How to Pay Next-to-Nothing in Taxes During Retirement

[jebmke]

Give it away.

Also, pay attention to cycles and bank a ton of losses when you have them. Over the first 10 years of retirement I sold a fair amount of equity for cash and re-balancing and never paid a dime of CG taxes.

"Give it away" or pay taxes are two sides of the same coin unless you have a specific charity that you are already devoted to.

Thats true whether they are deductible or not. And some often arent.

[dogagility]

I've calculated retiring in 2027, having about 80k of taxable income (salary, bonus, RSU vesting, interest) and getting a net federal tax credit of about $500 for the year.

Federal income tax would be about 1.5k. By contributing 4k to a 401k, I would receive a 2k Saver's Tax Credit.

Plan to withdraw from my Roth IRA to make up the remainder of our living expenses for the year.

[livesoft]

All of these "low tax in retirement" threads make the same assumptions:

* A person does NOT have multiple millions of dollars in a taxable account, throwing off dividends (or heaven forbid, capital gains).
* There is either no Social Security and/or other defined benefit pension, it's very small.
* No inherited IRA.
* No RMDs from one's own IRA or 401K.
* Little or no part-time job.

Now imagine a retiree with several of these components. Then what?

That's a nice list that applies to us, so to answer your question, here's what:
* Our taxable account is invested tax efficiently. We tax-loss harvest whenever possible. Return of capital is not taxed at all.
* One of us is currently getting non-small SS benefits. 15% of those benefits are not taxed.
* We both have inherited IRAs from which RMDs are required
* This one applies to us: We do not have RMDs from our own RIAs nor 401(k)
* We both have part-time jobs which gives us earned income which lets us contribute to IRAs or 401(k) or both.
* Our standard deduction is larger than for younger taxpayers
* Our previously funded HSAs are doing their job

In general, our income taxes go towards paying the tax on Roth conversions. I will venture that not many taxpayers have 7-figures in Roth IRAs. You'll enjoy it when you get there.

[thedaybeforetoday]

It seems the article's examples assume no social security, work (W2/1099) or pension income, so not really much useful info for me and spouse (two p.t. incomes, one pension, two social security incomes on the horizen...)

Not sure what percentage of folks have no income from any of those three sources, but would be interested to find out.

I'm early retiring this year, at age 55.

We'll have 7 years of no social security, work, or pension income.

Thanks for the response, but I'm looking for general data (ie: survey or the like over several thousand retirees) rather than anecdotes.

[GuyInFL]

Can you expand on this?

https://www.irs.gov/credits-deductions/ ... nity-zones

They may be not as useful now as they were when first introduced, but they are/were a way to defer/avoid tax entirely.

Wait... now I need to go out and stock up on toilet paper for the upcoming Bogleheads-induced TP scarcity?!

TP is my "go-to" for "expense that will last your life" that isn't housing/utilities - though some might argue you can reduce that expense by not stockpiling TP but instead installing bidets.

I'm familiar with Opportunity Zones, Just curious to see if you invested directly or found an ETF?
I found a list of opportunities at
https://www.novoco.com/resource-centers ... ds-listing
But they aren't ETFs so expense ratios aren't readily available. I suspect the are expensive and illiquid.

[VanGar+Goyle]

Congratulations. But does this mean that you were always in the 0% tax bracket, or did you overpay some time in a distant high tax hahava?

Don't know what you mean by "always". We've been in this situation since we retired. Two thirds of our portfolio is in taxable accounts.

During accumulation, the highest tax bracket we were ever in was 28%.

I was thinking of when you paid taxes in the 28% tax bracket.
Not knowing much else of you, you may have paid 28% back then, compared to 0%, 10%, or 12% last year, if a traditional IRA or 401(k) was available.

[feh]

Don't know what you mean by "always". We've been in this situation since we retired. Two thirds of our portfolio is in taxable accounts.

During accumulation, the highest tax bracket we were ever in was 28%.

I was thinking of when you paid taxes in the 28% tax bracket.
Not knowing much else of you, you may have paid 28% back then, compared to 0%, 10%, or 12% last year, if a traditional IRA or 401(k) was available.

