Bond Equity Account Switcharoo post FIRE?

[dividendman]

So, pre-FIRE I have my accounts set up so equities are in my taxable accounts and bonds are in my tax sheltered accounts so I don't have to pay ordinary income tax on the bond interest.

I'm going to fire (again!) in January. Since my taxable income will be so low, doesn't it make sense to somehow switch my bonds to my taxable accounts and equities to tax sheltered?

My logic is that the equities will grow a lot more so it's better to have them in tax sheltered accounts so they can get bigger and my ordinary income from interest is so low it won't cost me much in taxes.

Did anyone else do this? Am I missing something? The current hangup with my plan is to try to minimize the capital gains hit from switching my taxable accounts to bonds (of course switching from bonds to equities in the tax sheltered accounts have no problem).

[seattlecyclone]

My current strategy is to put the bond allocation largely in the pre-tax retirement accounts, because the growth in these will be assessed regular income tax regardless of what type of asset is in there. Furthermore I expect the bonds to grow less than equities over the long run. Putting bonds in the highest-taxed type of account should minimize tax in the long run compared to if I put slow-growing bonds in Roth (where growth won't be taxed) and equity in traditional. Our equities are primarily in Roth and taxable.

[dividendman]

My current strategy is to put the bond allocation largely in the pre-tax retirement accounts, because the growth in these will be assessed regular income tax regardless of what type of asset is in there. Furthermore I expect the bonds to grow less than equities over the long run. Putting bonds in the highest-taxed type of account should minimize tax in the long run compared to if I put slow-growing bonds in Roth (where growth won't be taxed) and equity in traditional. Our equities are primarily in Roth and taxable.

Yeah, I guess it's still optimal to do that. I don't know why I thought that having more room (via stock gains) in the tax sheltered accounts was somehow beneficial, but it's obviously better to take the cap gain in regular accounts than the regular income when withdrawing from the tax sheltered accounts.

Thanks! No switcharoo required.

[terran]

Gains in taxable are taxed at very low rates (even 0% for most mustachian level budgets) while they're taxed at higher ordinary income tax rates (which can still be pretty low, but always higher than long term capital gains at any given income level) in a tax deferred account, so I'd rather have gains in a taxable account than a traditional IRA/401(k). You could make a good argument for putting stocks in Roth and bonds in taxable though, I think. Although, even then tax free interest in Roth and tax free qualified dividends and long term capital gains in taxable (thanks to the 0% bracket) might still win out. Long story short, I think the principles of tax efficient fund placement still hold in your situation.