Use this Effective Tax Investing Strategy in Your Retirement...
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- čas přidán 13. 07. 2024
- Does your current investing and asset location strategy mess up your yearly tax bill? The strategy in today's video may help fix this. You can schedule an appointment with one of our Retirement Experts to look at your situation and help you plan for your future. Call us at (920) 544-0576 or go to www.safeguardinvest.com/contact.
Timestamps:
0:00 Tax-Efficient Investing in Retirement
0:10 The 3 Tax Buckets You Have in Retirement
1:36 General Idea Behind Asset Location
3:05 The Problem with Asset Location + Withdrawal Strategies
3:32 Fixing this Problem Example #1
5:32 Fixing this Problem Example #2
8:44 Problems and Objections with this Strategy
Disclaimer: The information in this video should not be taken as direct advice for your situation. The strategy discussed in this video may not be effective in your situation. Consult a professional before making changes to your retirement.
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First comment is the first of a bogus string that is going to tout an investment guru.
Trolls will be here soon. Patience....
I always "report as commercial spam" when I see those. Might be wasting my effort, but I hope it does something eventually.
I just click “report” and move on. Or I suppose you could entertain yourself for a bit, by jumping in with some crazy suggestions 😂
Always including the middle name, just like serial killers and assassins.
Great topic and discussion Eric! I had to watch it a couple of times and pause to allow it to sink in and think it through. I appreciate these discussion and all the time and effort you put into them. Thank you Eric! Larry, Central Valley, Ca.
Always good, thanks Eric
Head spins...
I have a fourth bucket, a Health Care Savings Account. I'm over 65, so it could be treated either like an IRA if I just withdraw from it or as a Roth IRA if I apply it to medical expenses (which I can because I've paid for medical expenses out of pocket since I opened it in 2013). My questions are: When, if ever, should I withdraw this money? If I don't withdraw from it, what investment class(es) should I use?
MLP USAC is my biggest non tax today income. But the new regulation for a K3 with a K1, may make this too much hassle for the avg joe. Those of us retired with a large cash position throws off lots of taxable income in high interest rate environment like today.
Question. With the stock markets hitting all time highs. Is it good to just stay in cash for now?
Say we have everything in a Roth. No pre-tax. No Debt. Yearly income from Social Security is 20K more than you need. No taxes on Social Security at this amount, married filing joint. What do you do with the excess cash in retirement? Where is the best place to invest?
Rookie question, how does one mange all this before retirement? A lot depends on what iptions you have from your work place, isnt it? If i want to buy tips but i cant use my 401k account. Naybe i dont understand things.
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I have trouble understanding the advantage of selling stock vs taking dividends. I get the tax advantage on year one but now the asset (and total returns) will reduce for each withdrawal. Does the tax savings really make up for opportunity costs of the asset depletion?
I am a somewhat affluent retiree with RMDs, IRMAA and higher taxes.
My attitude is that this stuff gets too complicated. Do the best you can and enjoy your retirement. It is what it is.
I truly appreciate the peace of mind focus. But I always find it interesting that finances are one of the areas people lead with 'do the best you can'. My vehicle is complicated, but I don't repair my only vehicle the best I can. I had braces as a kid, but my parents didn't just do the best they could to fix my own teeth, and thankfully so.
Absolutely agree. Back in early 2020 I was having a beer at the bar, after work, while my Tesla was charging. I pulled up my trusty iPhone app to admire my account balance, which always makes me feel good. (I own lots of AAPL @ $30).
I couldn’t believe my eyes when I noticed that oil futures had gone NEGATIVE! (yep. That means that they will pay you to take their oil). I remember telling the bartender that something major must be going on in the world for this to be happening.
Over the next few months I purchased stocks like a madman. I got a lot of great bargains.
When I prepared my taxes the following year, boy what a mess. (The REITs really create convolution). I decided that I would ease my situation and proceeded to simplify my holdings. I reduced the scope of my stock list by a factor of ten.
