Curious what folks experience closer to - in retirement is like for tax management. Is it really that big of a concern if you are fortunate to have such a nest egg?
Heard about the 3 buckets approach once your retirement savings start growing significant over 100k.
1st Bucket - Taxable Income - standard brokerage / savings. You pay taxes on dividends and capital gains. This Bucket is the first one that gets filled up for the tax man.
2nd Bucket - Tax Deferred - IRAs or 401k - you didn't pay taxes on the way in, but you're paying taxes on withdrawals. You have some flexibility in taking a tax hit on the withdrawals except when you hit RMDs. This Bucket will be tapped if the tax hit isn't too bad from Bucket #1, or if you have no choice.
3rd Bucket Tax Free income - Roth IRA/401k - paid into with after tax dollars - all growth tax free. You can tap this Bucket whenever 1 or 2 fills up your tax tolerance. But once it runs out? You're limited in options.
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19-06-2023, 11:15 AM #1
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3 buckets for retirement approach
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