dodecahedron wrote:Those of us planning a retirement budget with large charitable donations (made either via QCDs or donations of appreciated assets in taxable) may view our tax-deferred accounts as a taxfree account plus an account we are investing on charity's behalf.
So? Your tax situation is not like "most" of us. You plug in zero as your tax rate in the return times tax rate
metric and get everything with the same tax efficiency. It's just a different way to get to the same place. It matters not whether the asset is CD's (short or intermediate), junk bonds, a TBM fund, a Total Stock Market fund or whatever. They all have for the same tax efficiency for you
Agree that my current tax situation is unlike most. In retrospect, my late husband over-Rothified our holdings because we had been planning for both of us to be living longer than wound up being the case after his unexpected death. As a result, my material needs are less than we had originally been planning for as a couple and my tax-deferred holdings are basically earmarked for charity and LTC (if necessary).
There is an interesting historical tax reason why our Roth holdings wound up being so large relative to our tax-deferred holdings, but it has to do with tax hassles rather than tax rates.
Basically, we briefly held some equities in taxable with a DRIP in the early 1990s (these were gifts from a relative of funds we didn't want to hold long-term but held onto for a while out of politeness.) We had very busy and chaotic lives back then, with young children and self-employment income, and keeping track of basis was far more of a pain back in the day. I was the person in charge of doing taxes in our family and I complained enough (some might call it "bitching and moaning"
) about this that my husband took it to heart. Once Roth accounts appeared on the scene, we did some opportunistic conversions (our self-employment income had large swings) and from then on, virtually all our equities went into the Roth accounts, simply to avoid my complaints about dealing with basis.
Of course, nowadays with "covered" stock basis reporting and specific ID, it is much easier to have equities in taxable than back in the day.
But it is precisely because my Roth accounts ended up becoming so unexpectedly large relative to my needs that I can mentally earmark my RMDs from tax-deferred to go toward charity (or possibly other large deductible expenses, like LTC or our epically high and growing property taxes in beautiful and bucolic upstate NY.)