I don't understand what you're trying to say. We always maxed out our 401K/IRA. I can't see how we ever "overpaid" during accumulation.

[Mrbogleheads]

I've calculated retiring in 2027, having about 80k of taxable income (salary, bonus, RSU vesting, interest) and getting a net federal tax credit of about $500 for the year.

Federal income tax would be about 1.5k. By contributing 4k to a 401k, I would receive a 2k Saver's Tax Credit.

Plan to withdraw from my Roth IRA to make up the remainder of our living expenses for the year.

Filing single? I have similar income all unearned income can't get even close to tax savers credit.

In 2028 going forward you'd have no earned income. No 401k to reduce taxes.

[dogagility]

I've calculated retiring in 2027, having about 80k of taxable income (salary, bonus, RSU vesting, interest) and getting a net federal tax credit of about $500 for the year.

Federal income tax would be about 1.5k. By contributing 4k to a 401k, I would receive a 2k Saver's Tax Credit.

Plan to withdraw from my Roth IRA to make up the remainder of our living expenses for the year.

Filing single? I have similar income all unearned income can't get even close to tax savers credit.

In 2028 going forward you'd have no earned income. No 401k to reduce taxes.

MFJ. This plan would only be for one year, the year I'm planning to retire in March/April.

I also learned the Saver's Credit is a refund... meaning you would have to have a tax bill of at least $2000 to take advantage of the full $2000 Saver's Credit.

[jebmke]

Filing single? I have similar income all unearned income can't get even close to tax savers credit.

In 2028 going forward you'd have no earned income. No 401k to reduce taxes.

MFJ. This plan would only be for one year, the year I'm planning to retire in March/April.

I also learned the Saver's Credit is a refund... meaning you would have to have a tax bill of at least $2000 to take advantage of the full $2000 Saver's Credit.

Correct; non-refundable credit -- Line 4 of Schedule 3

The Energy Credit is also non-refundable. I frequently have to explain to my TaxAide clients that the promises from HVAC and insulation contractors notwithstanding, they don't get a credit because they don't have a tax liability.

[firebirdparts]

All of these "low tax in retirement" threads make the same assumptions:

* A person does NOT have multiple millions of dollars in a taxable account, throwing off dividends (or heaven forbid, capital gains).
* There is either no Social Security and/or other defined benefit pension, it's very small.
* No inherited IRA.
* No RMDs from one's own IRA or 401K.
* Little or no part-time job.

Now imagine a retiree with several of these components. Then what?

I think people will all that will be alright. A sane person would be interested in maximizing what you have after taxes instead of "minimizing taxes."
Sometimes you just have way too much money and there's nothing you can do about it.

[VanGar+Goyle]

I was thinking of when you paid taxes in the 28% tax bracket.
Not knowing much else of you, you may have paid 28% back then, compared to 0%, 10%, or 12% last year, if a traditional IRA or 401(k) was available.

I don't understand what you're trying to say. We always maxed out our 401K/IRA. I can't see how we ever "overpaid" during accumulation.

Did you max out your traditional pre-tax 401(k) and IRA accounts, or did you max out your Roth 401(k) and Roth IRA accounts?
Did you contribute or convert to Roth accounts at 28%?

[feh]

I don't understand what you're trying to say. We always maxed out our 401K/IRA. I can't see how we ever "overpaid" during accumulation.

Did you max out your traditional pre-tax 401(k) and IRA accounts, or did you max out your Roth 401(k) and Roth IRA accounts?
Did you contribute or convert to Roth accounts at 28%?

Maxed out pretax accounts first. Roth wasn't available for most of accumulation phase, although we did max that out also, when possible.

[pennsylvania211]

I find the blog post the equivalent of tail wagging the dog.

Imagine having worked hard all your life, saved diligently, invested diligently and did so in order to have a nice retirement.

Then when retirement comes (and no one knows how long do we have to live, let alone lifespan of our partner/spouse/friend or whoever we enjoy living in company with), this guy wants you to invest more of your limited remaining time on this planet and limited energy to "live suboptimally" (as in - "not the way you would've chosen for yourself") in order to maximize tax strategy.

This is so messed up.

