a low-tax to a not-low-tax environment.
Details here:

I'll be 48 this year, just 11.5 years away from unrestricted access to IRAs. Between this one-time $150k cap gain and debt ( we shouldn't have any issues hitting 59.5 without big tax bills or ACA premiums.

If that weren't the case, the ACA tick tock can be a good approach as long as there are no underlying (high cost) health issues.
Taxes / Spiked or smoooooth income for ACA?
« Last post by theupperwestmike on May 04, 2022, 01:26:28 PM »

Brilliant stuff as usual. I admire your creativity!

One of your moves got me thinking: your tax gain harvesting of $150k to ease the next few years of income for ACA (and other benefits). Assuming tax and ACA laws are unchanged, do you think you'll repeat something like that every few years - where you have one low/no ACA subsidy year followed by two or three generous subsidy years - or do you think that once you've run out of that full basis $150k, you will sell/convert a little each year going forward?

If not for your household situation, can you think of an early retiree household type where a spiked income pattern makes a lot of sense?
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