One thing to clarify is that assumes you have literally $0 income from anything other than long term capital gains.

If you have income from job/side hustle, a pension, take pre-tax 401k/IRA distributions, SS, capital distributions from an ETF/MF, dividends, etc, that eats into your $80k limit for no tax on LTCG.

There is a good chance if your brokerage account is big enough to utilize it as your primary source of income for the majority of your retirement timeline, then it will be spinning off some serious dividends as well.

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Posted by TorchtheFlyingTiger

1st coast

Member since Jan 2008

2255 posts

Posted on 6/28/22 at 10:52 am to bod312

No need to assume "literally zero income other than LTCG." Take this example for feasible use case

$25900 standard deduction + $83550 = $109450 before LTCG kicks in.

$70k (pension, SS, other income)
$15k dividends ($1M in VTI 1.5% yield)
Leaves $24450 of potential LTCG harvesting at zero rate.
Let's just say for simplicity's sake that I'm selling shares that have doubled in value.
I could have $70k + $15k + $24450 LTCG + 24450 basis for an annual $133,900 before LTCG kicks in.

If selling shares that haven't appreciated as much that number could be much higher based in a higher basis.

Meanwhile assets in tax advantaged 401k and IRAs continue to grow while drawing down at a safe withdrawal rate of total portfolio. If it isn't enough to live comfortably, could always draw a bit from Roth contributions or even borrow against taxable portfolio at very favorable rates. (Or just pay 15% LTCG on excess draw) Tell me where this is incorrect or not feasible.

This post was edited on 6/28/22 at 10:55 am

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