[sailaway]

I find the blog post the equivalent of tail wagging the dog.

Imagine having worked hard all your life, saved diligently, invested diligently and did so in order to have a nice retirement.

Then when retirement comes (and no one knows how long do we have to live, let alone lifespan of our partner/spouse/friend or whoever we enjoy living in company with), this guy wants you to invest more of your limited remaining time on this planet and limited energy to "live suboptimally" (as in - "not the way you would've chosen for yourself") in order to maximize tax strategy.

This is so messed up.

Who recommended living suboptimally? These tax strategies are more a question of using what you have optimally. There is a lot of advice out there to spend down retirement savings in a specific order, namely taxable, then traditional and hold onto Roth as long as possible. Articles such as this are showing folks how to be more strategic. For instance, we manage taxes and ACA subsidies by starting with taxable. If we underspend our income goals a certain year, we make a Roth conversion. If we overspend our income goals, we pull from Roth. Tax strategies affect how we make withdrawals, not how we spend our money.

[bombcar]

Correct; non-refundable credit -- Line 4 of Schedule 3

The Energy Credit is also non-refundable. I frequently have to explain to my TaxAide clients that the promises from HVAC and insulation contractors notwithstanding, they don't get a credit because they don't have a tax liability.

Which can be a good reason to check your taxes in early December and if those non-refundable credits are on the table, take them with Roth conversions.

[FinancialDave]

Give it away.

Also, pay attention to cycles and bank a ton of losses when you have them. Over the first 10 years of retirement I sold a fair amount of equity for cash and re-balancing and never paid a dime of CG taxes.

Oh, I like this post:

1. Give it away [I do use this one -- QCD]

2. Sell a bunch of your equities at market lows [ no thanks]

[get rid of the taxable account makes more sense to me]

[jebmke]

Give it away.

Also, pay attention to cycles and bank a ton of losses when you have them. Over the first 10 years of retirement I sold a fair amount of equity for cash and re-balancing and never paid a dime of CG taxes.

Oh, I like this post:

1. Give it away [I do use this one -- QCD]

2. Sell a bunch of your equities at market lows [ no thanks]

[get rid of the taxable account makes more sense to me]

You do realize that harvesting losses is not “selling your equities at market lows”, right?

[FinancialDave]

Oh, I like this post:

1. Give it away [I do use this one -- QCD]

2. Sell a bunch of your equities at market lows [ no thanks]

[get rid of the taxable account makes more sense to me]

You do realize that harvesting losses is not “selling your equities at market lows”, right?

You did notice the [no thanks]

I rarely have any losses as my taxable account doubled between its inception in May of 2022 to now, but I'm pretty sure you have to sell something at lower than you bought it, if that happens for you when the market is at a high then you ought to fire your "stock picker."

The fact is it makes absolutely no difference when you sell the loss, it just turns out you don't want to book a ST loss against a LTCG, as that is poor tax planning, but sometimes it just has to be done.

Like I said, getting rid of the taxable account or just letting it sit as an inheritance is your best bet if you don't need it. "Churning" it with losses is only doing damage to the next generation, because they don't need to reduce the cost basis!

[countmein]

All of these "low tax in retirement" threads make the same assumptions:

* A person does NOT have multiple millions of dollars in a taxable account, throwing off dividends (or heaven forbid, capital gains).
* There is either no Social Security and/or other defined benefit pension, it's very small.
* No inherited IRA.
* No RMDs from one's own IRA or 401K.
* Little or no part-time job.

Now imagine a retiree with several of these components. Then what?

My 95% taxable portfolio with 1m unrealized gains distributes 130k a year so 0% LTCG and TLH are both impossible. But I'm not complaining.

[LilyFleur]

Keep ordinary income as low as possible and focus on long-term capital gains.

I'm not sure what the news is here.

and pay attention along the way and harvest losses; if you play your cards right, your capital gains will be offset by accumulated losses.

I think I'd rather play my cards right and end up with negligible losses and mostly capital gains. I'm planning on my heirs receiving those capital gains at the stepped-up basis at the time of my death. The cards I was dealt give me the bulk of my portfolio in tax-deferred and a pension and the single tax bracket in a high-tax state, so all that adds up to higher taxes. It is what it is. I'm not complaining.

