When did you start drawing profits from taxable?

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LiveSimple
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Re: When did you start drawing profits from taxable?

Post by LiveSimple »

When ever real life expenses happens such as a vacation and cannot pay from paycheck.
Using taxable as checking account, invest all money when available and withdraw as needed.
Invest when you have the money, sell when you need the money, for real life expenses...
mrjohnanderson007
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Re: When did you start drawing profits from taxable?

Post by mrjohnanderson007 »

My plan is if/when I retire early (currently 35), thinking in the next 5 years. I will use the dividends as part of my income (VTSAX about 1.8%). But only if it's needed.
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ruralavalon
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Re: When did you start drawing profits from taxable?

Post by ruralavalon »

There was a time when we had two taxable accounts which we used like savings accounts , invested in Vanguard Prime Money Market Fund (VMMXX), in a era when a money market funds paid good interest, better than a bank savings account.

One account was used like a regular savings account/emergency fund.

The second was to accumulate money for large periodic necessary costs which did not recur monthly (e.g. quarterly income tax payments, twice a year real estate tax payments, twice a year college tuition for children).

LiveSimple wrote: Thu Sep 23, 2021 5:52 am When ever real life expenses happens such as a vacation and cannot pay from paycheck.
Using taxable as checking account, invest all money when available and withdraw as needed.
We did similarly with our taxable account before retiring after our joint taxable account became large enough to be more than just a savings account/emergency fund.

We invested more in our joint taxable account whenever extra money was available to invest, investing in very tax-efficient stock index funds. Then we drew out to spend as needed whether for an emergency or family vacations, home improvements, etc.

After retirement this has worked the same way. We occasionally reinvest any unneeded part of my Required Minimum (RMDs), and use occasional withdrawals for any emergency (e.g. replace car), or for life's extras.
Last edited by ruralavalon on Thu Sep 23, 2021 7:29 am, edited 1 time in total.
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sailaway
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Re: When did you start drawing profits from taxable?

Post by sailaway »

mega317 wrote: Mon May 07, 2018 1:58 pm I buy things that I want (vacations, furniture, property taxes, underwear) when I want them as long as I can afford it. It really has nothing to do with my investment returns or realizing wins.

Are you saying you want to spend more money? Go ahead if you can afford to. Or are you saying you want to sell some investments because they have gone up and you want to protect against loss?
This. We determine our priorities and then figure out cash flow. We sold from taxable to buy our boat, then to cash flow the last bit of a major refit a few years later.
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Sandtrap
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Re: When did you start drawing profits from taxable?

Post by Sandtrap »

NextMil wrote: Mon May 07, 2018 1:50 pm Looking for some guidance. I don't want to get into particulars of positions/amounts, but I want to get a sense on when people start drawing from their taxable account. I am still accumulating, and have been investing heavily for a few years, but when do you start pulling some of the fruits of your investments on the taxable side to start enjoying it? I am not anywhere close to retirement (still throwing tons into retirement), but starting to have that feeling of I want to realize some of my "wins" probably just because I am tiring of just investing for the long term. Does that make sense?

And when you did, did you start with just dividends or cash out part of your yearly returns to enjoy it? Did you earmark it for different things like vacations etc? I suspect most people on here will say they do not and just keep putting cash away, but there has to be a few folks that are starting to enjoy some of their investments pre-retirement.

Any thoughts or guidance?
3 years after retirement.
Before that lived on cash and rental business income only.
No employee pension.
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SocalLiving
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Re: When did you start drawing profits from taxable?

Post by SocalLiving »

"Fun" should be part of your monthly/yearly budget. As many above have said - your life does not need to be on hold for retirement. We save aggressively for retirement, including in a taxable brokerage account. But we also save separately in a high yield savings account for vacations, experiences, renovations, and big-ticket items. This does involve prioritizing and setting goals. Budget for fun now and retirement.

Set goals for your fun money and start saving for it separately from your retirement funds. We found that it actually does not slow down our retirement spending. It just prevents us from spending money on a bunch of stuff we don't really want or need.

The important thing is to figure out what fun activities you and your family actually want to do, without worrying about others. This means different things for different people. Almost all our fun budget goes to one big international vacation and 2-3 "trips". We don't go to restaurants every weekend and don't upgrade our furniture or car often because that is not as important to us.
Nowizard
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Re: When did you start drawing profits from taxable?

