Foobar is referring to the 0% capital gains tax for people in the 10% and 15% tax brackets. If you're currently working and making a nice wage, you might not be in the 15% bracket. In that case, mess with your asset allocation in your tax deferred accounts since there is no tax. Once you're retired, you can take qualified dividends and long-term capital gains of up to $36,250 (single) and $72,500 (married) without paying any tax based on the current laws. These are 2013 #'s.
Read this: http://www.gocurrycracker.com/never-pay-taxes-again/
Wow this just blew my mind. Can someone confirm a scenario then for me?
Lets say I have 3 accounts;
Traditional IRA
Roth IRA
Regular (taxable) Investment Account
Lets say I've grown nest eggs in all 3 accounts over a lengthy time and have decided to retire early.
So if I had my traditional IRA growing tax-free, and I'm (early) retired with no real income, I can roll part of that money over into a Roth IRA each year and have it counted towards my yearly income but as long as it is below the minimum amount needed to fall into the lowest tax bracket I will not be taxed on it right?
I can then withdraw that money from the Roth IRA since it is counted as a contribution (or principle) added to the Roth IRA, and principle can be withdrawn without penalty from a Roth IRA before age 59.5 right?
I can then make capital long-term gains or dividends of up to 70K (or whatever the max is) from my regular investment account and not have to pay capital gains taxes on these earnings because I have no taxable income?
In addition, I could in actuality make up to the maximum contribution amount for my Traditional IRA in real income each year as long as it all goes into the Traditional IRA and isn't counted towards my income for the year. right?
Seriously, if all that is accurate then that is freaking genius.
Questions:I can't find much info on if a rollover to a Roth IRA is considered principle, can anyone confirm this?
Also, if I make continued gains / dividends in my regular investment account, are they really not taxable up to a certain earnings amount if I'm under the minimum income needed to pay taxes? Or does this only apply to earnings in my IRAs?