[Atretes1]

I will ne in the same tax bracket if not even higher. But I guess that's nothing to complain about...lol.

[smitcat]

Give it away.

Also, pay attention to cycles and bank a ton of losses when you have them. Over the first 10 years of retirement I sold a fair amount of equity for cash and re-balancing and never paid a dime of CG taxes.

Oh, I like this post:

1. Give it away [I do use this one -- QCD]

2. Sell a bunch of your equities at market lows [ no thanks]

[get rid of the taxable account makes more sense to me]

Or - get rid of tax defferred if that is the best approach.

[FinancialDave]

Oh, I like this post:

1. Give it away [I do use this one -- QCD]

2. Sell a bunch of your equities at market lows [ no thanks]

[get rid of the taxable account makes more sense to me]

Or - get rid of tax defferred if that is the best approach.

If you mean getting rid of 100% tax deferred, I can't think of one in a thousand cases where that makes sense, from a mathematical perspective. I realize it can make sense from other perspectives. I just think there are probably a few more people paying zero taxes in retirement with a tax-deferred account than those without one. In doing taxes for 7 years, I saw many people without a tax deferred account, paying zero taxes, but it wasn't because they "got rid of it" they never had one.

[smitcat]

Or - get rid of tax defferred if that is the best approach.

If you mean getting rid of 100% tax deferred, I can't think of one in a thousand cases where that makes sense, from a mathematical perspective. I realize it can make sense from other perspectives. I just think there are probably a few more people paying zero taxes in retirement with a tax-deferred account than those without one. In doing taxes for 7 years, I saw many people without a tax deferred account, paying zero taxes, but it wasn't because they "got rid of it" they never had one.

Other than funds reserved for charitable giving that is a good mathmatical approach for a number of folks ...including us. I am surprised you have not seen any examples of folks with higher taxable accounts.

[FinancialDave]

If you mean getting rid of 100% tax deferred, I can't think of one in a thousand cases where that makes sense, from a mathematical perspective. I realize it can make sense from other perspectives. I just think there are probably a few more people paying zero taxes in retirement with a tax-deferred account than those without one. In doing taxes for 7 years, I saw many people without a tax deferred account, paying zero taxes, but it wasn't because they "got rid of it" they never had one.

Other than funds reserved for charitable giving that is a good mathmatical approach for a number of folks ...including us. I am surprised you have not seen any examples of folks with higher taxable accounts.

What you are suggesting here is not what I took as the intent of your message before.

In most cases the mathematical best case (for those mostly up to around $3 m) would be to end up with zero tax deferred or close to it by the time you go, so TIRA spending is the main source of my income, other than pensions and SS. Taxable account, which for me makes up about half that, essentially sits idle affecting my 6% effective tax rate very little on about $145k income. I think my QCDs will easily cover my RMDs for the next few years and I will continue to spend down my TIRA, which with this market is still growing just mildly.

I took what you were suggesting was to spend mostly Roth and or taxable for discretionary income in retirement. I'm not a fan of that. The higher your working income, the less and less I am a fan of that.

[smitcat]

Other than funds reserved for charitable giving that is a good mathmatical approach for a number of folks ...including us. I am surprised you have not seen any examples of folks with higher taxable accounts.

What you are suggesting here is not what I took as the intent of your message before.

In most cases the mathematical best case (for those mostly up to around $3 m) would be to end up with zero tax deferred or close to it by the time you go, so TIRA spending is the main source of my income, other than pensions and SS. Taxable account, which for me makes up about half that, essentially sits idle affecting my 6% effective tax rate very little on about $145k income. I think my QCDs will easily cover my RMDs for the next few years and I will continue to spend down my TIRA, which with this market is still growing just mildly.

I took what you were suggesting was to spend mostly Roth and or taxable for discretionary income in retirement. I'm not a fan of that. The higher your working income, the less and less I am a fan of that.

