Author Topic: Withdrawing from Vanguard  (Read 6018 times)

wfhark

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Withdrawing from Vanguard
« on: March 30, 2017, 06:57:39 AM »
Hello all, thanks for such great content and conversation!

Something that is still a bit of a mystery to me, even after a bunch of research/looking; what is the process like withdrawing from your Vanguard account(s)? 

Let's say hypothetically you had $500K split up like this:
42% $210,000.00 Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
28% $140,000.00 Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
21% $105,000.00 Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
9% $45,000.00 Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

You were ready to start withdrawing 4% per year ($20K) so that the fund is feeding off of itself. I believe you do a transfer request in Vanguard from the accounts to your Checking account (or whatever)...but,

1. How often do you withdraw? 1x/month? 1x/year?

2. I've read that this creates a "taxable transaction or taxable event"...what does that actually mean? Do you receive a form from Vanguard at the end of the year (like a 1099 from a company you've contracted from)?

3. What is a rough estimate for the tax rate at that size of a fund/withdraw?

4. What is the IRS actually taxing? The dividends you've earned, or just simply the total amount you've withdrawn? (what I mean by the dividends you've earned, is over the course of your investment, you've dumped let's say $420K into this fund, and it has grown to the $500K...so you've already been taxed on ~85% of the $$$, but not on $80K....so, is there some 'fuzzy math' that is done here?

Any information to any/all of these questions would be appreciated. I am not an expert, and am just starting out in the mustachian world...so please help me learn a bit more if I sound stupid in any of the questions!!! Thanks!!!
« Last Edit: March 30, 2017, 06:59:11 AM by wfhark »

Nothlit

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Re: Withdrawing from Vanguard
« Reply #1 on: March 30, 2017, 07:27:05 AM »
1. This depends on your cash flow needs & preferences. I don't have a good answer as I am not at the point of needing to do this yet. :)

2. Yes, Vanguard will send a 1099-B at the end of the year if you sold any shares. You'll also get a 1099-DIV for any dividends that were generated from your investments (not related to selling shares). Dividends and capital gains are two different things, so you may want to be sure you are comfortable with the terminology. If you're withdrawing from a 401k or IRA, you'll get a 1099-R.

3. Depends on how much taxable income you have for the year. 4% of a $500k portfolio would be only $20,000, which is going to be a pretty low tax bracket, if not zero, assuming you have no other income (depends on several factors including your deductions, exemptions, capital gains tax rate, etc.). Obviously the answer may be different if you end up with $50k or $100k in income.

4. You are being taxed on the capital gains of the shares you sell. You will own some number of shares of each of the index funds in your portfolio, each bought at different prices over the years. You are being taxed on the difference between the price you sold it for and the price you originally bought it for. In most cases, these will be long-term capital gains (shares held more than 1 year), which under current U.S. law are taxed at a lower rate than short-term capital gains or regular income. Note, what I've written up to this point presumes all your investments are in a taxable account. If some of them are in a traditional (non-Roth) 401k or traditional IRA, the rules are different. In that case, you are taxed on the entire amount of your withdrawal (because you didn't pay tax on the money going into those accounts in the first place). For a Roth 401k or Roth IRA, you won't pay any taxes on withdrawals at all.

Hopefully this is all making some sense. Feel free to ask follow-up questions!

rubybeth

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Re: Withdrawing from Vanguard
« Reply #2 on: March 30, 2017, 07:28:52 AM »
I don't know all of these answers since I haven't done it with Vanguard but with a taxable account in Fidelity. I'm sure others can give you more specifics for Vanguard's site.

1. Withdrawals are a personal thing--some people like to do them monthly like a paycheck, others do quarterly, or just take one big lump sum for the entire year. It's up to you.

2. Yes, you get a tax form later for the year.

3. Tax rate all depends on how much you take out during the year. It's like your income--some people have a standard yearly salary and so they can estimate their tax bracket, but others don't, and have to estimate their withholding accordingly.