I now hold a grand total of seven distinct securities and my portfolio is so much easier to manage. It takes me less than an hour to prepare my taxes and I even consider it an enjoyable task.
Maybe you inherited your money, maybe you earned and saved it. Maybe you were gifted an ivy-league education from your parents. People who are given money and opportunity just for the effort of being born to a certain family are much more likely to feel ok burning their money. Especially if they have so much money they don't even know how to spend it. Those of us who saved and sacrificed to build our nest eggs want to make the most of it. If I were you I wouldn't even watch these videos. Just go out and spend your money!
@@SafeguardWealthManagement I think comparing to fixing a car is too much. More like a ball game. You have good basic strategies and good alternative strategies but you never know what kind of ball is fixing to be pitched at you, a curve, knuckle, drop, fast. Sometimes you do a perfect strategy but the opponent just makes a great play. Say I convert all my funds to Roth and then a major health issue arises so that I have to spend mega wealth to recover. Those conversions were a waste of money cause if I'd waited I could of deducted all the IRA withdrawals as health expense. Otherwise, the conversions may be the wisest thing on the planet. The markets could keep going higher like a rocket or do an eternal crash. The future may not be represented by the past. But our best foot forward is to study the past and pick the best solution based upon that wisdom you've garnered. So I'm in agreement with pensacola321: Do the best you can or as I say "Put your best foot forward".
Great video! I had heard many times before the strategy of relocating when you need to sell stocks in taxable during a downturn, and replacing them in your IRA by selling bonds, which maintains your overall asset allocation, but shifts your asset location by increasing equities in the IRA which can in turn create a future RMD problem. Yes, this can be resolved with a Roth conversion but that increases your income which increases your taxes and can affect ACA subsidies as you mentioned.
Would have been good if you had closed the loop in the examples with numbers, by converting the $3,500 cash from the IRA to the Roth IRA to replace the stock you sold in the taxable account, knowing that this would have increased your tax on those $3,500 by whatever your ordinary income tax bracket is, to be able to truly compare vs the tax you would pay to take the dividend from your taxable account instead. This would have presented a more complete example. Still was a very good explanation.
Yes, I'm in general much more hesitant using this strategy around ACA years for the problems you describe. I note that towards the end of the video.
@@SafeguardWealthManagement Great video as usual. Wish I could work with you face to face. The problem doesn't go away once past aca, because you transition into Irmaa with their 2 year look back.
Taxable accounts should also have bond ETFs so you can use tax loss harvesting should the bonds of stocks go down. The paper losses can forever be carried forward to offset future gains 1:1.
Tax-loss harvesting bond ETFs will not offset the interest on average. I would not recommend this.
Hey! You have really good videos. But I'd like to ask you if you'd like an editor.
i had to watch the first third of the video twice before understanding the premise of relocation. "if you want to live on the dividends of your dividiend paying stocks but those stocks are in your tax deferred account but before you have forced income from the tax deferred.... then this is how you do it."
i have never been a live only on the dividends type of investor. spend the dividend if you need it. if not enough, then sell some stock as well or just sell a non dividend paying stock for your needs. total equity return is what matters. i get the favorable tax rates from the cap gains as you are spending it from the taxable and that if you drew the dividends out of the TDA then that would have been at marginal rates.
once you are pulling assets out of a tax deferred account any withdrawal is going to be taxed at marginal rates no matter if it's from the growth stock you had replaced the dividend paying stock with or any remaining dividend paying stock or dividends from that stock, so what is the advantage?what's the rigmarole for? why not just spend from the taxable growth stocks and let the dividends in the TDA(before any required distributions) get reinvested in the same stock or if you want to increase growth stocks in your TDA then sell dividend payers and buy growth stocks instead within the TDA. I don't know what i am missing.
needless to say a roth conversion plan takes precedence over this but i still don't get the point of relocation unless you really only want to live on dividends.