What I said above was for folks with larger taxable accounts which are many folks we know. In many cases the best use then becomes something like this:
- reserve whatever your target is for charitable
- convert the rest of tax defferred during early retire prior to SS/Pension/etc
- the total Roth is best used for heirs
- the taxable is used for expenses with the balance for heirs
- the remaining tax defferred is best used for charitable
- SS/Pensions will work well with divs from taxable

[celia]

Most people's aversion to paying taxes is irrational, especially LTCG, which is among the most favorable tax treatment there is.

Roth withdrawals are not taxed at all (once the account is 5 years old and the owner is over 59.5).


But I don't see the big deal. Even W2 employees can have a Next-To-Nothing tax bill. Just keep your AGI low and the deductions high. There's no difference whether you are working or not. We are all subject to the same tax code.

[FinancialDave]

What you are suggesting here is not what I took as the intent of your message before.

In most cases the mathematical best case (for those mostly up to around $3 m) would be to end up with zero tax deferred or close to it by the time you go, so TIRA spending is the main source of my income, other than pensions and SS. Taxable account, which for me makes up about half that, essentially sits idle affecting my 6% effective tax rate very little on about $145k income. I think my QCDs will easily cover my RMDs for the next few years and I will continue to spend down my TIRA, which with this market is still growing just mildly.

I took what you were suggesting was to spend mostly Roth and or taxable for discretionary income in retirement. I'm not a fan of that. The higher your working income, the less and less I am a fan of that.

What I said above was for folks with larger taxable accounts which are many folks we know. In many cases the best use then becomes something like this:
- reserve whatever your target is for charitable
- convert the rest of tax defferred during early retire prior to SS/Pension/etc
- the total Roth is best used for heirs
- the taxable is used for expenses with the balance for heirs
- the remaining tax defferred is best used for charitable
- SS/Pensions will work well with divs from taxable

Ok, but my assessment is that both methods produce about the same "big picture" and I ran a quick tax assessment for 2025 on my own $145k spendable income that cost me 5.95% effective tax in 2024, by converting just the TIRA income to taxable dividends. Left $60k SS and $32k pension alone. Result was $145k income with 4.69% tax.

Certainly, if either household wants to spend more they can use taxable with about the same marginal results, since they are in the 15% LTCG bracket.

The bigger-bigger picture is the person who has spent 30-40% marginal taxes on their Roth conversions, has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income. It's not really necessary to "convert" your TIRA, if instead of trying to fix a problem after it becomes a problem, you avoid the problem altogether by spending down the TIRA in a lower tax bracket before SS and pension, or you just avoid making that "too big to fail" TIRA in the first place.

Note: fyi - if I just take 2024 income and paste it down one line in my "one-line" tax spreadsheet with 2025 tax tables, my 5.95% effective rate goes down to 5.25% for identical income, or 5.30% if I use actual 2025 SS income, which I used above. So, a better comparison is 5.3% to 4.69%.

[smitcat]

What I said above was for folks with larger taxable accounts which are many folks we know. In many cases the best use then becomes something like this:
- reserve whatever your target is for charitable
- convert the rest of tax defferred during early retire prior to SS/Pension/etc
- the total Roth is best used for heirs
- the taxable is used for expenses with the balance for heirs
- the remaining tax defferred is best used for charitable
- SS/Pensions will work well with divs from taxable

Ok, but my assessment is that both methods produce about the same "big picture" and I ran a quick tax assessment for 2025 on my own $145k spendable income that cost me 5.95% effective tax in 2024, by converting just the TIRA income to taxable dividends. Left $60k SS and $32k pension alone. Result was $145k income with 4.69% tax.

Certainly, if either household wants to spend more they can use taxable with about the same marginal results, since they are in the 15% LTCG bracket.

The bigger-bigger picture is the person who has spent 30-40% marginal taxes on their Roth conversions, has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income. It's not really necessary to "convert" your TIRA, if instead of trying to fix a problem after it becomes a problem, you avoid the problem altogether by spending down the TIRA in a lower tax bracket before SS and pension, or you just avoid making that "too big to fail" TIRA in the first place.

You must be using specific numbers in each account, and ages, and spending levels etc. to calculate the numbers above.
In many cases I am sure it makes sense to follow a similar plan.
I merely said that when taxable is larger there are best plans which are the opposite - convert tax defferred first and prior to other incomes.
If you have seen 1,000's of situations where that does not work I am greatly surprised.