4. Capital gains tax. Here's a calculator to estimate: https://smartasset.com/investing/capital-gains-tax-calculator
« Last Edit: March 30, 2017, 07:30:32 AM by rubybeth »

neo von retorch

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Re: Withdrawing from Vanguard
« Reply #3 on: March 30, 2017, 08:06:03 AM »
I don't think you asked this, but I'll offer it up anyway. Maybe you're already aware. One possibly strategy with having ~4 funds is to make periodic (let's use quarterly as an example) withdrawals, and "rebalance" via those withdrawals.  If your target AA is 42/28/21/9, but it's currently 44/26/21/9, when you make your quarterly withdrawal, you take more from VTSMX to even things out. Then, 3 months later, you check your current AA again and take the appropriate amount to again rebalance. In other words, you're selling high!

wfhark

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Re: Withdrawing from Vanguard
« Reply #4 on: March 30, 2017, 08:32:10 AM »
2. Yes, Vanguard will send a 1099-B at the end of the year if you sold any shares. You'll also get a 1099-DIV for any dividends that were generated from your investments (not related to selling shares). Dividends and capital gains are two different things, so you may want to be sure you are comfortable with the terminology. If you're withdrawing from a 401k or IRA, you'll get a 1099-R.

3. Depends on how much taxable income you have for the year. 4% of a $500k portfolio would be only $20,000, which is going to be a pretty low tax bracket, if not zero, assuming you have no other income (depends on several factors including your deductions, exemptions, capital gains tax rate, etc.). Obviously the answer may be different if you end up with $50k or $100k in income.

4. You are being taxed on the capital gains of the shares you sell. You will own some number of shares of each of the index funds in your portfolio, each bought at different prices over the years. You are being taxed on the difference between the price you sold it for and the price you originally bought it for. In most cases, these will be long-term capital gains (shares held more than 1 year), which under current U.S. law are taxed at a lower rate than short-term capital gains or regular income. Note, what I've written up to this point presumes all your investments are in a taxable account. If some of them are in a traditional (non-Roth) 401k or traditional IRA, the rules are different. In that case, you are taxed on the entire amount of your withdrawal (because you didn't pay tax on the money going into those accounts in the first place). For a Roth 401k or Roth IRA, you won't pay any taxes on withdrawals at all.

Hopefully this is all making some sense. Feel free to ask follow-up questions!

First, thanks for the comprehensive response!

2. This will definitely come from taxable accounts, as I am not touching my 401K for a long time. So, I should expect 2 forms to come from Vanguard, and have to prepare for that during tax season...right? (I know this is something I should work with a CPA on)

3. I plan on working when withdrawing from this account(s), so my wife and I will have salaried income. Again, I'll have to work with a CPA at that time.

4. Again, this will be from taxable account, not IRA/Roth IRA/401K. Your explanation makes a lot of sense. Thank you!

I am not at the stage to withdraw yet, just trying to figure it all out in theory, and execution in one. Thanks!

Aggie1999

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Re: Withdrawing from Vanguard
« Reply #5 on: March 30, 2017, 09:08:58 AM »
One comment. When you get to the withdrawal stage, make sure your dividends are going to your money market account and not set to be re-invested. Then use the dividends as your first source of cash withdrawals. If you re-invest the the dividends then sell shares to fund your living you end up with two taxable events instead of one.

Spork

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Re: Withdrawing from Vanguard
« Reply #6 on: March 30, 2017, 09:10:43 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

Cezil

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Re: Withdrawing from Vanguard
« Reply #7 on: March 30, 2017, 09:24:46 AM »
What a helpful thread, thanks everyone.  And thank you for asking, wfhark!  Apparently I wasn't aware that I had these same questions in my head.  :)

wfhark

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Re: Withdrawing from Vanguard
« Reply #8 on: March 30, 2017, 10:36:38 AM »
Thanks everyone for the responses, and input....all have been very helpful. Thank you, Cezilous for the kind post as well!

Nothlit

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Re: Withdrawing from Vanguard
« Reply #9 on: March 30, 2017, 10:43:47 AM »
2. This will definitely come from taxable accounts, as I am not touching my 401K for a long time. So, I should expect 2 forms to come from Vanguard, and have to prepare for that during tax season...right? (I know this is something I should work with a CPA on)

Yes, typically the forms arrive by the end of January, though I think some may have a mid-February deadline in certain circumstances. Vanguard has a tax information section when you're logged into your account that will give you details on when you can expect the various forms to arrive.

