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Old 09-08-2017, 08:30 AM
 
7,262 posts, read 10,180,209 times
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First specific questions:
Retired: a small air natl guard pension, a small govt civil service pension and since I'm 61 I'll get the social security supplement for this next year. It stops at 62. With those 3 together I have just enough to live a pretty modest lifestyle and not dip into savings.

I was thinking of drawing that same amount I get for the social supplement when it stops from the equities account instead of taking social security right away so I get more SS later.
But how does that work for taxes? Should I be doing something different? How do I figure that out?
Maybe taxes will offset the benefit of waiting to take SS.

Currently renting. Thinking of buying a place in another state. I have TSP, regular..equities? with Morgan Stanley and some cash in the bank.
I'll need a hefty chunk from somewhere for the down payment. How do I minimize taxes?

General: In looking to move to another state I was thinking I should investigate how it would impact my finances. I see all those facebook feeds with the best and worst states for taxes. I thought well maybe it would be good to really "crunch some numbers" for a few different states and see how much difference there really is, like this is my monthly income in this state vs. that state. So many people seem to choose a state based on taxes. Except I'm hopeless at "crunching numbers".
I tried to start a spreadsheet by looking for info on states and the different heading categories are all so different I have no idea what to really be looking at what I should be comparing
What are brackets? Some states have a range?
https://www.taxadmin.org/assets/docs...es/ind_inc.pdf

The state I'm most familiar with is Michigan and on my list of places I'm most likely to buy a house, taxes pensions now but won't tax my guard pension (until they change that). So that's a heading.
Soc sec is exempt in Michigan but another state I'm interested in does tax soc sec. So thats a heading.
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Old 09-08-2017, 09:20 AM
 
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depending on your magi your social security may be taxed on a federal level on up to 85% of the amount you got . we don't know all your numbers .
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Old 09-08-2017, 09:59 AM
 
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MAGI above = Combined income = Adjusted gross income plus any tax-free interest plus 50% of your SS benefits. For singles, 0% of this sum if it's $25K or less -- but 85% if it's $34K or more -- will be included as taxable income and will be taxed at whatever your marginal tax rate is. For joint filers, it's 0% up to $32K, but 85% if above $44K.

The Motley Fool
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Old 09-08-2017, 01:07 PM
 
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I wouldn't put too much faith in articles written about state taxes. It's okay to read them and learn a thing or two, but by necessity they need to be very generic in nature.


If you're trying to stretch your money as far as it will go, I'd first write down a few states you'd be willing to move to. Then look at the cost of housing and the overall tax bill for your own personal circumstances in each of those locations. It is a lot of work!
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Old 09-08-2017, 02:14 PM
 
Location: Central Massachusetts
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Giesela

Without getting into specifics you have a couple of things that will conflict. First is your thought on taking a chunk of money from TSP (possibly) to buy a home. This is a possible problem but you do what you want on this. You will incur a tax hit but no penalty. You're also adding in possible debt maybe and that might or might not be good. That is all depending on your numbers.

The other path you are talking about is your draw on SS. Here is the proper path for that and it is to not go into debt with new house or at least do not take it from TSP but find another source or another way. Take your TSP in replacement of that supplement and even increase it to subsidize your current lifestyle. (PM me on specifics on this). But essentially your TSP will allow you to gain the longevity on SS draw to at least your retirement date to SS. Either to 66 or 70 or somewhere in between. That also lowers RMD draws in the future because you have lowered (possibly) your account to a more manageable level.

Pick the state you feel most comfortable in. Look at other places and if something peaks your interest go visit it.
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Old 09-08-2017, 05:24 PM
 
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This crap is endless.

depending on your magi your social security may be taxed on a federal level on up to 85% of the amount you got . we don't know all your numbers .

Isn't this true of where ever I live? Nothing I do to impact or change? I thought the only thing you could do was pick one state over the other.

I looked up MAGI
What is a 'Modified Adjusted Gross Income - MAGI'
Modified adjusted gross income (MAGI) is used to determine whether a private individual qualifies for certain tax deductions. Most notably, it is used to determine how much of an individual's IRA contribution is deductible and whether an individual is eligible for premium tax credits. A taxpayer determines modified adjusted gross income by taking his adjusted gross income (AGI) and adding back certain items, such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions, and deductions for higher-education costs.

Gross Monthly Annuity = 2,597
SS Supplment - which isnt really SS so I have no idea what that counts for and its only for another year anyway - 1,164
Guard Pension, not sure actually I think gross its =1880?

No foreign income, housing deductions, student loans have no IRA deductions or deductions for higher education costs.
I have Morgan Stanley equities, TSP and some cash. I think I have like..10,000 in an IRA, money I put in there ages ago.

If you're trying to stretch your money as far as it will go, I'd first write down a few states you'd be willing to move to. Then look at the cost of housing and the overall tax bill for your own personal circumstances in each of those locations. It is a lot of work!

This is what I was hoping to get help with. I don't mind the work but I can't do it if I don't understand it.

