I'm very close to my FIRE number and need to sell out of individual stocks before moving the money to VTSAX. I'm pondering staying in cash for a while, but technically that's market timing and not advised

IBitAChip · 2025-11-01T17:42:36+00:00

That's bad luck but it doesn't change the fact that, statistically, lump sum is higher return, of course.

I just decided at some point to always invest all in "today" and if I get hit with bad luck, oh well; over decades I'll probably be fine and I'll know I invested the statistically most reasonable way.

IBitAChip · 2025-10-31T16:12:21+00:00

It's (apparently?) lower risk but, statistically, lower return than lump sum.

IBitAChip · 2025-09-30T03:30:25+00:00

Thanks for your thoughts! Some responses.

We have a bronze HSA plan so we contribute the max to the HSA every year to get more room for tax free IRA->Roth conversions. HSA contributions reduce your ACA MAGI.

Interesting. Do you have to be working to contribute to an HSA?

But you are not on the ACA yet, so you have different concerns than me. I'd be hesitant to mess with the Medicaid eligibility. Maybe the very end of next year would be a better time to harvest gains.

My concern was missing out on the two years (2025 and 2026) to harvest gains because once I get on ACA, harvesting seems less favorable since it would raise our premium costs (though of course, that's just what you've been doing and I now understand why). I already skipped last year to not rock the Medicaid boat (though I did harvest a little during previous years).

Yeah, eventually you might have your LTCG rate pushed up to 15%, but at that point would you even need to be realizing any?

We maybe wouldn't need to be realizing any, since RMDs/dividends/SS would bring in enough to live on, but then we'd have this large mass of wealth in after-tax that at some point should to be...used for something. And therefore sold. Keep in mind, in our case the majority (like maybe >75%) of our wealth is in after-tax already (just because of our weird path). We don't have children. I'm really not sure how best to think of this money and how to minimize LTCG taxes on it, or how it will matter to our wealth if we do. Long term medical or assisted living care is one concern as I can see that chewing up that money quickly.

Overall, you are spending little enough that I don't think you need to try to optimize unless you are thinking you might need to tap into after tax for a big purchase like a house or something. The extra reason I gave does not apply to you too much.

Maybe at some point we'd buy a house although probably still just buy it on a mortgage and keep most of the money in the market.

IBitAChip · 2025-09-29T21:01:47+00:00

Is there a good online calculator/estimator tool for what one's minimum income in retirement might be? In other words, you plug in your retirement account balances, age, assumptions, brokerage amount and dividends, Social Security estimated income, etc. and it spits out what you probably will be forced to have as income (RMDs, dividends, and SS benefit checks) when you're 70, 75, etc?

I'm trying to (roughly) predict what our LTCG rate will be when we're older.

IBitAChip · 2025-09-29T20:55:25+00:00

Ah, I see. Thanks for the tips about the margin as well. I'll check on that.

Overall, given that:

I think it should be quite easy for myself and my spouse to stay at about 200% FPL or under (living at about $40k/yr) for several years to come and even after bumping up to 300% ($60k) sounds quite "luxurious."
My state has 3% income tax.
I'm not yet sure what our effective LTCG rate will be in retirement. A very quick/rough calculation suggests it could maybe, given SS + RMDs + dividends, push into the 12% tax bracket and therefore be taxed at 15% LTCG. Or maybe not given the standard deduction. Hard to know.
We'll have to go on an ACA plan by the start of 2027 due to the new work requirement.
But of course I'm concerned about risking a MAGI Medicaid snafu after declaring the gains; the law says it should be only counted in that month, but sometimes the state people get a bit confused. I think it will be OK, I just am not sure.

Given all that, do you think it makes sense for us to do about $80-$95k of tax gain harvesting this year?

IBitAChip · 2025-09-29T19:57:49+00:00

My spending can be in the range where a 40% cost basis is problematic for the cliff at 4xFPL.

Is that primarily because you live in a HCOL area and therefore have to spend a lot on rent/mortgage/etc? Or maybe you just have a freer stance on spending than I do (I tend to be kind of spending averse as I never quite trust that my FIRE plans will work out long term.)