And just to clarify, while you will only receive a 1099-B if you sold shares in a given year, you will most likely receive a 1099-DIV every year, because most index funds (at least the ones typically recommended on this forum) pay dividends on a monthly or quarterly basis. Even if you choose to immediately reinvest the dividends, that's still a taxable event.

It's fine if you use a CPA to help with your taxes, but I will say that W-2 income plus a handful of 1099's is not so complicated that you can't do it yourself. :)

neo von retorch

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Re: Withdrawing from Vanguard
« Reply #10 on: March 30, 2017, 11:00:56 AM »
One comment. When you get to the withdrawal stage, make sure your dividends are going to your money market account and not set to be re-invested. Then use the dividends as your first source of cash withdrawals. If you re-invest the the dividends then sell shares to fund your living you end up with two taxable events instead of one.

I feel like this is disingenuous. The dividends paid out triggers a taxable event: taxes on dividends paid. Selling shares triggers a different taxable event: capital gains on shares sold. Whether you reinvest dividends or not should not actually change the overall amount of taxes paid, though. If I'm missing something, please correct me.

Aggie1999

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Re: Withdrawing from Vanguard
« Reply #11 on: March 30, 2017, 12:19:37 PM »
One comment. When you get to the withdrawal stage, make sure your dividends are going to your money market account and not set to be re-invested. Then use the dividends as your first source of cash withdrawals. If you re-invest the the dividends then sell shares to fund your living you end up with two taxable events instead of one.

I feel like this is disingenuous. The dividends paid out triggers a taxable event: taxes on dividends paid. Selling shares triggers a different taxable event: capital gains on shares sold. Whether you reinvest dividends or not should not actually change the overall amount of taxes paid, though. If I'm missing something, please correct me.

That is true if you count your capital gains calculations as last in/first out. Then you probably won't have taxes on the new shares bought with the dividends if you sell them right away. I though most people calculated capital gains as first in/first out though. Is that not what more people do or am I missing something?

Never mind. I guess it does make sense that you would always do last in/first out in the calculations, especially in a growing market. Does seem simpler to just use the dividends if you need the cash as opposed to re-investing shares and then selling right away. Taxes are probably a wash though as you say.
« Last Edit: March 30, 2017, 12:24:07 PM by Aggie1999 »

PizzaSteve

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Re: Withdrawing from Vanguard
« Reply #12 on: March 30, 2017, 12:23:29 PM »
One comment. When you get to the withdrawal stage, make sure your dividends are going to your money market account and not set to be re-invested. Then use the dividends as your first source of cash withdrawals. If you re-invest the the dividends then sell shares to fund your living you end up with two taxable events instead of one.

I feel like this is disingenuous. The dividends paid out triggers a taxable event: taxes on dividends paid. Selling shares triggers a different taxable event: capital gains on shares sold. Whether you reinvest dividends or not should not actually change the overall amount of taxes paid, though. If I'm missing something, please correct me.

I think he may be suggesting that it can simplify your accounting by not reinvesting dividends.  You may also avoid the unlikely risk that you generate a short term gain or withdraw penalty if a fund has a minimum hold time.

But you are also right in that any non reinvested funds are 'out of the market' until you spend them,  which will slightly reduce returns.

Livewell

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Re: Withdrawing from Vanguard
« Reply #13 on: March 30, 2017, 01:08:21 PM »
I would have them send you a check quarterly for dividends

Then sell shares on whatever basis you need, monthly works fine, to fund the rest of your budget

Also do some reading on tax gain harvesting, which you could use to raise your cost basis over time without paying taxes

Livewell

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Re: Withdrawing from Vanguard
« Reply #14 on: March 30, 2017, 01:12:05 PM »
I would have them send you a check quarterly for dividends

Then sell shares on whatever basis you need, monthly works fine, to fund the rest of your budget

Also do some reading on tax gain harvesting, which you could use to raise your cost basis over time without paying taxes

Adding - gocurrycracker has good breakdowns on this, also see http://jlcollinsnh.com/2014/08/25/stocks-part-xxvi-pulling-the-4/

MustacheAndaHalf

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Re: Withdrawing from Vanguard
« Reply #15 on: March 30, 2017, 06:46:59 PM »
You plan to keep working while these funds throw off income and dividends, so I'd suggest looking at a tax-exempt bond fund.  In general at the 25% tax bracket or higher a tax-exempt bond fund has better after-tax returns.