Without getting into specifics you have a couple of things that will conflict. First is your thought on taking a chunk of money from TSP (possibly) to buy a home. This is a possible problem but you do what you want on this. You will incur a tax hit but no penalty. What kind of tax hit? How does that work? What do you mean adding in possible debt? You're also adding in possible debt maybe and that might or might not be good. That is all depending on your numbers.

The other path you are talking about is your draw on SS. Here is the proper path for that and it is to not go into debt with new house or at least do not take it from TSP but find another source or another way. Take your TSP in replacement of that supplement and even increase it to subsidize your current lifestyle. (PM me on specifics on this). But essentially your TSP will allow you to gain the longevity on SS draw to at least your retirement date to SS. Either to 66 or 70 or somewhere in between. That also lowers RMD draws in the future because you have lowered (possibly) your account to a more manageable level.


I don't understand this. You say not to use TSP in the first paragraph and then again in the second paragraph, but then later you tell me to use it...what instead of taking SS? Like take a monthly distribution from TSP to make up for the annuity and prolong taking SS. Yes, I had thought of this but thought I'd rather take it from the equity accounts. Are there any differences between one or the other in tax hits or penalties? Frankly I don't like MS or stocks and feel like I'm paying a lot in fees although they are slippery and I can't ever pin them down on it. I'd just as soon go through that first. If I needed say, 50,000 for a down payment I thought I'd take some from each with a little more of that being from MS.
What happens with that? Does it bump me into some higher tax bracket? For both federal and state? Or am I already there? Or should I use part of cash?
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Old 09-08-2017, 05:48 PM
 
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Yes, the tax code is a real mess. I'd suggest first getting a handle on the federal taxes first and worry about the state later. I find it easier to run experiments using tax software. The Taxcaster app on iPad is real handy.
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Old 09-08-2017, 06:10 PM
 
1,834 posts, read 1,021,492 times
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Quote:
Originally Posted by Giesela View Post
This crap is endless.

depending on your magi your social security may be taxed on a federal level on up to 85% of the amount you got . we don't know all your numbers .

Isn't this true of where ever I live? Nothing I do to impact or change? I thought the only thing you could do was pick one state over the other.
Yes, this is independent of the state you live in. There may not be a lot you can do about the SS being taxed. You do have some flexibility on when you start taking SS checks, and I'm assuming the same for your pensions?

I'll suggest first seeing if your SS will be taxed. If it will be, see if there's anything you can do to minimize that tax. One of the keys here is understanding "provisional income" and how it impacts the amount of SS benefit that gets taxed.

Last edited by hikernut; 09-08-2017 at 07:09 PM..
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Old 09-09-2017, 06:33 AM
 
7,262 posts, read 10,180,209 times
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Quote:
Originally Posted by hikernut View Post
Yes, this is independent of the state you live in. There may not be a lot you can do about the SS being taxed. You do have some flexibility on when you start taking SS checks, and I'm assuming the same for your pensions? No, I'm receiving my pensions

I'll suggest first seeing if your SS will be taxed. If it will be, see if there's anything you can do to minimize that tax. One of the keys here is understanding "provisional income"What? I have no pr and how it impacts the amount of SS benefit that gets taxed.

See know I don't even know whether you are talking federal or state.

So, I put personal income info out there and.....
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Old 09-09-2017, 07:31 AM
 
Location: Central Massachusetts
4,101 posts, read 3,693,156 times
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Quote:
Originally Posted by Giesela View Post
See know I don't even know whether you are talking federal or state.

So, I put personal income info out there and.....
You don't necessarily put personal information out here. In this case you can be generic but to get a more complete answer you need to give a larger overall picture.

Do not feel that you are giving us too much. Your first post on the thread gave us three sources of income.

Quote:
a small air natl guard pension, a small govt civil service pension and since I'm 61 I'll get the social security supplement for this next year
From this we are to help you determine if you should take SS or postpone it.

Quote:
I was thinking of drawing that same amount I get for the social supplement when it stops from the equities account instead of taking social security right away so I get more SS later.
But how does that work for taxes? Should I be doing something different? How do I figure that out?
Maybe taxes will offset the benefit of waiting to take SS.
If you delay taking SS you will need to ensure you have income to cover that especially after 62 when you lose the supplement. That is where TSP is your best bet. You need to use it. You do not want to just leave it for heirs. You saved that for just this type of purpose. To live on and enjoy life.

As for this.

Quote:
Currently renting. Thinking of buying a place in another state. I have TSP, regular..equities? with Morgan Stanley and some cash in the bank.
I'll need a hefty chunk from somewhere for the down payment. How do I minimize taxes?
The best source for that is your Morgan Stanley account. In that account only profits are taxed unless that is also a retirement account like a tIRA. If it is a Roth it just has to have been there 5 years.

You have set yourself up for success with your income and projected income. Along with your savings you have the resources to go in whichever path you choose. We can only help if we know the story. We are trying to help.
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