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I'm looking for your thoughts on a 2-part idea that I'm developing for my near future... I'm looking at potentially getting married next spring (not engaged yet, but that's due in large part to the fact that I'm deployed right now -- plan is to do so shortly after my return). Gratefully, she is prudent with her money, so there is no concern about her in that respect at all. We both do have some assorted debts, though we haven't talked everything through in complete detail yet. I know she has somewhere between $10k-$20k in student loans (at this time unknown interest rates), plus another $10k (or more) in a low-interest (1.0-1.5%) "career starter" loan, which she mostly used to buy her car. She has no other debts. I only have a car loan with $8k left on it, with current plans to have it down to $2k-$3k by the time we would actually get married. Both of us each own our respective homes, though I have a larger mortgage by ~$30k. So in all, our debt loads are relatively similar. As for assets, I know I have significantly more than she does (at least $100k more), though I also started my career 4 years ahead of her and make almost 50% above her income right now (though she'll be getting a series of promotions over the next few years to "catch up" to me)
My idea is this: Once we get married, I use the proceeds from some taxable investments I have in order to clear all of our non-mortgage debt. I'm looking at selling $40k-$45k (about 95%) of my taxable investments in December to do this, in order to take advantage of the 0% capital gains tax in the 15% tax bracket. In all, there is about $10k in unrealized capital gains (at present values). In my eyes, I see it as a way to let us start out together with an even footing and with more or less a clean slate financially (except for two easily manageable mortgages).
Because I'm currently deployed, my income for the last 5 months of this year will all be non-taxable. This means my total taxable income starts at $35k (plus minor interest from savings accounts, etc.). In addition, I will have over $15k in charitable ($12k) and mortgage interest ($3k) deductions. So I will be solidly in the 15% tax bracket this year. Except for the last $3200 that I have added since December of last year, all of it would be subject to long term capital gains taxes, which in the 15% bracket would cost me all of $0.00. My thought would be to leave the most recent $3200, then liquidate the rest in December for the eventual debt payoff bonanza. I would throw it all in a savings account (earning a paltry .8% or something silly like that) until actually pulling the trigger.
This is obviously a VERY tentative idea in the making (heck, the idea of getting married in itself is a work in progress) but I just wanted to get a rational outside opinion on this. #1: Does this make sense tax-wise? Would the taxes of all this work out as I'm thinking? #2: Does this make sense money-wise? #3: Does this make sense relationship-wise? #4: Would you do anything differently? Note that I don't plan to tell her about this plan until after we're married, basically as my own sort of surprise wedding gift to ourselves. The fact that I would keep it a secret might rankle some, but knowing that I have significantly more financial assets than her, I don't want my intention to do this to be a factor between us at all prior to getting married... Both for her sake (guilt over letting me pay off her debts) and mine (I'm no sugar daddy).
Because the questions will likely come up... These investments have previously been intended for any of a few different options: (a) fund a master's degree for myself if/when the military eliminates or reduces my eligibility for tuition assistance; (b) savings for the "next house" wherever I/we decide to buy again; (c) general savings for some unknown event(s) in the future. I currently have a full EF of $24k (6 months' normal expenses), about $100k in retirement (Roth IRA & TSP), and separate cash savings to help pay for wedding and related expenses. Oh, and we're both 27 y/o and both in the military.
My apologies for being so verbose, but here's my (possibly crazy) idea... what do you think?
My idea is this: Once we get married, I use the proceeds from some taxable investments I have in order to clear all of our non-mortgage debt. I'm looking at selling $40k-$45k (about 95%) of my taxable investments in December to do this, in order to take advantage of the 0% capital gains tax in the 15% tax bracket. In all, there is about $10k in unrealized capital gains (at present values). In my eyes, I see it as a way to let us start out together with an even footing and with more or less a clean slate financially (except for two easily manageable mortgages).
Because I'm currently deployed, my income for the last 5 months of this year will all be non-taxable. This means my total taxable income starts at $35k (plus minor interest from savings accounts, etc.). In addition, I will have over $15k in charitable ($12k) and mortgage interest ($3k) deductions. So I will be solidly in the 15% tax bracket this year. Except for the last $3200 that I have added since December of last year, all of it would be subject to long term capital gains taxes, which in the 15% bracket would cost me all of $0.00. My thought would be to leave the most recent $3200, then liquidate the rest in December for the eventual debt payoff bonanza. I would throw it all in a savings account (earning a paltry .8% or something silly like that) until actually pulling the trigger.
This is obviously a VERY tentative idea in the making (heck, the idea of getting married in itself is a work in progress) but I just wanted to get a rational outside opinion on this. #1: Does this make sense tax-wise? Would the taxes of all this work out as I'm thinking? #2: Does this make sense money-wise? #3: Does this make sense relationship-wise? #4: Would you do anything differently? Note that I don't plan to tell her about this plan until after we're married, basically as my own sort of surprise wedding gift to ourselves. The fact that I would keep it a secret might rankle some, but knowing that I have significantly more financial assets than her, I don't want my intention to do this to be a factor between us at all prior to getting married... Both for her sake (guilt over letting me pay off her debts) and mine (I'm no sugar daddy).
Because the questions will likely come up... These investments have previously been intended for any of a few different options: (a) fund a master's degree for myself if/when the military eliminates or reduces my eligibility for tuition assistance; (b) savings for the "next house" wherever I/we decide to buy again; (c) general savings for some unknown event(s) in the future. I currently have a full EF of $24k (6 months' normal expenses), about $100k in retirement (Roth IRA & TSP), and separate cash savings to help pay for wedding and related expenses. Oh, and we're both 27 y/o and both in the military.
My apologies for being so verbose, but here's my (possibly crazy) idea... what do you think?
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