Easiest might be quarterly withdrawals.  I believe Total Stock Market issues quarterly dividends, so you can just avoid reinvesting those and will get some of your withdrawal from that.  I'm not sure it makes sense to reinvest just so you have to sell.  The 2% dividends won't cover your withdrawal rate of 4% anyways, so take the full dividend into your money market account and figure out what else to sell to reach 4%.  Another nice feature of quarterly with a 4% withdrawal rate is you can just divide your account value by 100, and that's the amount to withdraw (1% per quarter, 4% per year).

I'm not sure if I follow the overall plan.  If you are both working, are you going to contribute to a 401(k) plan while simultaneously selling assets to cover expenses?  It sounds like you might be simultaneously spending and contributing to retirement.  If 4% withdrawals are enough to cover expenses, what happens when you both retire from the two jobs?

wfhark

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Re: Withdrawing from Vanguard
« Reply #16 on: March 31, 2017, 05:36:54 AM »
I'm not sure if I follow the overall plan.  If you are both working, are you going to contribute to a 401(k) plan while simultaneously selling assets to cover expenses?  It sounds like you might be simultaneously spending and contributing to retirement.  If 4% withdrawals are enough to cover expenses, what happens when you both retire from the two jobs?

The overall plan / theory is to have assets that generate a passive income. Owning rental property, and/or a small 'passive income' business seems much riskier to me, and my wife doesn't want the hassle. To paraphrase MMM 'the only superpower is to not spend money!'...I find that superpower much simpler than managing tenants or a staff of employees.

As stated in an earlier post, we both contribute as much as possible to 401K / 403b plans for actual retirement.

This is all based on our personal preferences, and after many months of discussion; the goal is not to retire super early for us. The goal is to have a passive income.

des999

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Re: Withdrawing from Vanguard
« Reply #17 on: March 31, 2017, 06:58:34 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

I agree with everything you are saying, unfortunately after I am maxing out all of my tax deferred accounts, I don't really have much left for other investments (outside of my Roth everything I have is pretax accounts).

So, with that being said, when it's time for me to start taking distributions, will I have to care at all about which shares I'm receiving, how much I paid for them, vs what they are worth now, etc... It is my understanding that if I withdraw 20k / year from my tIRA, as a married couple, we can basically live off of that 20k and pay little to no taxes.  Is that correct, do the capital gains and dividend income only matter in brokerage accounts?  Thanks!

Spork

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Re: Withdrawing from Vanguard
« Reply #18 on: March 31, 2017, 07:55:06 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

I agree with everything you are saying, unfortunately after I am maxing out all of my tax deferred accounts, I don't really have much left for other investments (outside of my Roth everything I have is pretax accounts).

So, with that being said, when it's time for me to start taking distributions, will I have to care at all about which shares I'm receiving, how much I paid for them, vs what they are worth now, etc... It is my understanding that if I withdraw 20k / year from my tIRA, as a married couple, we can basically live off of that 20k and pay little to no taxes.  Is that correct, do the capital gains and dividend income only matter in brokerage accounts?  Thanks!

If you are withdrawing from Roth/tIRA -- your tax basis doesn't matter.  (There are some edge cases, like if you ended up putting post-tax money in a tIRA.)

Also remember that if you're withdrawing from your tIRA, you will either need to:
* be over 59.5
* pay a 10% penalty
* do a Roth ladder where you convert and let the money "bake" 5 years.  (I am assuming by the fact you already have a Roth, you're already on this track.)
* go the substantially equal payments route.  (I don't know enough about this route to really say much, but you can google SEPP and get the gist of it.)

des999

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Re: Withdrawing from Vanguard
« Reply #19 on: March 31, 2017, 08:00:43 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

I agree with everything you are saying, unfortunately after I am maxing out all of my tax deferred accounts, I don't really have much left for other investments (outside of my Roth everything I have is pretax accounts).

