Using Capital Gains Thresholds to Reduce Taxes

Early retirement income can feel complicated, but a steady paycheck from savings starts with a simple framework. This episode reframes withdrawal decisions, explains why a fixed 4 percent rule can be too conservative in some cases, and shows when a 5 percent starting point may fit with the right allocation and ongoing adjustments. A million dollar case study turns rates into an annual paycheck while addressing sequence risk and flexible spending guardrails.

Taxes do the heavy lifting. Retirement income is taxed differently than wages, with no FICA on non wage income, only up to 85 percent of Social Security taxable, and long term capital gains often taxed at 0 or 15 percent. Blending IRA withdrawals, brokerage draws, and Social Security can produce the same 100,000 dollars of cash flow with a lower tax bill than a 100,000 dollar salary. The discussion covers thresholds, brackets, the higher standard deduction after age 65, and tactics to keep more of the portfolio working.

The episode finishes by assembling the paycheck. IRA, brokerage, Roth, Social Security, and pension income are coordinated so deposits match spending rhythms, with room for the retirement spending smile, one time costs, healthcare, and annual tune ups as markets and laws evolve.

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The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

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Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

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