am i understanding long 0% long term capital gains during retirement correctly?

[finalpsychyear]

Lets say I am married and retire in 10 years at the age of 55 with a 1 million portfolio of just stocks giving me a return of 5% yearly or 50k.

From what I am reading provided if i were to sell anything that qualified as long term from my portfolio yearly i would pay 0% tax if i had NO other income at the age of 55 since being married i would be under the 77,200 income limit for 0% capital gains?

In theory i think it could be closer to selling 100k in stock a year if the married couple took the standard deduction pushing their net income to 75k?

Fantastic news if true.

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[TMP-SMX]

1 million isn't enough to retire on but I'm assuming you are giving a hypothetical especially if you are thinking decades from now given inflation. Yes that's the benefit of long term capital gains if you have no other taxable income that you pay 0% tax less than 78k per year.

 

[finalpsychyear]

1 million isn't enough to retire on but I'm assuming you are giving a hypothetical especially if you are thinking decades from now given inflation. Yes that's the benefit of long term capital gains if you have no other taxable income that you pay 0% tax less than 78k per year.

That is fantastic news i am quite surprised it is like that.

So once you have 1 million invested in say VTSAX in your taxable brokerage account and continue to invest 100k for 10 years additionally in the same vtsax portfolio because you want an early retirement where you at most plan to withdraw 100k per year, even with a conservative 5% return and even adjusting for inflation you would have nearly 3 million in today's dollars. If you were lucky to be 45 or 50 when you retire you would have 30x your planned expenses and a withdrawal rate of 3.3% paying 0% tax.

I realize its not THAT easy to accumulate 1 mill for a young doc but once you do is the above plan feasible even if you were ignorant enough and did no roth, hsa, sep/solo 401k, cash balance etc??

 

[TMP-SMX]

It's how our tax system is designed. Those that are paid as an employee pay a relatively higher tax rate on their income. Investing and owning a business (including real estate) has tax benefits as it builds growth in the economy. This is how someone like Donald Trump can lose significant sums of money and still come out ahead with leverage. In the end, we have no idea what tax changes will occur in the future and that's why diversifying your accounts is best to ensure you have plenty of options in the future to use Roth IRA and other retirement accounts to be able to adjust spending and distributions to benefit you.

I'll make one correction many states will tax capital gains at their standard and others don't or don't have income tax. Remember the more dividends you have those also count towards income that you want to be qualified and at the long term capital gains rate. Non qualified dividends are taxed at your marginal rate. VTSAX is good because there aren't much dividends paid out compared to other equities. Any dividend equities you should carry in your retirement accounts and not in your taxable account.

 

[finalpsychyear]

It's how our tax system is designed. Those that are paid as an employee pay a relatively higher tax rate on their income. Investing and owning a business (including real estate) has tax benefits as it builds growth in the economy. This is how someone like Donald Trump can lose significant sums of money and still come out ahead with leverage. In the end, we have no idea what tax changes will occur in the future and that's why diversifying your accounts is best to ensure you have plenty of options in the future to use Roth IRA and other retirement accounts to be able to adjust spending and distributions to benefit you.

I'll make one correction many states will tax capital gains at their standard and others don't or don't have income tax. Remember the more dividends you have those also count towards income that you want to be qualified and at the long term capital gains rate. Non qualified dividends are taxed at your marginal rate. VTSAX is good because there aren't much dividends paid out compared to other equities. Any dividend equities you should carry in your retirement accounts and not in your taxable account.

Right. My plan would be to use geographical arbitrage like moving to Florida for example.

So I am assuming your response is a yes to the scenerio i presented 1 mill initially invested in vtax followed by 100k for 10 years with conservative returns giving you nearly 3 mill and if only pulling at most 100k you have "won the game" even if you did nothing else ?

 

[Mman]

So once you have 1 million invested in say VTSAX in your taxable brokerage account and continue to invest 100k for 10 years additionally in the same vtsax portfolio because you want an early retirement where you at most plan to withdraw 100k per year, even with a conservative 5% return and even adjusting for inflation you would have nearly 3 million in today's dollars. If you were lucky to be 45 or 50 when you retire you would have 30x your planned expenses and a withdrawal rate of 3.3% paying 0% tax.

As you said, it's only people with less than $78K of taxable income that pay 0% on long term capital gains but don't forget that any social security income will be taxable.

 

[darkdome987]

Lets say I am married and retire in 10 years at the age of 55 with a 1 million portfolio of just stocks giving me a return of 5% yearly or 50k.

From what I am reading provided if i were to sell anything that qualified as long term from my portfolio yearly i would pay 0% tax if i had NO other income at the age of 55 since being married i would be under the 77,200 income limit for 0% capital gains?

In theory i think it could be closer to selling 100k in stock a year if the married couple took the standard deduction pushing their net income to 75k?

Fantastic news if true.

Don't forget that you can also deduct $3000 of Capital LOSSES every year too. If you were buying the vanguard total stock market every month, you can selectively sell the individual shares that yielded a net loss. And after you sell those share, you can buy them back immediately you can buy a somewhat similar but not identical stock, for example the 500 index . As a result you reduce your taxable liability by 30k over 10 years. This is called tax loss harvesting.


Thx @Crabbygas for pointing it out

 

[Crabbygas]

You can't buy them back immediately. That's a wash sale. You can buy something similar or you can wait 30 days.