So, with that being said, when it's time for me to start taking distributions, will I have to care at all about which shares I'm receiving, how much I paid for them, vs what they are worth now, etc... It is my understanding that if I withdraw 20k / year from my tIRA, as a married couple, we can basically live off of that 20k and pay little to no taxes.  Is that correct, do the capital gains and dividend income only matter in brokerage accounts?  Thanks!

If you are withdrawing from Roth/tIRA -- your tax basis doesn't matter.  (There are some edge cases, like if you ended up putting post-tax money in a tIRA.)

Also remember that if you're withdrawing from your tIRA, you will either need to:
* be over 59.5
* pay a 10% penalty
* do a Roth ladder where you convert and let the money "bake" 5 years.  (I am assuming by the fact you already have a Roth, you're already on this track.)
* go the substantially equal payments route.  (I don't know enough about this route to really say much, but you can google SEPP and get the gist of it.)

thanks, I am aware of the ways to get to my money prior to 59.5, but about those edge cases :)  I accidentally contributed about $2000 pretax money to my rollover tira about 7 years ago, and realized my mistake and never added money to it again.  Do you know what kind of tax implications this could have?  Or, what exactly that means for my rollover tira?  I thought I read some where I could owe tax on capital gains.  Any info would be greatly appreciated. 
 

Spork

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Re: Withdrawing from Vanguard
« Reply #20 on: March 31, 2017, 08:07:57 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

I agree with everything you are saying, unfortunately after I am maxing out all of my tax deferred accounts, I don't really have much left for other investments (outside of my Roth everything I have is pretax accounts).

So, with that being said, when it's time for me to start taking distributions, will I have to care at all about which shares I'm receiving, how much I paid for them, vs what they are worth now, etc... It is my understanding that if I withdraw 20k / year from my tIRA, as a married couple, we can basically live off of that 20k and pay little to no taxes.  Is that correct, do the capital gains and dividend income only matter in brokerage accounts?  Thanks!

If you are withdrawing from Roth/tIRA -- your tax basis doesn't matter.  (There are some edge cases, like if you ended up putting post-tax money in a tIRA.)

Also remember that if you're withdrawing from your tIRA, you will either need to:
* be over 59.5
* pay a 10% penalty
* do a Roth ladder where you convert and let the money "bake" 5 years.  (I am assuming by the fact you already have a Roth, you're already on this track.)
* go the substantially equal payments route.  (I don't know enough about this route to really say much, but you can google SEPP and get the gist of it.)

thanks, I am aware of the ways to get to my money prior to 59.5, but about those edge cases :)  I accidentally contributed about $2000 pretax money to my rollover tira about 7 years ago, and realized my mistake and never added money to it again.  Do you know what kind of tax implications this could have?  Or, what exactly that means for my rollover tira?  I thought I read some where I could owe tax on capital gains.  Any info would be greatly appreciated.

In short: no, I don't.  Someone will chime in. 

My semi-educated guess is that when it comes out, you'll pay tax based on the cost basis.  I know I've seen reference to this in tax forms or in the Turbotax/HRBlock questions. 

des999

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Re: Withdrawing from Vanguard
« Reply #21 on: March 31, 2017, 08:34:47 AM »
I didn't see it in the above replies and I think it bears mentioning:  While there is a lot of emphasis on this site on investing in tax deferred accounts, those taxable accounts are still HUGELY tax advantaged.

Capital gains are always taxed at a marginal rate lower than your "normal" marginal rate.  It pays a lot more to sit back and live off of cap gains/dividends than it does to have a job.  If you are married, you can have $75k of cap gains/dividends and pay ZERO tax.  And that's the gains.... If you're selling shares, you'll have to sell quite a lot to have $75k of gains. 

Read Go Curry Cracker's blog article: http://www.gocurrycracker.com/never-pay-taxes-again/

I might also suggest you do you taxes by hand once or twice... Feel free to check yourself and re-do it with H&R/Taxact/Turbotax/etc.  But do them by hand and get a feeling for what is going on.  You can then structure your income/withdrawals a little more intelligently.

