Retirement Income Strategies: IRA vs. Brokerage Withdrawals (The Tax-Smart Choice for Retirees)
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- čas přidán 4. 07. 2024
- Mark asks a common question - What should I do regarding my withdrawal strategy? Should I first pull from my brokerage account or my IRA?
There is no one-size-fits-all answer, but James provides a framework for creating a strategy to increase your odds of getting the most out of your money saved. He walks through the pros and cons of first pulling from your IRA versus a brokerage account, taking into consideration required distributions, tax rates and strategies, capital gains, Roth conversions, tax gain harvesting, and charitable giving.
Questions answered:
What are the tax implications of giving to family members versus charities?
How should capital gains affect my withdrawal and tax strategy?
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⏱Timestamps:⏱
0:00 - Mark’s question
3:12 - Pros of pulling from IRA
7:24 - Lower tax rate today
9:27 - Cons of pulling from IRA first
11:38 - Charitable giving
13:58 - Pros of brokerage pulls
18:40 - Other potential pros
21:39 - Cons of pulling from brokerage
26:03 - Things to consider
30:50 - Wrapping up
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I love your videos! You leave no stone unturned, and I appreciate the depth in which you illustrate each scenario. Each time I watch one of your videos, I feel even better about my upcoming retirement years. Thanks!
Learned about 70.5 age minimum for QCD through your video. I simply donate appreciated assets every year vs setting up a DAF since I itemize each year. I had heard of QCD, but didn't know about the age limitation. That might be perfect for me to switch to when I reach the cutoff for my standard deduction to be as valuable as itemizing. Definitely when I get to 75 and RMD zone.
I appreciate you getting into the detail that you do -- helps much vs other more fluff videos such as "8 things to do before retiring". I also really appreciate the client examples. Keep those coming -- oh, and alot of us are divorced and single, so please don't make every example as a married couple. Great work.
Thank you James for another excellent video. This is exactly what my husband and I were talking about recently. Your video helps confirm our thinking. Much appreciated!
Wow James! Great analysis, given scant details, you touched on just about every financial/tax aspect to consider while in retirement. 👍🏼
Thank you, James, I’m impressed by how comprehensive your presentation was in only about 30 minutes. I have created spreadsheets to forecast our future income levels, asset levels, and taxes, but after listening to this podcast I feel challenged to try a few different scenarios. We have already done many ROTH conversions, but I haven’t thought about tax gain harvesting before Social Security kicks us into a higher federal tax bracket. Thanks again for spending so much time preparing and recording this presentation. I appreciate all you do. Hope you have a great summer.
Great review of the decision points recognizing the timelines, portfolio locations as well as the allcations of each account impacting the decisions. The scenario-driven approach you use to provide financial advice is a real aid to walkiing through the impacts / costs and savings.
This is a great video.
What a fantastic video! Congratulations on a job well done!!! You have captured all the little details that have been bouncing around in my thoughts. Why is it so hard to find a financial fiduciary that gets it like you obviously do?
What a timely video. I retired last month and have a very similar situation with a large holding of a single stock with a big gain in my brokerage. I’m still setting up a strategy for all of these variables. I’m about to turn 60, SS at 67 so I have some time to set up for rmd.
That was excellent. Will be rewatching and taking notes!
If you have a good brokerage account, you might have enough dividend and interest coming in to live on. Since you're paying tax on the income anyway, you might as well use it for spending.
Thanks James for another very informative video! Since this topic applies to me, it was extremely helpful!
I plan on working part-time, for minimum wage for a few few years before retiring full time and doing roth conversations during those low income years.
This was so incredibly helpful. Thank you so much for your content and the time you put into it.
Great video, James, thanks! Only point I don’t think was touched on is, for those on Medicare, getting bumped into a higher IRMA bracket by withdrawing from IRA, all of which I believe would count when figuring IRMA, vs. taking from brokerage where only the gain would count.
Great content and summaries James. Appreciate you! Rich
Love your information, keep doing what you do.
Excellent video. I always learn so much from you.
I am glad you brought up the fact hat having bonds in taxable is not always a “NO”, especially if you will be using the taxable account first in retirement especially when you retire before 59.5 when you don’t yet have access to your IRAs without a penalty, or when you try to keep your income low for ACA subsidies.
