3 Tax Mistakes You Can't Afford to Make As An Early Retiree
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- เผยแพร่เมื่อ 26 ก.ย. 2024
- I begin with a quick story about tax planning and my background before showing you how to pay 0% in taxes and other ways to reduce your taxes when retiring early.
**In the first example, the couple itemized and did not take the standard deduction. I misspoke here!
Ari Taublieb, CFP®, MBA is the Vice President of Root Financial Partners (Fiduciary) and host of the Early Retirement Podcast.
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⭐ Please comment below when you're planning to retire and what you are most excited to start spending more time on when you retire ⭐ieeg
Great video Ari, this is how I plan to maximize my retirement. 0% capital gains and Roth conversations. $60,000 AGI seems to be the magic number for this strategy as a single person. Also, keeping my AGI under $60,850 gets me a fully subsidized ACA Bronze high deductible plan with the ability to fully contribute to an HSA. I love crunching the numbers. The ability to minimize AGI and one's expenses plays a bigger role than one's portfolio amount.
Amazing!
Yeah I was planning on retiring early and it sounds like 60k (inflation adjusted) is about the best option unless I end up with more money than expected.
60k tax free is close to 80k pre-tax on ordinary income.
Your not talking to the wall Ari, great stuff as always.
Ha thank you
Thanks Ari. Still looking forward to the video about spending early to avoid RMDs later. That seems like a lot more fun than Roth conversions.
Another variable affecting the decision between Roth conversion and tax gain harvesting is whether or not you need the funds available to cover your expenses. Harvesting the gains will make those gains and their basis immediately available for your spending needs, while a Roth conversion does not make that reportable income available for expenses for that year unless you are executing a Roth conversion ladder where you are withdrawing from your Roth at the same time.
Exactly!
Hi Ari, I am really enjoying your videos! I was wondering if you would do a video discussing the superhero account. I am particularly interested in how the asset allocation for a superhero account is determined based on various circumstances. For example, is there cash in the superhero account since it will likely be tapped first? Are "riskier" assets like real estate (ETFs or funds) avoided considering the shorter time horizon? What if someone has a small pension? Or if longevity does not run in their family? Or if the couple has an age gap of 10 years or better, and the younger wants to retire early along with the elder? What about having separate emergency savings outside of the superhero account? I'm not sure if all these factors play a role, but I would certainly like to learn. Thanks for all that you do!
Thanks Ari, really enjoying your videos! Can you please do a deep dive on the “Rule of 55” for 401K distribution at the age of 55?
Great suggestion!
Great Video Ari....Best Regards Rich
Thank you!
Thanks Ari, another great video! I always look forward to your video's because it's packed with good information. I'm in the process of finalizing my retirement plans. Part of the plan is determining the best time to do my Roth conversions and tax harvesting. So I really enjoyed the video.
Very kind and these comments are why I do it!
Keep the examples coming!! Awesome stuff!!
Thanks! Will do!
What a great video !!! Subscribed to this channel despite I'm not close to retirement
Great video! Retirement is within 24 months for me. Will definitely need to search out a tax planning professional.
Best of luck and Happy Retirement :D
Wow!! Awesome stuff.
Thank you
Hi Ari. It's a bit unclear from this video but I have two quick questions on IRA conversions. Hopefully you can reply, perhaps even make a video on this: (1) I thought IRA conversions can always be done, but you mentioned that after age 62 there's other considerations. Why? (2) Can we also do a 401k to RothIRA conversion? Thanks much. I'm really happy I found and subscribed to this channel.
You can do conversions any time! After you retire, you want to weigh the benefits of subsidy v. conversions. Yes - SOME plans allow for these conversion, but some don’t.
@@earlyretirementariThank you SO MUCH Ari !! TRULY! I suppose in the 401k plans which don't allow the Roth IRA conversions, it can still allow an in-plan 401k roth conversions, but then the money continues to grow in that employer plan. I wonder whether that's a good idea ... not sure. Thanks again for your help !!!
Ari. are you taking on new clients ? I am seeking a accountant
The problem with Roth conversions, especially the older you are, is that although gains grow tax free, losses are not deductible within Roth. The older you are the less time/risk appetite there is for volatility or losses.
You are correct. However, that is why the Roth should be invested aggressively when you don’t need to take distributions from it in the near to intermediate future, so that it has time to recover in the event of a downturn. If you know that the time is approaching when you will need to start taking distributions from it to cover your expenses, then you need to switch the Roth to more conservative investments, as your focus will be on capital preservation rather than seeking higher returns.
Awesome content as always Ari!. To make sure I understood your last point on why not to do the Roth conversion in the example even if it saves you $7-8k in taxes, is because, if you project how much you will save in taxes in the same period by harvesting gains at 0%, the taxes avoided in LTCGs will be higher than the taxes avoided by doing the Roth conversion. Is this correct ? Thanks!
Gross tax free and compound growth forever! So as it grows from $1M - $2M, no taxes ever again
@@earlyretirementari wouldn’t that then favor the Roth conversion over the tax gain harvesting?. I thought you said in the end that they should not do the conversion and should harvest the gains instead. Thanks again!
@@J-2024-v8i it depends if there’s significant concentration in one stock where you can harvest gains and then do Roth conversion. Depends on many factors. Have to do a return adjusted analysis to determine which will benefit more and with all planning, not black and white!
@@earlyretirementari Makes complete sense. Thanks so much for the quick reply!
@@J-2024-v8iyeah think it depends. If you have room in the 10% for the 401K conversions it would likely be more valuable as they'd be saving close to 18% in taxes while a brokerage would just be saving 15%.
If the brokerage is riskier assets, then it may be better to harvest so that they can re-allocate if necessary.
This is why you really need to start planning for retirement withdrawal strategy in your 50s as you may be better off using a Roth 401K or brokerage account depending on your current asset allocation.
Even when you hit your RMDs it may be good to max out the 28% bracket in this example with Roth conversions to see if you can limit brackets in the future.
why do i feel like my long term capital gains was counted into the ordinary income category? Or is this only for IRA brackets?
LTCG have their own tax buckets. They are taxed after ordinary taxes such as from an 401k or IRA.
Ari, what about if they had several holdings 5hrowing off dividends and interest. That is taxable agi is it not ??
Yes it is!
So their taxable may very well had been higher ?@@earlyretirementari
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Thanks for all your productivity in creating great content, Ari. When do you sleep?😀
HA. You’re so welcome. Too many people to help! And I make sure to get my 8 hours 😂
I batch my content!
@@earlyretirementari 🤣
where are you located? what state?