re: Future Tax/Investment Question

What is the "big tax bill" going to be? Is it a single event that will create ordinary income? A big sale of a capital asset? Huge withdrawal from tax-deferred investment?

Put another way... are you trying to save money now for the tax bill later on? The last sentence you wrote - about having to pull the money out of the 401K before you hit 59.5 is what is confusing me. You should not put money in a 401K that you know you will need before age 59.5.

Generally speaking, skipping step 3 might make sense if all of the money you would have put in step 3, you instead put into single growth stocks that have large appreciations and never pay out dividends. If a stock pays out dividends, you have to pay the tax each year. If it's a fund, surely it will pay out dividends and capital gains, both of which will be taxed each year.

You could also put that step 3 money into hard assets such as precious metals and land. Of course, this is just looking at the tax aspects... you have to consider if those types of investments make sense for you. Don't let the tax tail wag the investment dog.