Question for the week: Do you think about or optimize for tax diversification in retirement? For example, are you intentionally diversifying between Roth, pre-tax, and taxable accounts as a hedge against future tax code changes?

[–] yenahmik 3 points 2 years ago

I don't think about it a ton, but I've made some small decisions over time related to tax strategy.

My ongoing strategy is to hold all bond funds in my pre-tax accounts. This should limit their growth, so I won't pay as much income tax on their withdrawal. It also reduces tax drag from the payouts, since they aren't held in a taxable account. Alternatively, I hold exclusively stock funds in my Roth. This will prevent being taxed on the higher gains, hopefully.

Another somewhat major choice I made (one time only) was to covert a former 401k to my Roth IRA after I quit that job to go back to school. Since I'd only made something like $14k that year, it made sense to take the "tax hit" that year as opposed to waiting until retirement.

Overall, we are fairly diversified between accounts. It helps that my spouse exclusively contributed to a Roth 401k until we got married and I forced them to switch to Trad so our income wouldn't be too high for Roth IRA contributions. I have a Trad IRA and my 401k will only accept rollover money, so a backdoor Roth is not a great option for me.

[–] FancyPantsFIRE 2 points 2 years ago

We’re in a high enough tax bracket that I struggle to envision a scenario where we’re not better off maximizing what pretax spaces we have right now. That said we also make backdoor and megabackdoor Roth contributions and have a sizable taxable brokerage balance. It wasn’t by design but we’ve ended up with a good split across each bucket.

[–] yenahmik 4 points 2 years ago (2 children)

Happy spreadsheet day, everyone! Should see some nice all time highs with how the market performed this month.

[–] yenahmik 3 points 2 years ago (1 children)

My net worth increased by 3% from last month! That seems massive, since it was mostly from market gains.

I also finally debugged my calculation for how far out I am from my number. For some reason, it has been showing I was something like 45 years out from being able to retire. I've mostly been ignoring it, but finally looked into the formula and realized one of my numbers should have been a negative instead of a positive. Just like that, I shaved off 35 years of work remaining! 😂

[–] FancyPantsFIRE 3 points 2 years ago

In clickbait headline form: Retire decades earlier with this one trick!

[–] FancyPantsFIRE 3 points 2 years ago

I don’t really spreadsheet on a monthly basis but I did pull up the empower app — all time high indeed!

[–] runawaycorvid 4 points 2 years ago* (last edited 2 years ago) (2 children)

Double post: I wondered why I couldn’t see any new content on my main account (not this lemmy.world one). Figured my instance defederated Lemmy.ml or the opposite. Ignored it for a bit.

Just looked at my “Local” posts on that account. Nazis took over. That explains it. Off to find another “main” instance…

[–] [email protected] 2 points 2 years ago

It's such a gamble right now. I look forward to the framework improving and the healthy instances rising to the top. Good choice on lemmy.world. it's a safe bet imo.

[–] FancyPantsFIRE 2 points 2 years ago (2 children)

Does that mean the instance owner was okay with the content and new nazi population?

[–] runawaycorvid 2 points 2 years ago (1 children)

Probably (hopefully) not? It’s more likely that it is an instance owner who isn’t always checking their local content. Other instance owners sent messages prior to defederating for clarification / requesting removal and didn’t get a response.

[–] FancyPantsFIRE 2 points 2 years ago

Interesting, seems like one of many federation related challenges.