XPost: alt.economics

I’m 62, ready to retire and need to know how much I'll be taxed on
capital gains when I cash in my nest egg
I’m 62, ready to retire — but wondering if
I’ll be penalized on my capital gains when I start cashing in
my nest egg. The secret to turning capital gains into tax-efficient
retirement income
I’m 62, ready to retire — but wondering if I’ll be penalized on my capital gains when I start cashing in my nest egg. The secret to turning capital gains into tax-efficient retirement income
Maurie Backman
Sun, April 6, 2025 at 2:30 AM PDT 5 min read
4
Tax strategy should be top of mind when it comes to drawing down your retirement account.

If you've held stocks in your retirement portfolio for a long time, you
may be looking at significant gains.

Those long-term capital gains could play a big role in your retirement
finances — and a positive one.

But it's important to balance your various income streams and cash out
your gains strategically.

The benefits of long-term capital gains
Long-term capital gains are earnings on investments held for at least a
year and a day. Any earnings on investments held for a shorter time are classified as short-term capital gains.

There's a major difference between them when it comes to taxes.
Long-term capital gains are taxed at lower rates than short-term capital
gains, which are taxed as ordinary income.

You can leverage the tax-advantageous aspect of long-term capital gains
when it comes to drawing on your nest egg for income.

The amount of tax you pay on long-term capital gains depends on your
tax-filing status and your overall income. Here’s a rundown of long-term capital gains tax rates as of 2025.


If you're married and filing jointly, your long-term capital gains tax
rate will be:

0% if your combined income is $96,700 or less

15% if your income is between $96,701 and $600,050

and 20% if your income is more than $600,500.

These are significantly better rates than the taxes levied on short-term capital gains.

For example, if you're single with an annual income of $45,000, you’ll
pay a 12% tax on short-term capital gains versus no taxes at all on
long-term capital gains.

If you're married and file jointly with an annual retirement income of $240,000, you’ll pay a 24% tax rate on short-term capital gains but
almost 10% less (15%) tax on long-term capital gains.

This tax advantage may be one reason to start withdrawing long-term
capital gains as retirement income before you claim Social Security. The
longer you wait to claim Social Security, the larger those monthly
benefits will be — for life.

Leveraging long-term capital gains
It's important to consider all your retirement income sources —
including 401(k)s and Social Security benefits — as you plot out your
tax strategy.

Let's say most years your retirement income is low enough for you to pay
0% taxes on long-term capital gains, but you get a windfall that bumps
you into the 15% range in that year.

It’s a good idea to talk to a financial advisor or tax professional
about the best ways to minimize your tax burden in retirement.

This could include doing a Roth conversion ahead of retirement so you
have some tax-free income at your disposal later on.

You may end up having to pay taxes on retirement savings if you have
money in a traditional IRA or 401(k). At a certain point, you'll be
forced to take required minimum distributions (RMDs), which are a
taxable event.

If your retirement income isn't low enough to qualify for a 0% tax rate
on long-term capital gains, you can try selling other investments
strategically at a loss to offset those gains.

For example, say you're looking at a $10,000 long-term gain that's
subject to a 15% tax rate. If you're able to take a $10,000 loss in a
taxable account, that negates your tax obligation.

Overall, long-term capital gains can be one of your greatest tax
advantages in retirement.

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