This statement here - " has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income."
is absolutely inaccurate in our case.

[FinancialDave]

Ok, but my assessment is that both methods produce about the same "big picture" and I ran a quick tax assessment for 2025 on my own $145k spendable income that cost me 5.95% effective tax in 2024, by converting just the TIRA income to taxable dividends. Left $60k SS and $32k pension alone. Result was $145k income with 4.69% tax.

Certainly, if either household wants to spend more they can use taxable with about the same marginal results, since they are in the 15% LTCG bracket.

The bigger-bigger picture is the person who has spent 30-40% marginal taxes on their Roth conversions, has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income. It's not really necessary to "convert" your TIRA, if instead of trying to fix a problem after it becomes a problem, you avoid the problem altogether by spending down the TIRA in a lower tax bracket before SS and pension, or you just avoid making that "too big to fail" TIRA in the first place.

You must be using specific numbers in each account, and ages, and spending levels etc. to calculate the numbers above.
In many cases I am sure it makes sense to follow a similar plan.
I merely said that when taxable is larger there are best plans which are the opposite - convert tax defferred first and prior to other incomes.
If you have seen 1,000's of situations where that does not work I am greatly surprised.

This statement here - " has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income."
is absolutely inaccurate in our case.

Yes, everyone's situation is different, and I was only really "generalizing" about the future, as I am just as sure our "guess" about it will be "absolutely inaccurate."

My point to make was, I tend to believe and teach making an effort to get it right ahead of retirement is a better plan, because trying to "fix it" after you have retired is less than optimal in most cases. Sure, the lower "tax window" pre-SS and pensions is better than nothing, but it is not optimal, compared to having done it right to begin with.

Of course, the above is not always possible, so nothing wrong with the next best thing. The last 20 years has taught us a lot about financial planning that didn't even exist back then when many of us were working.

I retired about 13 years ago and in that time my taxable account was used to pay off the mortgage and thus was zero for many years until 2022 when it was filled up again with real estate sale. Now in 2.5 years it has doubled and ballooned into a 7-figure problem. Luckily the only problem is LTCG and not dividends that I don't need to spend. What I can do is use the cash set aside in it to feed matching programs for grandkids Roth accts and things of that nature, rather than leaving them a real estate problem they would have to solve after we are gone. We are now renting.

[smitcat]

You must be using specific numbers in each account, and ages, and spending levels etc. to calculate the numbers above.
In many cases I am sure it makes sense to follow a similar plan.
I merely said that when taxable is larger there are best plans which are the opposite - convert tax defferred first and prior to other incomes.
If you have seen 1,000's of situations where that does not work I am greatly surprised.

This statement here - " has only accomplished pre-paying the taxes for the next generation, but not really gained them any spendable income."
is absolutely inaccurate in our case.

Yes, everyone's situation is different, and I was only really "generalizing" about the future, as I am just as sure our "guess" about it will be "absolutely inaccurate."

My point to make was, I tend to believe and teach making an effort to get it right ahead of retirement is a better plan, because trying to "fix it" after you have retired is less than optimal in most cases. Sure, the lower "tax window" pre-SS and pensions is better than nothing, but it is not optimal, compared to having done it right to begin with.

Of course, the above is not always possible, so nothing wrong with the next best thing. The last 20 years has taught us a lot about financial planning that didn't even exist back then when many of us were working.

I retired about 13 years ago and in that time my taxable account was used to pay off the mortgage and thus was zero for many years until 2022 when it was filled up again with real estate sale. Now in 2.5 years it has doubled and ballooned into a 7-figure problem. Luckily the only problem is LTCG and not dividends that I don't need to spend. What I can do is use the cash set aside in it to feed matching programs for grandkids Roth accts and things of that nature, rather than leaving them a real estate problem they would have to solve after we are gone. We are now renting.

