The key is using selective selling of assets to minimize reported net income and/or taxable impact.
Say you have $1,000,000 of stock with a $900,000 basis. If you need $50,000 of cash, then “on average”, you would sell $50,000 and only book $5,000 of gains as “income”. In all likelihood, if your investment profile looked like that, you’d have a mix of assets with gains and losses, and you could often pick and choose what you sold to keep your income within whatever limits you’re targeting.
Where it really gets “fun” is that there’s a concept called capital gains harvesting. If your income is low enough, your long term capital gains tax rate is 0%. If you qualify, you can sell some assets for long-term gains, pay no federal taxes on those gains, and then re-buy the same assets at a new, higher basis price. The higher your basis is relative to your total portfolio value, the easier it is to play that game of keeping your taxable income down by selecting which assets you sell to minimize your reported income and tax burden.
Regards,
-Chuck
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