I agree with everything you are saying, unfortunately after I am maxing out all of my tax deferred accounts, I don't really have much left for other investments (outside of my Roth everything I have is pretax accounts).

So, with that being said, when it's time for me to start taking distributions, will I have to care at all about which shares I'm receiving, how much I paid for them, vs what they are worth now, etc... It is my understanding that if I withdraw 20k / year from my tIRA, as a married couple, we can basically live off of that 20k and pay little to no taxes.  Is that correct, do the capital gains and dividend income only matter in brokerage accounts?  Thanks!

If you are withdrawing from Roth/tIRA -- your tax basis doesn't matter.  (There are some edge cases, like if you ended up putting post-tax money in a tIRA.)

Also remember that if you're withdrawing from your tIRA, you will either need to:
* be over 59.5
* pay a 10% penalty
* do a Roth ladder where you convert and let the money "bake" 5 years.  (I am assuming by the fact you already have a Roth, you're already on this track.)
* go the substantially equal payments route.  (I don't know enough about this route to really say much, but you can google SEPP and get the gist of it.)

thanks, I am aware of the ways to get to my money prior to 59.5, but about those edge cases :)  I accidentally contributed about $2000 pretax money to my rollover tira about 7 years ago, and realized my mistake and never added money to it again.  Do you know what kind of tax implications this could have?  Or, what exactly that means for my rollover tira?  I thought I read some where I could owe tax on capital gains.  Any info would be greatly appreciated.

In short: no, I don't.  Someone will chime in. 

My semi-educated guess is that when it comes out, you'll pay tax based on the cost basis.  I know I've seen reference to this in tax forms or in the Turbotax/HRBlock questions.

thanks.  I made a post about it, hopefully it'll get some responses.  Hopefully it didn't screw things up too much for me :)

Tom Bri

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Re: Withdrawing from Vanguard
« Reply #22 on: April 02, 2017, 05:35:54 PM »
I vote for the once/year withdrawl, for one reason only. I use Turbotax, and they offer to pull your docs directly from your investment company. Not once in ten years+ has this actually worked, so I had to go and put in the data from each sale by hand, a long and tedious process since we had monthly withdrawls for over a year.

MustacheAndaHalf

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Re: Withdrawing from Vanguard
« Reply #23 on: April 02, 2017, 07:58:50 PM »
I use Turbotax, and they offer to pull your docs directly from your investment company. Not once in ten years+ has this actually worked ...
This being a thread about Vanguard, I assume that's the investment company you use.  Over in the "tax" topics area I posted about a Vanguard-specific issue with importing.

It turns out you have to run "import" twice in TurboTax.  First, you import "Vanguard - Brokerage account" and then "Vanguard - Mutual fund account".  You might need to run import twice, once with each account type at Vanguard.

I noticed missing transactions and when I asked Vanguard about it they mentioned the need to import twice.  That fixed the problem for me.

Tom Bri

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Re: Withdrawing from Vanguard
« Reply #24 on: April 03, 2017, 12:23:47 PM »
I use Turbotax, and they offer to pull your docs directly from your investment company. Not once in ten years+ has this actually worked ...
This being a thread about Vanguard, I assume that's the investment company you use.  Over in the "tax" topics area I posted about a Vanguard-specific issue with importing.

It turns out you have to run "import" twice in TurboTax.  First, you import "Vanguard - Brokerage account" and then "Vanguard - Mutual fund account".  You might need to run import twice, once with each account type at Vanguard.

I noticed missing transactions and when I asked Vanguard about it they mentioned the need to import twice.  That fixed the problem for me.

Excellent info. Thanks.

In fact my Vanguard account was only a minor issue, since it is new and has had little activity other than adding $. Other accounts were more annoying. However, in the future I will probably go for fewer, larger withdrawls anyway, just in case! Hopefully this will not be necessary for quite a number of years. I was back in school for a few years, and taking money out to pay living costs not quite covered by my part time job. Back to full time now, with a nicely higher salary.