The debate on this forum and in the financial community in general also seems to be: should I do Roth or Tradition tax deferred. Why isn't taxable brokerage considered in this topic tier of retirement vehicle options?
I recently retired at 43 with 70% of net investments in taxable brokerage accounts. Our annual expenses will be around 120k.
We are married filing jointly.
30k: DW part time work
30k: dividends in a taxable account
30k: capital gains in taxable account for approximately 60k in total proceeds.
Total: 120k
Our total tax should be 0 Federal (negative 5400 if child tax credits are included). Part time work will be covered by standard deduction. Dividends and capital gains will be taxed at 0 since we will make less than 96k.
If we used our Traditional accounts we would be in the 22% bracket at 120k. Plus a 10% penalty, for a 32% max rate.
If we used our Roth accounts, we would have a 10% penalty for a total tax of 10%.
There has been a small amount of tax drag, but this drag will probably be recouped with a single year of Traditional distributions and a couple years of Roth distributions.
Certainly this doesn't work for everyone, but for anyone considering scaling back or retiring before 59.5, a taxable brokerage seems like a no brainer. Why is this so rarely discussed as a top tier option as a retirement vehicle?
I recently retired at 43 with 70% of net investments in taxable brokerage accounts. Our annual expenses will be around 120k.
We are married filing jointly.
30k: DW part time work
30k: dividends in a taxable account
30k: capital gains in taxable account for approximately 60k in total proceeds.
Total: 120k
Our total tax should be 0 Federal (negative 5400 if child tax credits are included). Part time work will be covered by standard deduction. Dividends and capital gains will be taxed at 0 since we will make less than 96k.
If we used our Traditional accounts we would be in the 22% bracket at 120k. Plus a 10% penalty, for a 32% max rate.
If we used our Roth accounts, we would have a 10% penalty for a total tax of 10%.
There has been a small amount of tax drag, but this drag will probably be recouped with a single year of Traditional distributions and a couple years of Roth distributions.
Certainly this doesn't work for everyone, but for anyone considering scaling back or retiring before 59.5, a taxable brokerage seems like a no brainer. Why is this so rarely discussed as a top tier option as a retirement vehicle?
Statistics: Posted by Pepper11 — Fri Jan 31, 2025 5:48 pm — Replies 7 — Views 399