Post by Nowizard »

Basically, though there are no absolute assurances other than for those who are quite wealthy, the concept for us was simple. Project income in retirement based on SS, any pension and assets, along with progression toward achieving that goal. As time reveals whether on track or exceeding it, expect that increased questions such as yours will appear rationally. Assume that your rational approach has resulted in current success and recognize that spending more will probably be accompanied by some anxiety, but do it since you are rational. Just as with accumulating, there is no guarantee of outcome, but it is likely that you will continue toward your ultimate goal and enjoy the ride more.

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Raraculus
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Re: When did you start drawing profits from taxable?

Post by Raraculus »

I have already drawn profits on my taxable investments. Cash is trash, and I keep very little of it on hand, just enough to pay for essential expenses.

Usually, when a CC bill with a promo 0% APR expires, that's when I sell off taxable shares to pay it off. This approach didn't work too well in 2020, but has worked great so far in 2021.

The downside? I incur LTCG's, and I'm fast approaching the 22% tax bracket. I may not be able to sell profitable taxable investments for the rest of the year. :(
RetiredCSProf
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Re: When did you start drawing profits from taxable?

Post by RetiredCSProf »

I started investing in a taxable account when I was in high school. I invested in a single stock fund. I sold it all, at a profit, when I started my career and needed a car to drive to work (in my early 20's).
VanGar+Goyle
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Re: When did you start drawing profits from taxable?

Post by VanGar+Goyle »

I suppose that you should harvest Long Term capital gains while in the lowest two income tax brackets,
If your 'taxable' income is more than your W2 income, you should start enjoying your profits more.
Not that I did that. Did not fill out a schedule D until started collecting unemployment insurance. :(
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DoctorWu
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Re: When did you start drawing profits from taxable?

Post by DoctorWu »

You stated that you are still accumulating. So the notion of drawing money out makes no sense to me. The one and only time we did was 24 years ago, at age 36, to help fund a big down payment on the home we built. We have no plans to draw down non-IRA holdings until it becomes part of a tax strategy in retirement.
SGM
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Re: When did you start drawing profits from taxable?

Post by SGM »

I drew from taxable to pay for furthering my education and changing careers. I also used my taxable profits to pay off a mortgage, buy cars, pay for Roth conversions and to buy a vacation house. I take less capital gains in retirement than I did before. We have everything we need and we have multiple income streams in retirement.
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grabiner
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Re: When did you start drawing profits from taxable?

Post by grabiner »

Even though I am still working, I have sold for a capital gain from my taxable account when I needed to spend money that had not yet accumulated in cash. I took a large gain to make a down payment on a home, a small gain to buy a car, and a trivial gain (bought a mutual fund for $5000 and sold it for $5032) to buy another car.

I also drew down my taxable account to pay off the mortgage, but that was not a capital gain. I harvested losses in February 2020. Rather than reinvesting the cash directly in other stock funds, I paid off the mortgage. I kept my stock exposure by then moving an equal amount from bonds to stock in my employer plan.
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ByThePond
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Re: When did you start drawing profits from taxable?

Post by ByThePond »

I started drawing from taxable in early retirement, when I started doing Roth conversions and was waiting to collect SS at age 70.
afan
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Re: When did you start drawing profits from taxable?

Post by afan »

Hopefully, never.

While working, money goes into savings as a one-way street. We live on what we earn.

After retirement we plan to live on SS and RMDs. Taxable dividends and (mainly unrealized) capital gains in taxable account will be reinvested.
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Wiggums
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Re: When did you start drawing profits from taxable?

Post by Wiggums »

I used my taxable account to pay off the mortgage, but that was not a capital gain.
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ryman554
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Re: When did you start drawing profits from taxable?

Post by ryman554 »

mega317 wrote: Mon May 07, 2018 3:26 pm
ionball wrote: Mon May 07, 2018 2:25 pm I agree that making money is more important than avoiding taxes. But you could defer the taxes longer and make even more money by following MotoTrojan's suggestion!
How does cash flowing an expense defer taxes?
Selling in taxable casts of a capital gain (unless they are down). So, stop investing and cash flow vs. invest and sell equities defers more taxes.
Not reinvesting dividends and/or capital gains is similar idea.
ryman554
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Re: When did you start drawing profits from taxable?

Post by ryman554 »

I touched my taxable for a new roof. Did a.combination of not investing for 2-3 months and selling those investments which had gone down. (That's why taxable can be dangerous as an emergency fund).
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