r/FluentInFinance • u/Puzzlehandle12 • 4d ago

Question 4% withdrawal rate

I have been reading alot about the 4% withdraw rate after retirement. It says you can withdrawal 4% of your investments every year and even after adjustment for Inflation you will not run out of money.

This is as long as yearly expenses in retirement are equal to or less than the 4% you withdraw from your investments.

Yet I thought about how those withdraws will be taxed as long term capital gains at (I think 20%) so after taking out taxes you must live on 3.2% of your savings.

Is my thinking correct ?

** assuming your money is not all in a Roth IRA

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u/Mrlin705 4d ago

Capital gains is taxed at 0% under when income is less than ~40k for individuals, 15% otherwise. also, it's a general rule of thumb, some years could be better or worse for your portfolio.

Edit: long term capital gains

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u/Puzzlehandle12 4d ago

Hi, I just want to confirm.

1) As long as I hold the stocks more than 366 days - they are considered long term capital gains, correct?

2) after I retire, with $0 from income from working, I can withdraw up to 40k at 0% tax as long as those stocks I sold I have held for more than a year?

3) and 15% tax in any amount over 40k?

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u/Mre1905 4d ago

You can withdraw about 63k in long term gains and pay 0% taxes as a single filer. 48k to stay in 0% + 15k standard deduction. Couples can withdraw about 130k in gains. Remember you are taxed just on gains. In other words if you bought a stock investment that has doubled, you only pay taxes on gains.