What percentage of your net worth is not taxed?

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Cpadave
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What percentage of your net worth is not taxed?

Post by Cpadave »

And do you think about the tax as eventual liability reducing your net worth?
In my case. It is about 31%. Unrealized gain in taxable accounts is about 19%. Tax deferred retirement accounts is about 10%. And about 2% unrealized income such as ibond and other investments. Our house which is about 11% of net worth(no mortgage) has depreciated since we bought it more than 7 years ago.
Last edited by Cpadave on Sat Nov 28, 2020 9:38 am, edited 1 time in total.
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Re: What percentage of your net worth is not taxed?

Post by dodecahedron »

I used to think a good bit about this. When my late husband was alive, we actually calculated an estimated present value of expected future income taxes as a liability.

But after lots of Roth conversions and internal growth in Roth accounts and continuing Roth contributions over the years and realizing that much of my future planned or expected future spending is very tax efficient (donating appreciated securities now, starting QCDs in four years, eventually charitable bequests, and possible LTC costs) and realizing that the vicissitudes of future tax law changes have been historically unpredictable, I am pretty relaxed about this.
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Re: What percentage of your net worth is not taxed?

Post by Cpadave »

That’s great. Unfortunately I haven’t been able to take advantage of roth.
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Re: What percentage of your net worth is not taxed?

Post by tibbitts »

Cpadave wrote: Sat Nov 28, 2020 9:27 am And do you think about the tax as eventual liability reducing your net worth?
Yes, although I failed to appreciate the impact until very recently - actually not until the middle of 2020. That was too late for me to make some adjustments I could have made earlier. Over 60% of my net worth hasn't been taxed yet. And that's counting the Roth conversions I've already done this year and pretending I don't owe any tax (Q4 conversions, so the tax will be due early next year.) Once those payments are made from post-tax funds in 2021, over 65%.
Last edited by tibbitts on Sat Nov 28, 2020 9:57 am, edited 2 times in total.
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Re: What percentage of your net worth is not taxed?

Post by tibbitts »

Cpadave wrote: Sat Nov 28, 2020 9:40 am That’s great. Unfortunately I haven’t been able to take advantage of roth.
Why?
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Re: What percentage of your net worth is not taxed?

Post by Cpadave »

tibbitts wrote: Sat Nov 28, 2020 9:49 am
Cpadave wrote: Sat Nov 28, 2020 9:40 am That’s great. Unfortunately I haven’t been able to take advantage of roth.
Why?
Income too high to contribute into Roth. Current tax rate too high to convert. Maybe in near future as my income is going down.
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Re: What percentage of your net worth is not taxed?

Post by tibbitts »

Cpadave wrote: Sat Nov 28, 2020 9:50 am
tibbitts wrote: Sat Nov 28, 2020 9:49 am
Cpadave wrote: Sat Nov 28, 2020 9:40 am That’s great. Unfortunately I haven’t been able to take advantage of roth.
Why?
Income too high to contribute into Roth. Current tax rate too high to convert. Maybe in near future as my income is going down.
Okay; a good problem to have.
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Re: What percentage of your net worth is not taxed?

Post by anon_investor »

Thanks to the mega and regular backdoor Roth, I now have more Roth funds (41%) than pre-tax (40%) or taxable (19%).
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Re: What percentage of your net worth is not taxed?

Post by earlyout »

Never really thought about it until now but less than 5% is taxable several years into retirement. Large conversions to Roth before Social Security and the remaining traditional IRA will go to charity. The appreciation of our personal residence is less than the exemption. Appreciated holdings in taxable account will get a stepped up basis when they are inherited but the taxable account does generate taxable income as dividends.
Last edited by earlyout on Sat Nov 28, 2020 10:21 am, edited 1 time in total.
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Re: What percentage of your net worth is not taxed?

Post by Cpadave »

earlyout wrote: Sat Nov 28, 2020 10:13 am Never really thought about it until now but less than 5% several years into retirement. Large conversions to Roth before Social Security and the remaining traditional IRA will go to charity. The appreciation of our personal residence is less than the exemption. Appreciated holdings in taxable account will get a stepped up basis when they are inherited but the taxable account does generate taxable income as dividends.
There is a good chance that step up basis will go away or be limited. As much as it will benefit me greatly, it never made sense.
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Re: What percentage of your net worth is not taxed?