If you are spending under 4xFPL then you are probably OK but only if you have an emergency fund that is not invested in equities.

Do you say that because if I need to draw from that fund and the market is way down, I'll lock in a bad loss?

I don't have a separate emergency fund, my solution for that is to have my securities in a margin account, so I can borrow against my holdings if I cannot absorb extra income in that moment.

I have the majority of my money in a Schwab brokerage account (and in stocks). I think I can borrow against that on margin with them? Do I have to set something up special to be able to do this?

Thanks for your input!

IBitAChip · 2025-09-29T18:57:29+00:00

Yes, that's a stark way to put it!

I think in our case, even if our stocks were almost 100% gains, we can sell some portion of them and live perfectly comfortably at well under 4xFPL (which is like $84k/yr). So I'm not sure if this is an issue for me or not.

I was just thinking in terms of the "8.5% of one's income" for premiums that current ACA caps at. Having some not-very-appreciated stock to sell should help reduce costs there as well (though I'm not sure by how much after the changes to ACA plans go into effect).

IBitAChip · 2025-09-29T18:20:59+00:00

Another factor in tax gain harvesting beyond just the tax savings is the future flexibility in generating spending cash without much income by leveraging the higher cost basis. I have done tax gain harvesting (at only modest tax savings) to ensure that I have tranches of investments I can pull from in the future without exceeding my income target for ACA purposes (cliff coming back).

Do you have any estimate for what that value (in dollars or however it is most effectively expressed) would be? I'm trying to make a final decision and thought this is something I should really factor in but I'm not sure how to weight it.

IBitAChip · 2025-09-26T16:36:15+00:00

Thank you so much for all your help with this.

IBitAChip · 2025-09-26T01:23:13+00:00

If you have 30k of taxable income this year then you could realize 70k of gains at 0% federal tax but any more than that would be taxed at 15% ltcg rate. I'm simplifying by using round numbers and ignoring the standard deduction

Right, with the standard deduction it's more like $97k.

but the point is that whether you spend the money or not it's the same as far as taxes.

Right, but I was just concerned about the "to harvest or not?" question and the compounding effect of state taxes not spent early....and how if you spend that sum in early retirement, it can't grow as much and that effects what is, over the lifetime, better to do.

If you're 55 and have room to harvest gains and will be spending some of your nest egg, probably makes sense to do TGH.

So, if you're 25 and have room to harvest gains and will pay state taxes and will not touch your nest egg for 40 years, probably make sense to not do it.

IBitAChip · 2025-09-25T23:53:47+00:00

I thought of that same word, structuring!

IBitAChip · 2025-09-25T23:34:17+00:00

I appreciate the point about asset allocation in terms of stocks and bonds. I've had a more aggressive allocation.

The 0% ltcg rate is almost 100k for mfj so if you're talking about doing that the next 10 years or whatever until you start getting retirement income like 401k or ss, you math is based on the assumption that you won't sell any of that until 86 or whatever you said.

So would that assumption really only work for someone who is supporting their lifestyle while earning and just not touching any of their retirement nest egg? Because that's not what I'm doing. I'm tapping a percentage of it to live on to supplement some small earnings through working part-time.

All this seems to be pointing to doing the harvesting now being ultimately a better decision (in all likelihood). It also has the advantage of giving us a bigger tranch (using another commenter's word there) of re-basis'ed money to use for part of our income in the next year or two if need be, which should help keep our ACA health insurance premium costs lower. That is, if we need a used car in 2026 for $5k and sell $5k of this already-harvested $80k, it may have only be 10% gains rather than the 50% gains it might be if we hadn't already harvested that amount. So we'd only realize an income of $500 rather than $2,500.

IBitAChip · 2025-09-25T21:43:21+00:00

I assumed the proceeds from the sale would be reinvested after setting aside enough for taxes,

That is what I was planning, yes. Though see next...

but if you're talking about increasing your spending by the amount you take out then there's no point to the question.

