Here’s a few ideas on how to use BeyondETFs Pro and the Brockmann Method on BOTH sides of the taxable and tax-free divide.
Situation:
I had my entire Investment Retirement Account (IRA) portfolio, which compounds tax-free until distribution. Distribution, you might recall, is the act of removing assets from a tax sheltered account and then attracting the income tax burden associated with the value. If the owner of the IRA performs a distribution before 59 1/2 years of age they may attract a 10% penalty tax (no penalty if funds are for education or medical expenses, or if you put the assets’ value back within 60 days).
Solution:
I withdrew a large distribution so that I could apply the assets against the mortgage, and accelerate the payoff of that liability. But, instead of just removing the target amount, I withdrew and set aside an additional 25% to handle the incremental income tax in the new year. With those funds, I reinvested according to the Brockmann Method. It continues to grow and contributes to my Scorecard regardless of which side of the tax barrier it lives.
This way my distribution tax liabilities are covered AND, I’m still generating incremental growth that will be taxed at the lower Capital Gains rate whenever they’re sold.
Insights:
I think this is how I’ll handle the Required Minimum Distribution, which start at age 73. I’ll just move the required amount of assets from pre-tax to post-tax and carry on with BeyondETFs Pro and the Brockmann Method. Capital Gains is paid on only once an asset is sold, and only in the year after the sale is completed. I think this will be very effective with only a nominal increase in transaction activities.
Disclaimer:
Peter Brockmann, the author of this post, is not a financial advisor. Purchase of stocks carries risk of some, none and negative returns. You are responsible for your financial future.