Post by midareff »

A somewhat parallel thought is what percentage of your retirement portfolio income is taxed, by account.... taxable, IRA and Roth... and what impact does that (or should have) have on your placement of assets? Try the exercise after CPI-U and tax adjustments.

As far as the OPs question: roughly 1/3 of the income generated by my taxable account is taxable, about 5% of IRA and none of Roth.
Last edited by midareff on Sat Nov 28, 2020 10:37 am, edited 2 times in total.
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Re: What percentage of your net worth is not taxed?

Post by Nate79 »

Cpadave wrote: Sat Nov 28, 2020 10:18 am
earlyout wrote: Sat Nov 28, 2020 10:13 am Never really thought about it until now but less than 5% several years into retirement. Large conversions to Roth before Social Security and the remaining traditional IRA will go to charity. The appreciation of our personal residence is less than the exemption. Appreciated holdings in taxable account will get a stepped up basis when they are inherited but the taxable account does generate taxable income as dividends.
There is a good chance that step up basis will go away or be limited. As much as it will benefit me greatly, it never made sense.
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Re: What percentage of your net worth is not taxed?

Post by sycamore »

OP, could you clarify what you mean by "What percentage of your net worth is not taxed?"
Which taxes are you talking about: federal / state income, FICA taxes, cap gains taxes?

Much of my net worth is from my earned income.
Much of that income was taxed for FICA (SS+Medicare) and state & federal income taxes. -> Counts as taxed.
During some high income years, I paid no SS tax on the portion that exceeded the SS wage base. -> But most of it was taxed otherwise.
Even fell into the AMT. -> Ugh, lots of tax there.
With 401k and traditional IRA contributions I avoided (postponed) state & federal income taxes. -> Taxed or not? TBD
With Roth contributions, the income for it was taxed up front. -> Counts as taxed.
I've done a traditional to Roth IRA conversion and paid income taxes on that. -> Counts as taxed.

In the future, some of my traditional IRA withdrawals will fit in the standard deduction = 0% tax bracket. That's not taxed.
And, my taxable account consists of my basis and unrealized capital gains, the latter hasn't been taxed yet. Some cap gains will likely be in the 0% tax bracket. That's not taxed.

Basically, an accurate answer is hard to figure out due to complexities in the tax code.

Or maybe it'd be good enough to estimate it as:
((taxable net worth - taxable basis) + (Roth net worth - Roth contributions)) / (total net worth)

Seems like an interesting question but practically it may not really mean much for me. I'll still try to optimize on maximum after-tax return.
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Re: What percentage of your net worth is not taxed?

Post by jebmke »

No way to know. Tax-deferred isn't un-taxed. However, it can be if one's tax rate is zero at withdrawal (impossible for us) or via use of QCDs. We don't yet know what the QCDs will be so the answer is unknowable.
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Re: What percentage of your net worth is not taxed?

Post by abuss368 »

dodecahedron wrote: Sat Nov 28, 2020 9:35 am I used to think a good bit about this. When my late husband was alive, we actually calculated an estimated present value of expected future income taxes as a liability.

But after lots of Roth conversions and internal growth in Roth accounts and continuing Roth contributions over the years and realizing that much of my future planned or expected future spending is very tax efficient (donating appreciated securities now, starting QCDs in four years, eventually charitable bequests, and possible LTC costs) and realizing that the vicissitudes of future tax law changes have been historically unpredictable, I am pretty relaxed about this.
That is close to where we are as well. We converted all Traditional IRAs to Roth IRAs. Roth 401k at work as well. Taxable account has Total Market Index Funds. I am now fine with everything. The overall tax on dividends compared to the total portfolio is small.
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Re: What percentage of your net worth is not taxed?

Post by Kenkat »

I would consider the house to be taxed if you pay property taxes.
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Re: What percentage of your net worth is not taxed?

Post by LadyGeek »

Nate79 wrote: Sat Nov 28, 2020 10:34 am
Cpadave wrote: Sat Nov 28, 2020 10:18 am
earlyout wrote: Sat Nov 28, 2020 10:13 am Never really thought about it until now but less than 5% several years into retirement. Large conversions to Roth before Social Security and the remaining traditional IRA will go to charity. The appreciation of our personal residence is less than the exemption. Appreciated holdings in taxable account will get a stepped up basis when they are inherited but the taxable account does generate taxable income as dividends.
There is a good chance that step up basis will go away or be limited. As much as it will benefit me greatly, it never made sense.
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Re: What percentage of your net worth is not taxed?