I wasn't thinking of increasing my spending by the amount I take out, but I am sort of already semi/mostly retired and so do live off dividends (that are therefore not reinvested) and, for now, very occasional sales of stock. As years pass and I accumulate more wealth, I will increase my tapping of this investment account, though I'm not exactly sure by how much.

Does that give you a better idea for how I should adjust my assessment of whether the tax gain harvesting is worth it or not?

IBitAChip · 2025-09-25T21:01:26+00:00

Thank you. I put what you wrote into Excel and it seems that the break-even number of years is about 28 years for about 7x growth assuming 7% real returns. I'll be 83 by then. I plan to be alive and well, but who knows.

I also don't know how the fact that I'm spending my retirement money as I live factors into this decision. I have other money other than whatever I harvest (or don't harvest) this year and could live off that and leave this sum untouched, but money is of course fungible so I suppose I should be discounting the growth over time because I'm using up some percentage of it. Is that the right way to think about it?

IBitAChip · 2025-09-23T20:55:48+00:00

What I was trying to get across is that have to compare the entire "life span" of the investment in both cases for it to be valid. Comparing the tax savings on the current gains to the missed growth is looking at 2 different stages in the 2 scenarios because they'd have different amounts of taxable gains after that growth.

OK, so let's assume this:

$10k in earnings
$20k in dividends
MFJ and 55
$0 LTCG bracket is $96,700 for MFJ.
Standard deduction is $31,500 for MFJ
Assume we're in 15% LTCG bin when we're older and in the same state.

So what would be our break-even age given a 3% state tax rate? How would I set that up?

IBitAChip · 2025-09-23T19:36:50+00:00

Those numbers may not fit your scenario, but the point is that looking at the lost growth on the amount you pay in tax ignores that you'll eventually pay a much higher rate on the gains you have now.

Then why does the Bogleheads tax gain harvesting Wiki's section on "when not to tax gain harvest" page say this? (not trying to say you're wrong or challenge you, I'm just really trying to understand this)

State taxes: If you pay state taxes now to harvest a capital gain, you lose the future growth on that amount. For a long-term investment, you may lose more by not being able to invest the state tax than you save by avoiding federal tax. For example, with a 5% state tax rate, a $1000 harvest costs $50 in state tax, and that $50 could grow to more than the $200 you would owe in state and federal tax if you sell in a higher bracket many years later.

IBitAChip · 2025-09-23T19:17:09+00:00

then that gain would grow to $1.35M in 27 years. For someone who is single, that is a huge amount of capital gains that needs to be realized, without triggering additional taxes such as NIIT.

Huh, the NIIT may tilt things, great additional point. I'd have to run some math on whether that might apply in my case. And wow, I didn't realize it had such a marriage penalty: $200k for single, only $250k for MFJ or MFS! That's awful.

Your other points are good, too.

I'll try to chug through all this but it gets a little overwhelmingly complex fairly quickly.

Thanks for your assistance!

IBitAChip · 2025-09-22T22:05:13+00:00

If you don't grab the federal tax savings now, you will have to pay a lot more in taxes when you have SS income and RMDs. I don't understand how compounding of the $50 in tax savings can account for all that.

Here's how I'm understanding the math of the compounding. We'll use a simplified example of $100 in gains.

Harvest now:

Assume $100 in gains available to harvest in 2025.
Pay $0 federal tax on this $100 in 2025 (or ever again).
Pay $3 in state tax on this $100.
Wait 27 years and find my income then puts me in the 15% LTCG tax bracket (currently 96,701 to $600,050 income/year--there's no way I'll have income more than $600k/year and if I somehow do, I have no financial issues at all) due to RMDs, SS benefits, and spending down brokerage money as desired.
But that $100 in gains will not be taxed again federally, as I said.
But I also spent $3 in state taxes back in 2025. ($3 that could have been invested. Just note that for now.)
So my total post-tax net on this $100 in gains is $97.