Also important to know that, although Roth conversions can be great on those few years of early retirement, more than just saying that ACA subsidies and gain harvesting competes with it, the effect is quite significant since, if you Roth convert a significant amount, not only you pay all the subsidies back at tax time, but also you need to pay the taxes for the conversion. These two extra taxes can deplete your taxable account and cash cushions much faster than you expected.
You could always sell stock that is down in your brokerage account and buy the same stock in your IRA hence you get the money you need without having to sell the stock when it's down (regarding having bonds/cash in a IRA and only having stock in a brokerage account).
Well done!!!🎉 thank you for your advice.
James, good video, especially for those of us who appreciate info down in the weeds.
Wife and I have this huge problem as well. $4 million in Pre-tax retirement accounts waiting to be taxed as well as decades of capital gains from tech stocks investments in a brokerage account. Not yet retired since our income is sufficient.
Investing in a Roth IRA can be smart because contributions are made with after-tax dollars, allowing tax-free growth. When you withdraw in retirement, you keep it all. I retired with 2 million dollars.
great video
Great content.
It seems like doing a bit of all of the above could make a lot of sense especially without a pension. Take up to the standard deduction or maybe 10% tax bracket from the IRAs, take the rest from brokerage up to expense level, execute Roth conversions up to a marginal rate that you’re comfortable paying/it makes sense paying. You might not get enough converted to get rid of detrimental RMDs, but it would help mitigate a bit.
excellent
Hey James, in the video you when you were discussing the cons of taking money from a brokerage account you talked about asset location and how sometimes having your bond portfolio in your tax deferred account and only stocks in your brokerage account does not work well if you need to sell declining stocks to meet expense needs. Would like your opinion on the following strategy: Sell your declining stock for income purposes, immediately sell same amount of bond fund in your tax deferred account and simultaneously purchase the stock you just sold in that account. To me in this way, you have the benefits of asset location and have neutralized the impact of selling stocks in a down market. Am I thinking about this correctly?
This makes sense to me. You have to be careful of wash sale rules. Would love to hear James' opinion on this strategy.
If I'm understanding correctly what you're asking, you would need to be careful of wash sale rules (if you were planning to take a tax deduction on the losses).
You are thinking about it correctly except for the part of selling the same amount in bonds to repurchase the same amount in stocks. Remember that the LTCGs from stocks in taxable can potentially have zero taxes, while the stocks you buy in the Trad IRA will be taxed as ordinary income when the time comes to withdraw them, so your after-tax amounts will not be the same. Also, assuming you are trying to maintain a fixed asset allocation, remember that the stocks you sold in taxable are being withdrawn from the portfolio for expenses, so rebuying them in your IRA by selling bonds, essentially lowers your bond allocation and increases your stock and in turn the risk level of your portfolio. In summary, the amount to sell in bonds in your IRA to re-buy stocks may not be the same amount hat you sold of stocks in the taxable account,
That’s a very good topic James’s, question for you. I am 60 years old. I have a brokerage account with Webull and I also have a Roth IRA account with them and I also a day trader all my trading is done in my Roth IRA with a minimum of my stocks in my regular investment account, what do you recommend me to do, when I fully retired at age 62 I am taking an early retirement ?
Regarding the ‘con’ of high stock AA in brokerage being potential issue for spending in down market, wouldn’t it make no difference as long as you also reallocated within an IRA to buy more stocks and sell bonds? Net of no change in your total AA?
Assuming you are trying to maintain a fixed asset allocation, remember that the stocks you sold in taxable are being withdrawn from the portfolio for expenses, so rebuying them in your IRA by selling bonds, essentially lowers your bond allocation and increases your stock and in turn the risk level of your portfolio. the amount to sell in bonds in your IRA to re-buy stocks may not be the same amount that you sold of stocks in the taxable account. This will also change your asset location as you will now have less bonds in the IRA while the amount of stocks stays the same, increasing your total AA in the portfolio.
Won't RMDs lessen as you get older as the money you extract makes the IRA worth less? I mean that the amount of money in the portfolio will decrease each year as you withdraw?
Is there a condensed version of this lol
Yes pay a professional!!
Another very informative video, however, you looked some what in pain in the video. I'm assuming that's due to the sunburn that we can see on your face and nose. All I can say is ALOE VERA! I hope you feel better in the future.
The person who asked this question hasn't watched any of the past videos 😂