Location of Assets (taxes)

[ImCheap]

For those who have retired or have studied this more than I what do you feel is the optimal mix/location of assets for the best tax/asset growth efficiency?

For sake of argument lets say you have investable assets of $1,000,000 and in the 15% bracket, many have state taxes too, lets keep that in the back of our minds.

With all the moving parts in regards to SS taxes, ACA subsidies, etc. its a moving target. Ones ability to move assets around tax shelter wise is a slow process. Most of my saving years I felt having multiple piles is good thing without knowing the future tax laws and what life is going to toss you. I was investing about 10 years before a Roth was option.

For what is worth currently I'm sitting at:
10% Roth
30% Tax Deferred
60% Taxable

Much of this out of our control but I currently have a few options, fill up on some Ibonds is one thing I'm considering. We are still working and will continue to fill up our work plans (only options we have are tax deferred) and Roth accounts. Some Roth conversions maybe in order too at some point after we quit working for the man.

For those who are living the dream/retired/not working etc.  what would be your mix if you could choose?
 

[DavidAnnArbor]

Having 60% in taxable accounts you're forced to report some dividend income every year which definitely will impact your AGI and therefore your MAGI for ACA subsidy purposes.

[SeattleCPA]

For those who have retired or have studied this more than I what do you feel is the optimal mix/location of assets for the best tax/asset growth efficiency?

For sake of argument lets say you have investable assets of $1,000,000 and in the 15% bracket, many have state taxes too, lets keep that in the back of our minds.

With all the moving parts in regards to SS taxes, ACA subsidies, etc. its a moving target. Ones ability to move assets around tax shelter wise is a slow process. Most of my saving years I felt having multiple piles is good thing without knowing the future tax laws and what life is going to toss you. I was investing about 10 years before a Roth was option.

For what is worth currently I'm sitting at:
10% Roth
30% Tax Deferred
60% Taxable

Much of this out of our control but I currently have a few options, fill up on some Ibonds is one thing I'm considering. We are still working and will continue to fill up our work plans (only options we have are tax deferred) and Roth accounts. Some Roth conversions maybe in order too at some point after we quit working for the man.

For those who are living the dream/retired/not working etc.  what would be your mix if you could choose?

What I'm about to say completely ignores any ACA credits or subsidies... I'm talking just taxes...

The tax-deferred stuff (so 30% of $1M or $300K) you can invest in anything with. The income that flows out of this amount via draws will be taxed as ordinary income... But that'll be either totally sheltered by your personal exemption and standard deduction or mostly sheltered. e.g., a 4% draw on $300K would produce about $12K of income and that would be basically totally sheltered in many situations by a $6K or $12K standard deduction and a $4K personal exemption...

With 60% of $1M in a taxable account, or $600K-ish, you'd want that money generating either long-term capital gains or qualified dividends. If you earned (say) 4% or 5% on this $600K, this $24K or $30K is probably taxed at 0% because you're still at the 10% or 15% tax bracket.

The Roth stuff? That's not taxable at all.

[DavidAnnArbor]

With Inflation Bonds from the Treasury, you can choose to pay taxes on the interest you earn each year, or you can defer those tax payments until you withdraw from the IBonds at some point in the future. They stop paying interest after 30 years.
I Bonds were definitely a good deal in the early 2000s and before, because there was a fixed interest rate that you got on top of the inflation rate. I have some that earn a 1.6% fixed rate plus inflation. However, that fixed rate has now dropped to zero, so not sure how good a deal they are. The stock market over the 10-20 year horizon will most decidedly outpace this rate of return.

[ImCheap]

With Inflation Bonds from the Treasury, you can choose to pay taxes on the interest you earn each year, or you can defer those tax payments until you withdraw from the IBonds at some point in the future. They stop paying interest after 30 years.
I Bonds were definitely a good deal in the early 2000s and before, because there was a fixed interest rate that you got on top of the inflation rate. I have some that earn a 1.6% fixed rate plus inflation. However, that fixed rate has now dropped to zero, so not sure how good a deal they are. The stock market over the 10-20 year horizon will most decidedly outpace this rate of return.

This is true, I do however like the idea of some safe "cash", a good 5 years worth of living expenses, almost  like buying insurance in some ways. My better half has some time yet to fill up the 457, that plan has a decent Stable Value Fund we are looking at using at well.

We have a good 5-10 years to get this dialed in!

[ImCheap]

For those who have retired or have studied this more than I what do you feel is the optimal mix/location of assets for the best tax/asset growth efficiency?

For sake of argument lets say you have investable assets of $1,000,000 and in the 15% bracket, many have state taxes too, lets keep that in the back of our minds.

With all the moving parts in regards to SS taxes, ACA subsidies, etc. its a moving target. Ones ability to move assets around tax shelter wise is a slow process. Most of my saving years I felt having multiple piles is good thing without knowing the future tax laws and what life is going to toss you. I was investing about 10 years before a Roth was option.

For what is worth currently I'm sitting at:
10% Roth
30% Tax Deferred
60% Taxable

Much of this out of our control but I currently have a few options, fill up on some Ibonds is one thing I'm considering. We are still working and will continue to fill up our work plans (only options we have are tax deferred) and Roth accounts. Some Roth conversions maybe in order too at some point after we quit working for the man.

For those who are living the dream/retired/not working etc.  what would be your mix if you could choose?

What I'm about to say completely ignores any ACA credits or subsidies... I'm talking just taxes...

The tax-deferred stuff (so 30% of $1M or $300K) you can invest in anything with. The income that flows out of this amount via draws will be taxed as ordinary income... But that'll be either totally sheltered by your personal exemption and standard deduction or mostly sheltered. e.g., a 4% draw on $300K would produce about $12K of income and that would be basically totally sheltered in many situations by a $6K or $12K standard deduction and a $4K personal exemption...

With 60% of $1M in a taxable account, or $600K-ish, you'd want that money generating either long-term capital gains or qualified dividends. If you earned (say) 4% or 5% on this $600K, this $24K or $30K is probably taxed at 0% because you're still at the 10% or 15% tax bracket.

The Roth stuff? That's not taxable at all.

I thank you, think this year I'm going to play with the tax software and run some numbers. With the only option at our work places being tax deferred (403B, 457 and a SAR-SEP) I'm a little afraid of it getting to high, yeah first world problems. Currently we are sitting with close to $400k in deferred accounts, will keep filling them up and look at conversion when that time comes.

What I did forget to add was SS and the impact, like everyone else I would prefer not to pay taxes!