Withdrawl rate vs return on your money (social security, security, taxes)

[mathjak107]

good point and thanks. i wasnt even thinking in terms of contributory pensions but you made the case for the the point im trying to make. when you buy an annuity your in effect buying a pension and your point proves there can be almost no difference between the 2.

[lenora]

Originally Posted by MadManofBethesda

Actually, the distinction you make between the computation of the income tax on a pension and the computation of income tax on an annuity is only true if you did not contribute a cent toward your pension (which is unlikely).

If a portion of your salary was withheld by your employer to pay for your pension then you use the same life expectancy charts to determine what percentage of your pension is taxable and what percentage is basically a return of principal (your previous deductions/contributions). In my case, I contributed just over $170,000 toward my pension during my 31 year employment, so this amount will be untaxed as it is returned to me over the next 30 or so years.

Better stick to finance and not taxes (j/k).

I don't get it. I thought the employee contribution was pretax. If so, why would this not later be taxed? Not arguing - just questioning. My tiny annuity is fully taxed.

[highcotton]

Originally Posted by lenora

I don't get it. I thought the employee contribution was pretax. If so, why would this not later be taxed? Not arguing - just questioning. My tiny annuity is fully taxed.

Are you sure that your employee contribution wasn't post [after] tax? I've never heard of employee contributions being with employee money that had not been taxed. That's [one reason] why holders of 401(k) accounts keep employee contributions in which taxes have been paid separate from employer contributions.

[TuborgP]

http://en.wikipedia.org/wiki/401(k)

Employers can help their employees save for retirement while reducing taxable income under this provision, and workers can choose to deposit part of their earnings into a 401(k) account and not pay income tax on it until the money is later withdrawn in retirement. Interest earned on money in a 401(k) account is never taxed before funds are withdrawn.

[Rtom45]

How do all these numbers change if your goal is to have $0 when you die? (and I do mean nothing, no money, no house, no nothing). Understand this is just a goal and there will be lots of variables that prevent it from happening.

[mathjak107]

tell us which day you will die and we will run the numbers...

[Rtom45]

Not to jinx myself, but lets say July 2036. I understand the world may end before then and lots of other things may happen. But just as an example, and use the numbers that have been used in this discussion.

[mathjak107]

in all seriousness its a difficult task because no one can predict the gains or losses your portfolio would have and thats the determing factor.

of course if you want to figure a certain amount of gains or loss hypothetically you can play here

How Long Will My Money Last With Systematic Withdrawals? - Financial Calculators from CalcXML

[Rtom45]

So most of this discussion is pointless?

[mathjak107]

huh? no, thats is the point of the discussion. since you dont know the variables like how long you will live , what your returns will be or what inflation will be you better find a way to work around that. part of that may be by insuring at least part of your income and your spouses income forever with open ended payments . any other way is dependent on the unknown.. no one can predict enough variables to tell you when you will be broke. the calculator i gave you will tell you when you will spend your last dollar if you want to guess at the future gains., anything else go see a fortune teller for.