Post by rkhusky »

Cpadave wrote: Sat Nov 28, 2020 9:50 am
tibbitts wrote: Sat Nov 28, 2020 9:49 am
Cpadave wrote: Sat Nov 28, 2020 9:40 am That’s great. Unfortunately I haven’t been able to take advantage of roth.
Why?
Income too high to contribute into Roth. Current tax rate too high to convert. Maybe in near future as my income is going down.
Consider using the Backdoor Roth technique if you don’t have a large Traditional IRA.
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Re: What percentage of your net worth is not taxed?

Post by anon_investor »

abuss368 wrote: Sat Nov 28, 2020 10:56 am
dodecahedron wrote: Sat Nov 28, 2020 9:35 am I used to think a good bit about this. When my late husband was alive, we actually calculated an estimated present value of expected future income taxes as a liability.

But after lots of Roth conversions and internal growth in Roth accounts and continuing Roth contributions over the years and realizing that much of my future planned or expected future spending is very tax efficient (donating appreciated securities now, starting QCDs in four years, eventually charitable bequests, and possible LTC costs) and realizing that the vicissitudes of future tax law changes have been historically unpredictable, I am pretty relaxed about this.
That is close to where we are as well. We converted all Traditional IRAs to Roth IRAs. Roth 401k at work as well. Taxable account has Total Market Index Funds. I am now fine with everything. The overall tax on dividends compared to the total portfolio is small.
How long did it take you to convert all your TIRA to Roth? And how large was your TIRA balance?
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Re: What percentage of your net worth is not taxed?

Post by abuss368 »

anon_investor wrote: Sat Nov 28, 2020 11:26 am
abuss368 wrote: Sat Nov 28, 2020 10:56 am
dodecahedron wrote: Sat Nov 28, 2020 9:35 am I used to think a good bit about this. When my late husband was alive, we actually calculated an estimated present value of expected future income taxes as a liability.

But after lots of Roth conversions and internal growth in Roth accounts and continuing Roth contributions over the years and realizing that much of my future planned or expected future spending is very tax efficient (donating appreciated securities now, starting QCDs in four years, eventually charitable bequests, and possible LTC costs) and realizing that the vicissitudes of future tax law changes have been historically unpredictable, I am pretty relaxed about this.
That is close to where we are as well. We converted all Traditional IRAs to Roth IRAs. Roth 401k at work as well. Taxable account has Total Market Index Funds. I am now fine with everything. The overall tax on dividends compared to the total portfolio is small.
How long did it take you to convert all your TIRA to Roth? And how large was your TIRA balance?
Large and we did it over time. then I left my firm and have another Traditional IRA that I have been chipping away at. I have done small and large conversions. I can almost do small conversions where the impact is barely noticeable to our taxes and finances.

In hindsight, I have ZERO regrets.

Another often missed advantage is having Roth IRA distributions will result in no impact to Medicare premiums at retirement. This is not discussed enough.
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Re: What percentage of your net worth is not taxed?

Post by Cpadave »

Sorry. I did not mean to speculate about any potential future tax policy. As to tax, I meant income taxes, Federal and State taxes that I can be subject to eventually.
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Re: What percentage of your net worth is not taxed?

Post by JackoC »

dodecahedron wrote: Sat Nov 28, 2020 9:35 am I used to think a good bit about this. When my late husband was alive, we actually calculated an estimated present value of expected future income taxes as a liability.

But after lots of Roth conversions and internal growth in Roth accounts and continuing Roth contributions over the years and realizing that much of my future planned or expected future spending is very tax efficient (donating appreciated securities now, starting QCDs in four years, eventually charitable bequests, and possible LTC costs) and realizing that the vicissitudes of future tax law changes have been historically unpredictable, I am pretty relaxed about this.
I calculate a liability for unrealized taxes on IRA and unrealized capital gains. I count IRA net as account value*(1-ord income tax rate), and taxable assets minus the cg tax rate on the unrealized gain. It's a significant though not dramatic effect, net is ~86% of gross overall, tax deferred is a pretty small part of portfolio, and little unrealized gain on 'safe' part of taxable portfolio.