'Get it right' ahead of time also assumes some real specific accountr size numbers which are affected by many common things such as these:
- available tax defferred programs over many years
- available tax deferred programs of a usable size and cost
- 'enough' space in tax defferred for all desired savings
- no geo arbitrage
- income(s) of similar sizze or growth each year
- no inheritance
- no deferred comp
- no small business
- no unschedable large expenses
I find that with many folks the 'better they do' the larger the taxable accounts may end up.
The taxable acount is used to 'increase' the Roth accounts during conversions. Gifting is just one part of the 'espenses' each year. Primary real estate is stepped up and is preferred in our case for a number of reasons.

[MnD]

Several controlled studies in behavioral economics have demonstrated that people are willing to pay more than $1 in total costs to avoid paying $1 in taxes. I saw it in my own household growing up as my Dad got talked into a few tax shelters by his "full service" broker that performed terribly. Fortunately not a big portion of his investments. And I see examples of it crop up here quite frequently. People are very tax adverse to the point of irrationality, especially once in retirement.

[2ndvizio]

Minimizing taxes in retirement seems easy enough in theory but in actuality, nothing seems to go right. Plan was to sell off the tbills and buy VOO and then in 401k sell SP500 index fund and buy a bond fund so ordinary taxes are minimized and can live off of stock gains and dividends at long term capital gain tax rates. So really low tax rates other than CA taxes.

Just got laid off so will be retiring now, planned to this year so it acutally works out for the best. But things are just so hard with 401ks. Rule of 55 to get the money out early isn't a good idea after all due to partial withdrawals not allowed. Had 100 percent equities in 401ks so thought easy enough change to bonds. Found out changing that also affects Roth 401K so that is not a good idea after all since I want all stocks in the Roth 401k. Then thought change to bonds in some older 401ks I have instead. Look there and rates are about 2 percent instead of tbills at 4+ percent so tax savings does not outweight performance loss. Probably can get good bond rates in IRA but can't move to IRA this year since did backdoor Roth already.

Sorry for venting, sometimes things can be so frustrating.

[barberakb]

All of these "low tax in retirement" threads make the same assumptions:

* A person does NOT have multiple millions of dollars in a taxable account, throwing off dividends (or heaven forbid, capital gains).
* There is either no Social Security and/or other defined benefit pension, it's very small.
* No inherited IRA.
* No RMDs from one's own IRA or 401K.
* Little or no part-time job.

Now imagine a retiree with several of these components. Then what?

Then you remain grateful that you actually can easily afford the taxes.

[prioritarian]

High taxes in retirement is a great problem to have. It means you are wealthy. I’ll happily take the income that puts me in the top bracket, thanks.

I would be exceedingly unhappy taking income that would put me in the top bracket which is why this will never happen to me.

It's also possible to be in the top 5% of wealth and still have low taxes in retirement. As someone whose retirement goal is to QCD every cent of my tax deferred accounts RMDs, I fully expect to pay next to nothing in taxes. And if by chance QCDing does not suffice, I will make use of charitable donations and trusts to wipe away my tax burden.

[mass_biker]

A little variation on this scenario.

Parents - late 70s/early 80s.
Live rent/mortgage/RE taxes free - we happily own the apartment (outright) they live in.
Expenses (auto insurance, phone, internet, Medicare) are negligible - more than covered by SS distributions, annuity income etc.

Total assets in their portfolio ~ $600k: $100k in IRAs where they are getting modest RMDs and $500k in taxable. This does not include their SPIA.

They had $0 in W2 income last year.

But other sources:
- $3k of qualified dividends
- $22k of ordinary dividends
- $5k of IRA distributions
- $12k of annuity income
- $40k of SS income

With the standard deduction (MFJ) of $30713 or so,their taxable income was $11k or so, with total tax owed something like $300 last year from their 1040-SR. And they continue to run a surplus each month between their sources and modest uses.

The plan is for them to have nothing left at the end. Comfort etc. in their remaining living years is a focus.

I want to clean up their portfolio of odd lot mutual funds, 6 or 7 individual stock positions that total less than $100k (some AAPL, some AMZN, other odd ducks here and there).

One thinking is that with no W2 income, and no need to grow capital/leave a legacy, one could simplify/tilt their portfolio to generate more income (why a handful of growth stocks and mutual funds?) through a SPIA or garden variety Vanguard bond fund. Given their circumstance, isn’t that the optimal AA going forward?

Welcome any thoughts
MB