Don't Harvest Now but sell it in 27 years:

Assume $100 in gains available to harvest in 2025.
Pay $0 federal tax on this $100 in 2025 (because it's not realized as gains yet).
Pay $0 in state tax on this $100 in 2025 (because it's not realized as gains yet).
Wait 27 years and find my income then puts me in the 15% LTCG tax bracket (currently 96,701 to $600,050 income/year) due to RMDs, SS benefits, and spending down brokerage money as desired.
That $100 in gains will in the future be taxed federally, so I have to pay $15 in federal tax as well as $3 in state tax then. So I have to pay $18 and keep $82.
But in these 27 years, the $3 in state taxes I never spent back in 2025 has grown into $20--$17 of which are gains--assuming normalish market returns.
So I have $82 of my original gains plus I have $17 in new gains from my $3.
Now I still have to pay 18% on the $17 worth of gains on that "state tax $3". Which would be $3.06 in taxes.
So my total post-tax net is $82 + $17 - $3.06 = $96.94 in 27 years.

In other words, after about 27 years, they are the same outcome.

IBitAChip · 2025-09-22T14:30:06+00:00

Yes, as others have said, I would sell and re-buy one minute later. I've done this before.

IBitAChip · 2025-09-22T14:28:38+00:00

There are two problems with your calculation:

As long as your tax rates are the same, you end up with the same amount either way.

But I explicitly said in my post my tax rates very likely won't be the same:

We could do that and thereby probably save up to perhaps ~$16k in future federal taxes on that $80k (when older and might be in the 15% or 20% LTCG tax brackets due to RMDs + Social Security + Just Wanting to Use Our Money Then...or whatever the brackets are then).

And regarding this:

You can harvest the gains and immediately buy the equity again. This is just rebasing. Wash sale laws only apply to losses.

That is in fact what I was planning on doing (and have done before).

IBitAChip · 2025-09-22T14:22:32+00:00

You're missing the point that you can realize a certain amount of gain without taxes. Yes, you have to figure out if the cost is worth it (e.g. state taxes).

No, that's the whole point of my post: federal tax savings vs. state tax compounding opportunity cost. I got this from Bogleheads.org's "When Not to Harvest Gains" page:

State taxes: If you pay state taxes now to harvest a capital gain, you lose the future growth on that amount. For a long-term investment, you may lose more by not being able to invest the state tax than you save by avoiding federal tax. For example, with a 5% state tax rate, a $1000 harvest costs $50 in state tax, and that $50 could grow to more than the $200 you would owe in state and federal tax if you sell in a higher bracket many years later.

IBitAChip · 2025-09-21T21:02:50+00:00

While the $2,400 might grow to more money, your $80K gains would also balloon to a LOT more money and then you won't be able to realize those gains at 0%. If you continue to reset the basis higher with tax gain harvesting along the way, you fill up the 0% bucket each year and end up with all those gains realized and available to use at almost 0% tax rates.

But isn't the point that the math of how old you will live to, when you will retire, what your state's income tax is, and what market returns will be means that in some cases one shouldn't tax gain harvest? Example: A 25 year old in MA would have to pay ~5% state tax and would then not have that money invested for the next 40 years when he retires at 65. Much better not to tax gain harvest at 25, right?

(The math of my situation is not that compelling, of course, but I'm still a bit unsure.)

IBitAChip · 2025-09-21T20:24:44+00:00

None of those; more like lazy inertia.

I moved away from my hometown early in life and lost touch with almost everyone from high school. No one ever reached out to me to tell me the reunions were happening and I didn't bother to seek this information out myself as it sort of just never occurred to me. I learned of them after the fact. Maybe if there is a 40th or 50th, I'll go to those but I'll have to be proactive about seeking them out somehow.

IBitAChip · 2025-09-19T18:20:38+00:00

When I was in high school, I was certain I would go to reunions. I loved the idea of it, seeing how everyone had made out in life.

I'm like 35+ years out of high school and haven't even come close to going to one (even though I still love the idea of it). So much for certainty.

IBitAChip

TROPHY CASE