On tax deferred it would be more uncertain if there was much chance of achieving a lower tax rate on the IRA's via Roth conversion in low income years, but for us that's highly unlikely. There is some variation, assuming current tax law, depending how much of the IRA balances end up as Qualified Charitable Distributions v coming directly to us* but it's within the margin of error I figure.

The rates I use are current marginal. It would be more if we realized a lot of gain all at once so the implicit assumption is gradual recognition. Again in our situation lower than current marginal is not likely under current law. Future tax rates could change, but so could future asset values: if we view a calculation of gross asset values at today's prices to be useful, why wouldn't a calculation of unrealized tax at today's rate be just as useful? If anything there's more uncertainty of future gross asset values, for stuff like stocks, than future tax rates.

*we'll make the charitable contribution either way, either we contribute taxable appreciated assets and get that deduction and extinguishment of the unrealized capital gain, or we eliminate the IRA RMD from federal taxable income with QCD (NJ doesn't recognize QCD's or have a charitable deduction). QCD does not make the IRA money tax free compared to the baseline assumption of making the same charitable contributions non-QCD.
Last edited by JackoC on Sat Nov 28, 2020 12:03 pm, edited 2 times in total.
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Re: What percentage of your net worth is not taxed?

Post by Ron Ronnerson »

I’m a teacher and my wife is a stay-at-home parent and we are currently in the 12% federal and 4% state (California) income tax brackets but our effective income tax rates are 1% federal and 0% state.

I max out a 403b and 457b and contribute 10% of salary toward a pension in order to bring down our modified adjusted gross income enough to qualify for subsidized health insurance (my employer, a school district, doesn’t provide health benefits). We don’t currently contribute to Roth accounts but funded Roth IRAs years before opening other types of accounts and our Roth IRAs are currently 25% of net worth (which is $1.2M).

We purchased our Bay Area home in 2010 for $500k (with a 3% down payment) and currently have $500k equity in the home (the house is worth $850k now). On a side note, we keep refinancing and still have 30 years of payments left. The equity in the house is about 40% of our net worth. We are under the capital gains exclusion as the appreciation on the house is under $500k at this point.

We have 35% of our net worth in tax deferred accounts that I do think about, particularly as I’m expecting a six-figure teacher’s pension around age 60 (in 14 years). We will likely accept what is coming to us and pay the taxes but I’m thinking of escape hatches if the burden is higher than we want to bear. One possibility is moving to Nevada (no income tax) and another is moving to Hawaii (doesn’t tax pensions). While we wouldn’t be able to avoid federal income tax, we could effectively avoid having to pay California income tax since we’re currently not paying any.

California’s prop 13 and recently-passed prop 19 do provide incentive to stay in California due to being able to keep our property taxes low in the future. So that adds another element to consider.

In short, yes, I do consider that the eventual tax liability will reduce my net worth but I’m trying to set things up so that my net worth along with income from pension and social security will be such that I don’t have to worry about it too much.
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Re: What percentage of your net worth is not taxed?

Post by pasadena »

My Net Worth is entirely in financial products (no home). As of today:

- Tax deferred (401k): 55.5%
- Roth: 17.5%
- Tax free (HSA): 2%
- Taxable: 25% (of which about 33% is unrealized gains)
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Re: What percentage of your net worth is not taxed?

Post by pasadena »

Cpadave wrote: Sat Nov 28, 2020 9:50 am
tibbitts wrote: Sat Nov 28, 2020 9:49 am
Cpadave wrote: Sat Nov 28, 2020 9:40 am That’s great. Unfortunately I haven’t been able to take advantage of roth.
Why?
Income too high to contribute into Roth. Current tax rate too high to convert. Maybe in near future as my income is going down.
You can use the backdoor method.
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Re: What percentage of your net worth is not taxed?

Post by musher »

I do estimate tax liability for tax deferred accounts at my current marginal bracket for purposes of calculating net worth. Haven't done the same thing for capital gains in my taxable.

Not really sure how useful net worth is, but that's what I do. Gives me some idea of how much of my money is mine I guess.

