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If you are paying anywhere close to 50% in taxes you need to fire your accountant. The long-term capital gains tax is 0 - 20%. For a couple, the first 78k can
by stocknoob 5y ago
If you are paying anywhere close to 50% in taxes you need to fire your accountant.
The long-term capital gains tax is 0 - 20%. For a couple, the first 78k can be withdrawn tax-free. The rest can be withdrawn at 15% tax rate.
In the unlucky case all 4M is in an IRA, you take a 72t election to avoid the early withdrawal penalty. Then, the rest can be withdrawn (if needed) with the 10% penalty + 15% tax rate (above 78k). Not sure how you're getting anywhere close to 50%.
- matt_s 5y agoI was doing napkin math, assuming a large distribution would hit the 37% bracket + 10% penalty + state income tax somewhere in 1-10% range. I know that 37% is the highest bracket and really only applies to income over a threshold but that depends on filing status, exemptions, etc. My example was more thinking the nest egg OP has is more than enough, especially since I've over-estimated taxes. Also if it is in a tax-protected 401k/IRA then capital gains is irrelevant since it is income tax for distributions as I understand it. This 72T election is an interesting concept for an early retirement scenario, thanks for sharing that, I never heard about it.