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[Solved] Overall Asset Allocation table and capital gains tax

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Last Post by Bill Hines, Advice-Only Flat-F... 4 years ago

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Wolfram Volpi

(@wolfv)

Trusted Member Customer

Joined: 4 years ago

Posts: 32

Topic starter September 29, 2022 7:42 am

I am retired and will very gradually rebalance my asset allocation from 2022 to 2035 as I draw down my accounts.
But for simplicity, I modeled the rebalance as one big step in 2035.
In my PRC > FINANCIAL ASSETS > Asset Allocation > Overall Asset Allocation table:

| Period | Starts | Stocks | Bonds |
|---------------------------------|
| Period 1 | 2022 | 60% | 40% |
| Period 2 | 2035 | 30% | 70% |

The model implies that in 2035, 50% of stocks are sold in one lump.
Will PRC tax the realized capital gains in the higher tax bracket?

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Overall Asset Allocation

(@nc-cpl)

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Joined: 5 years ago

Posts: 242

October 7, 2022 1:25 pm

Just wondering...if you have your start and ending allocation percentages figured out, wouldn't it be just as easy to gradually decrease the stock %age and increase the bond &age over three additional periods to get a smoother and more accurate projection for the years in between the two end points? Say:

2025 53/47

2028 44/56

2032 37/63

(the above is made up)

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Wolfram Volpi

(@wolfv)

Trusted Member Customer

Joined: 4 years ago

Posts: 32

Topic starter October 7, 2022 4:09 pm

Hi @nc-cpl,

I am using Mode 2 because it calculating Roth conversions easier.
But Mode2 only has 2 periods.
(Mode 2 is new for 2022 and is described on PRC manual page 45).

I can not make out how PRC taxes capital gains on the TABULAR PROJECTIONS.

I could try your idea in Mode 1, if the 2-period approximation puts me in a higher tax bracket.

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Wolfram Volpi

(@wolfv)

Trusted Member Customer

Joined: 4 years ago

Posts: 32

Topic starter October 9, 2022 6:06 pm

I just discovered PRC > TABULAR PROJECTIONS > Summary > Allocations > Stocks, Bonds.
Which shows that PRC Mode 2 changed stock/bond allocations gradually and smoothly (less than 3% most years).
That answers my question. 😀

PRC is a great tool!

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Bill Hines, Advice-Only Flat-F...

(@hines202)

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Joined: 6 years ago

Posts: 321

October 11, 2022 10:51 am

Those calculated glide paths, such as the TABULAR PROJECTIONS > Summary > Allocations > Stocks, Bonds are very useful as to-do items! These things don't happen by themselves. PRC has no power to modify our asset allocation for real, so they should be taken as items to be implemented each year (typically as year-end or new-year task checklists).

Same with Roth conversions, movement of monies between overflow of cash to brokerage, contributions, and things like that. Consider the tabular projections for those things to be to-do items. For example, if you say your on-hand cash ceiling is $50k, whenever it exceeds that you should be moving the excess to your brokerage (something you would do year-round, not as EOY or BOY tasks).

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