You may have this covered, but even in circumstances where your tax bracket prevents direct Roth contributions, and existing IRAs conspire to make Roth conversions a poor tax choice, you might consider establishing a Roth account and doing a small conversion anyway just to start the Roth 5 year clock that determines whether Roth earnings are taxable after 59.5
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Re: What percentage of your net worth is not taxed?

Post by rkhusky »

My breakdown is:
Deferred: 53.5%
Roth: 36.7%
Taxable:9.8%

I have a dozen years left to do Roth conversions. I don't worry about getting rid of all tax-deferred, just enough to get our RMD's below what we would need to withdraw for expenses.
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Re: What percentage of your net worth is not taxed?

Post by Eagle33 »

We don't do % of net worth. We calculate how many years of expenses including taxes in out IRAs and add the years of expenses net taxes in our Roths. We use 2017 tax brackets & rates and assume single filing based on a couple's expenses to account for a worst case scenario. Want to know how many years of expenses without accounting for SS.
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Re: What percentage of your net worth is not taxed?

Post by grabiner »

See Tax-adjusted asset allocation on the wiki.

Since I expect to retire at a 31% marginal tax rate, $6900 in a Roth IRA is equivalent to $10,000 in a traditional retirement plan, and will give me the same amount to spend if invested the same way. I likewise deflate my taxable account by the 26% of gains which I expect to lose to taxes.

After adjustment, my portfolio is
Roth and HSA: 34%
Traditional: 35%
Taxable: 31%

I also own a condo, which I expect to be able to sell tax-free because of the capital gains exclusion). The taxable decreased in 2020 because I paid off the condo mortgage, but it will now grow faster because I no longer have mortgage payments.
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Re: What percentage of your net worth is not taxed?

Post by LadyGeek »

Don't forget that you pay property taxes on your home. Property tax is not an income tax, but it's still a tax paid (to your local government).
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Re: What percentage of your net worth is not taxed?

Post by Stormbringer »

LadyGeek wrote: Sun Nov 29, 2020 8:01 am Don't forget that you pay property taxes on your home. Property tax is not an income tax, but it's still a tax paid (to your local government).
Not to mention sales tax. Whatever is left after taking money out of your accounts may be taxed (again) as you spend it.
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Re: What percentage of your net worth is not taxed?

Post by neverpanic »

LadyGeek wrote: Sat Nov 28, 2020 11:06 am To explain further, speculation about future legislation is prohibited by forum policy, see: Unacceptable Topics
Politics and Religion

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
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This forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.

The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
As I read this, my interpretation is that it's within bounds to talk about the expiring tax cuts which will push the top marginal rate to 39.6% in 2025. Am I reading the rule correctly? In the OP's case, he's expecting a decline in income, but what if their earnings go up?
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Re: What percentage of your net worth is not taxed?

Post by Stoic9 »

It is a moving target but I do track Investment accounts and subtract expected taxes based on upcoming RMD's to get a more realistic number for NW. I have not yet found a use for knowing my NW number. I am able to ascertain that my NW has increased 38.77% since I retired 3 years ago. Again I haven't found a use for NW numbers yet.

Looking at investment accounts only I have 21% non-taxable but plan to increase that number through conversions. My rental properties are a whole different math.
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Re: What percentage of your net worth is not taxed?

Post by corn18 »

This is our withdrawal plan. 401k conversions are to the top of the 12%/15% tax bracket. The 401k money went in @ 39% and will come out at 12%, so I consider that a win. I can also tax gain harvest all my taxable cap gains @ 0% while doing conversions. This model assumes 2% real returns on a 60/40 portfolio. If returns are higher, I won't be able to get everything done before 72, but that would be a nice problem to have.

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Re: What percentage of your net worth is not taxed?

Post by EddyB »

Cpadave wrote: Sat Nov 28, 2020 9:27 am And do you think about the tax as eventual liability reducing your net worth?
In my case. It is about 31%. Unrealized gain in taxable accounts is about 19%. Tax deferred retirement accounts is about 10%. And about 2% unrealized income such as ibond and other investments. Our house which is about 11% of net worth(no mortgage) has depreciated since we bought it more than 7 years ago.
We have about a third of our investment portfolio in 401(k) accounts. We’re not much worried about the tax implications; we have about a quarter of our investment portfolio in Roth accounts and a suspended passive-activity loss that we’ll (probably) eventually be able to access, and between them and (hopefully) some early-retirement years, we should have decent flexibility to reduce the tax-deferred balances at a moderate tax cost.
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Re: What percentage of your net worth is not taxed?