"why not just spend from the taxable growth stocks and let the dividends in the TDA(before any required distributions) get reinvested in the same stock or if you want to increase growth stocks in your TDA then sell dividend payers and buy growth stocks instead within the TDA." - you just described the idea in this video.
Why for the rigmarole? Let's use the safety/bond example. Most retirees put the safety they need in the account they are withdrawing from, which is typically taxable first. Take whatever that safety portion is, let's say $500,000 and let's assume its earning 5%. You've got $25,000 extra in interest each year. OR... you use this relocation idea and minimize or eliminate the issue completely.
@@SafeguardWealthManagement the first paragraph was from me describing doing trades WITHIN the TDA itself WITHOUT relocation.
in the second paragraph- then the safety portion (bonds or dividend paying stocks) as you describe it would be in the taxable account , the account they are withdrawing from first and not in the TDA as described in the video. qualifed dividends in the taxable would still be taxed favorably similar to LTCGs and there would be no relocation necessary. if you now decide to relocate the dividend payers FROM taxable to TDA( reverse of what was in the video). you could just buy the same stock in your TDA as much as you are spending from the qualified dividends generated in the taxable. this would increase your position on your safety portion(since you were only spending the interest or dividends of the bond or stock in the taxable and not liquidating the positions). that did not seem to be the point of the video. . ...i still do not get it.
i appreciate your videos and have been more aggressive with my conversions mainly because of your videos. from 2022 , first yr without a W2, up till 2023. i have converted 285K and just converted another 128k mid January. 413k so far. will be more aggressive 2024 and 2025 given the expiration of the tax cuts. my roth assets are now more than my tda assets but i am not planning on depleting the tda.
@@SafeguardWealthManagement That's almost exactly my case...would I use my cash to buy 500K of etf/stock in my taxable and then sell 500K of stock in my TDA to keep invested in cash at hight interest rates? That's my bridge to SS at 70, so wanted to keep it safe in cash but it's killing me with the interest right now :)
“Buy back growth stock in IRA” :
What if the growth stocks become the huge performers. That is the problem I have now.
I hope they are all in my Roth IRA, not in my IRA.
I try not to be as granular as that and just make sure my stock funds are in Roth and a combo of stock and bond funds in IRA. Taxable brokerage is where all my international index funds are located so I can take advantage of the foreign tax credit. (my Roth looks like 80% US index, 20% ex-usa all world index; Trad IRA is 40% bond funds 48% US index 12% ex-usa all world index; Taxable is 60% ex-USA all world index and 40% US index. These numbers aren't "clean" because I wanted some USA index in taxable for funding retirement when international is depressed, like right now, so I don't strictly follow optimum tax efficiency because fund correlations matter as well...I'm slowly shifting Trad IRA to Roth through conversions over time and will eventually get to the Traditional being all my bond allocation at which point Roth conversions will be less important to me with the slow growth of bonds and our individual pensions start up at that time increasing our taxable income and decreasing our ability to do Roth conversions while keeping taxes low).
I don't understand... You pay tax on the dividend, regardless if you reinvest it or not.
And in IRA you pay taxes regardless as income tax. What and I missing?
Say WHAT????
!.) MQY gives you 4.9% tax free
2.) No dividends from buying a second home with your taxable account.. grows tax free and your heirs get it tax free.. and you get to enjoy it a lot more than a brokerage statement each quarter.. could provide income if necessary in later years by just renting it out...
1. With MQY it depends how much you care about interest rate risk. Long maturity bond funds can be problematic in a retirement income plan.
2. Buying a second home is great depending on non-financial goals. I'm all for retirees utilizing their wealth in a way that benefits their life. If the goal is growth and money to the next generation, it will almost certainly fall short to owning equities. Step up in basis (tax-free to your heirs) happens in real estate and equities.
@@SafeguardWealthManagement
Would like to see a study on best time to buy long dated bonds , perhaps when yields are at ten yr highs like now ? I bought zero coupon bonds in 1982 and held them for my daughters college fund .. in 1999.. pretty happy with that move !