Post by You Know What I Mean »

Cpadave wrote: Sat Nov 28, 2020 9:27 am And do you think about the tax as eventual liability reducing your net worth?
In my case. It is about 31%. Unrealized gain in taxable accounts is about 19%. Tax deferred retirement accounts is about 10%. And about 2% unrealized income such as ibond and other investments. Our house which is about 11% of net worth(no mortgage) has depreciated since we bought it more than 7 years ago.
Yes, as far as traditional, tax-deferred retirement accounts, which are about 47% of our total investments. For many years I have included an associated liability account (in Quicken) to reflect that federal and state income taxes will reduce the value of traditional retirement accounts as funds are withdrawn or converted to Roth. I use 25% as the approximate tax rate.
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Re: What percentage of your net worth is not taxed?

Post by JBTX »

About 80% of our net worth is in tax advantaged. Of the tax advantaged, approximately 40% Roth, the rest traditional.
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Re: What percentage of your net worth is not taxed?

Post by Tattarrattat »

corn18 wrote: Sun Nov 29, 2020 2:58 pm This is our withdrawal plan. 401k conversions are to the top of the 12%/15% tax bracket. The 401k money went in @ 39% and will come out at 12%, so I consider that a win. I can also tax gain harvest all my taxable cap gains @ 0% while doing conversions. This model assumes 2% real returns on a 60/40 portfolio. If returns are higher, I won't be able to get everything done before 72, but that would be a nice problem to have.

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Re: What percentage of your net worth is not taxed?

Post by JDCarpenter »

Like the OP, we were in high bracket nearly all years when working. Had a few years of low comp to do Roth 401k contributions, and converted nominal amounts to Roth 5 years before retirement to start one five year clock. At retirement, we had considerably less than 5% in Roths, and 3 years of spending in taxable accounts. We were very aware of the tax and RMD issues/hit.

Since then, we've aggressively converted to Roths as we drew down the taxable accounts. Will continue to do so in the next 10 years while living solely on the deferred accounts. This makes much more sense for us than if we had converted in the 39.6 bracket when working
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goodenyou
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Re: What percentage of your net worth is not taxed?

Post by goodenyou »

I do think about the tax implications of retirement planning. We are 75% taxable (approximately 30% of total is gains) and 25% tax deferred. We just started to do Mega Backdoor Roth 401k in my wife’s plan. There are a lot of unknowns for us. If we stop working before 62 (very likely), we plan to do more Roth conversions to lower our RMDs. We even recently thought about funding all of her 401k space with after-tax contributions (the 6% employer match is pre-tax) and converting it to Roth. The big unknown is future tax policy. If there is a limit on pretax benefits of 401k contributions, we may have to rethink our strategy. Having many different sources of assets with different taxing characteristics is important. I think of diversification of location of assets is important just like diversification in and across asset classes.
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WhiteMaxima
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Re: What percentage of your net worth is not taxed?

Post by WhiteMaxima »

Do Roth conversion to the standard deduct $48000. Live on after tax saving with 0% tax gain level. Do this till age 72 and start SSI.
MathWizard
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Re: What percentage of your net worth is not taxed?

Post by MathWizard »

15% is Roth, so I have already paid income taxes on this,
so should not be subject to further income taxes

20% is property , subject to property taxes.

65% is tax deferred

Of course,when I spend the money,it is also subject to
sales tax of 7%

I do manage my tax load.

I estimate paying about 14% of current tax deferred assets and subsequent earnings and SS benefits over the next 35 years.
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corn18
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Re: What percentage of your net worth is not taxed?

Post by corn18 »

Tattarrattat wrote: Sun Nov 29, 2020 9:56 pm
corn18 wrote: Sun Nov 29, 2020 2:58 pm This is our withdrawal plan. 401k conversions are to the top of the 12%/15% tax bracket. The 401k money went in @ 39% and will come out at 12%, so I consider that a win. I can also tax gain harvest all my taxable cap gains @ 0% while doing conversions. This model assumes 2% real returns on a 60/40 portfolio. If returns are higher, I won't be able to get everything done before 72, but that would be a nice problem to have.

Image
What software was used to generate this chart?
Excel. I have a giant spreadsheet that tracks my current situation and a sheet for retirement. It has grown very complex, so I always run my data through the Flexible Retirement Planner and Firecalc. That spend plan has a 99% probability of success.
Don't do something, just stand there!
rkhusky
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Re: What percentage of your net worth is not taxed?

Post by rkhusky »

corn18 wrote: Sun Nov 29, 2020 11:55 pm That spend plan has a 99% probability of success.
You mean that the spend plan would have been successful in 99% of past time periods of some length. The future success rate is unknowable.
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corn18
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Re: What percentage of your net worth is not taxed?

Post by corn18 »

rkhusky wrote: Mon Nov 30, 2020 8:49 am
corn18 wrote: Sun Nov 29, 2020 11:55 pm That spend plan has a 99% probability of success.
You mean that the spend plan would have been successful in 99% of past time periods of some length. The future success rate is unknowable.
Correct. If I plug in no SS, 50% equity hit followed by 0% real returns for 30 years, I can never retire. At some point, you have to hit the I believe button and retire. I've made much bigger decisions with far less data.
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oldfort
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Re: What percentage of your net worth is not taxed?

Post by oldfort »

I discount my spendable net worth based on future taxes, primarily tax deferred retirement accounts. For housing the first $250k/$500k in capital gains can be exempt for a single/couple respectively.
walkindude
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Re: What percentage of your net worth is not taxed?

Post by walkindude »

corn18 wrote: Sun Nov 29, 2020 11:55 pm
Tattarrattat wrote: Sun Nov 29, 2020 9:56 pm
corn18 wrote: Sun Nov 29, 2020 2:58 pm This is our withdrawal plan. 401k conversions are to the top of the 12%/15% tax bracket. The 401k money went in @ 39% and will come out at 12%, so I consider that a win. I can also tax gain harvest all my taxable cap gains @ 0% while doing conversions. This model assumes 2% real returns on a 60/40 portfolio. If returns are higher, I won't be able to get everything done before 72, but that would be a nice problem to have.

Image
What software was used to generate this chart?
Excel. I have a giant spreadsheet that tracks my current situation and a sheet for retirement. It has grown very complex, so I always run my data through the Flexible Retirement Planner and Firecalc. That spend plan has a 99% probability of success.
Nice chart; I need to make one like that. Two questions:

1 - Are you sure you want to convert all of your 401k to Roth and not leave some for possible high medical expenses/QCDs late in life?
2 - Any idea what causes taxable to start increasing all the way out at 84-85?
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corn18
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Re: What percentage of your net worth is not taxed?

Post by corn18 »

walkindude wrote: Mon Nov 30, 2020 1:48 pm
corn18 wrote: Sun Nov 29, 2020 11:55 pm
Tattarrattat wrote: Sun Nov 29, 2020 9:56 pm
corn18 wrote: Sun Nov 29, 2020 2:58 pm This is our withdrawal plan. 401k conversions are to the top of the 12%/15% tax bracket. The 401k money went in @ 39% and will come out at 12%, so I consider that a win. I can also tax gain harvest all my taxable cap gains @ 0% while doing conversions. This model assumes 2% real returns on a 60/40 portfolio. If returns are higher, I won't be able to get everything done before 72, but that would be a nice problem to have.

Image
What software was used to generate this chart?
Excel. I have a giant spreadsheet that tracks my current situation and a sheet for retirement. It has grown very complex, so I always run my data through the Flexible Retirement Planner and Firecalc. That spend plan has a 99% probability of success.
Nice chart; I need to make one like that. Two questions:

1 - Are you sure you want to convert all of your 401k to Roth and not leave some for possible high medical expenses/QCDs late in life?
2 - Any idea what causes taxable to start increasing all the way out at 84-85?
1. I am keeping that as an option. I can reduce SORR a bit with lower conversions (=lower taxes) early on. That would leave me some for medical and QCDs. I just use 100% conversion as my base. This is what it looks like @ 75% conversion rate:

Image

2. My pension + SS is greater than my expenses. I am carrying a 30 year fixed rate mortgage @ 2.75% into retirement and that goes away @ 84. I could pay it off before retirement, but all the math says to keep the low rate money.
Don't do something, just stand there!
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