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Old 08-02-2011, 06:23 PM
 
Location: Central Florida
973 posts, read 1,489,255 times
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Quote:
Originally Posted by Dollydo View Post
I have retired more than once. The first time, I took an early retirement package from my career in corporate america, it included medical & dental insurance until I am 65. In April of this year I retired from my current job and will not be able to get medicare for another year, so, I am doing everything I can medical & dental wise.

Another thing I did was sit down with my tax accountant to further understand my tax ramifications in retirement. I was surprised to find out that I would have to pay income taxes on 85% of my SS benefit. Single and making over x number of dollars. Of coarse, every situation is different.

Otherwise, I just followed thru on my plans, and am now trying to figure out what to do with my time.

Good Luck, enjoy your retirement!
What is this due to may I ask? Not a pension, right?
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Old 08-02-2011, 07:35 PM
 
Location: Los Angeles area
14,018 posts, read 17,729,443 times
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Quote:
Originally Posted by Americanwoman54 View Post
What is this due to may I ask? Not a pension, right?
You didn't ask me, you asked Dollydo, but since I also pay federal taxes on 85% of my Social Security retirement benefits, I will be so bold as to answer. Whether you pay any tax on SS, and if so what percentage is taxed (up to the maximum of 85%) is determined by a formula which essentially considers the amount of your Adjusted Gross Income as the main factor. (I believe you substract out half your SS, but I'm not sure I'm remembering that detail correctly). So if you have substantial income outside of SS, which could be a pension, and/or interest income, capital gains, earned income, self-employment income, etc., then this triggers a tax on the SS. The bottom line is that if your income is all or mostly Social Security, you do not pay any federal income tax on it at all. But the forumula does not distinguish pension income from any other kind of income, so yes, having a more than negligible pension could cause you to pay taxes on your SS.

Actually I think that is fair, even though I pay the tax, because I think that the formula only taxes people who can afford to pay it. If your non-SS pension is small, it won't be enough (by itself) to trigger the tax on SS.
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Old 08-02-2011, 08:43 PM
 
Location: Central Florida
973 posts, read 1,489,255 times
Reputation: 1098
Quote:
Originally Posted by Escort Rider View Post
You didn't ask me, you asked Dollydo, but since I also pay federal taxes on 85% of my Social Security retirement benefits, I will be so bold as to answer. Whether you pay any tax on SS, and if so what percentage is taxed (up to the maximum of 85%) is determined by a formula which essentially considers the amount of your Adjusted Gross Income as the main factor. (I believe you substract out half your SS, but I'm not sure I'm remembering that detail correctly). So if you have substantial income outside of SS, which could be a pension, and/or interest income, capital gains, earned income, self-employment income, etc., then this triggers a tax on the SS. The bottom line is that if your income is all or mostly Social Security, you do not pay any federal income tax on it at all. But the forumula does not distinguish pension income from any other kind of income, so yes, having a more than negligible pension could cause you to pay taxes on your SS.

Actually I think that is fair, even though I pay the tax, because I think that the formula only taxes people who can afford to pay it. If your non-SS pension is small, it won't be enough (by itself) to trigger the tax on SS.
Thank you for your input and scaring the bejeezes out of me!!!! I thought I knew what I was doing in order to retire in a year, but now I am panicking! I hadn't realized I would have to pay taxes on ss and you mean just taxes and not ss or medicare, right? as that would be too weird! And as far as my pension, when I looked at paying taxes on that, I flipped out if I am looking at it correctly that I add in my ss as well for income? I don't even pay that much on my salary which is double that, BUT then I never took off my dependents as I always got money back due to fillikng out the long form. I cannot afford to give up 25% of my monthly check for taxes and wait to get it all back at the end of the year, so do you know if I can just claim more dependents again or would it be better just to tell them the amount I want taken out?? And finally, can you point me in the direction of that formula for the adjusted gross income?? I would greatly appreciate it AS I REALLY DO WANT TO RETIRE SOON!!!!
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Old 08-02-2011, 09:03 PM
 
Location: Murrieta, CA
1,268 posts, read 1,507,532 times
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Good topic and comments. As for me I hope to retire in the next 12 - 24 months. In addition to not talking about it around co-workers I have found (the hard way) don't talk about it around your friends that are older than you and can't afford to retire. Same with relatives. So many boomers have not saved enough, don't have a pension, are talking about working until they are 70, they sure don't want to hear about anyone retiring in their 50s.

@ American Woman I am no expert my husband does pay income tax on his social security. Depending on your tax bracket it will be from a few hundred to a few thousand dollars. They lump all taxable income in together and since I still work full-time we get taxed on his social security. But his SS is so small compared to my income I don't have any taxes withheld from his checks at all. I just have enough withheld from my checks to cover both of us. They don't take FICA out of his social security checks so you don't have to worry about that, most states don't tax Social Security, I know CA does not. The only taxes we pay on it are federal taxes and the amount is small.

You could meet with a tax attorney or CPA before you retire and they should be able to work out the numbers for you so there will be no surprises.

I would love to hear how people handle medical insurance post retirement but pre-Medicare. That seems to be my biggest hurdle.
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Old 08-02-2011, 09:51 PM
 
Location: Los Angeles area
14,018 posts, read 17,729,443 times
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Default Possible misunderstanding

Quote:
Originally Posted by Americanwoman54 View Post
Thank you for your input and scaring the bejeezes out of me!!!! I thought I knew what I was doing in order to retire in a year, but now I am panicking! I hadn't realized I would have to pay taxes on ss and you mean just taxes and not ss or medicare, right? as that would be too weird! And as far as my pension, when I looked at paying taxes on that, I flipped out if I am looking at it correctly that I add in my ss as well for income? I don't even pay that much on my salary which is double that, BUT then I never took off my dependents as I always got money back due to fillikng out the long form. I cannot afford to give up 25% of my monthly check for taxes and wait to get it all back at the end of the year, so do you know if I can just claim more dependents again or would it be better just to tell them the amount I want taken out?? And finally, can you point me in the direction of that formula for the adjusted gross income?? I would greatly appreciate it AS I REALLY DO WANT TO RETIRE SOON!!!!
I hope to find time soon to look for that formula, but I am wondering if you understood me correctly (or if I expressed myself poorly) because the situation is not as draconian as you seem to think. Let's be clear on the 85%. They will not be taking 85% of your SS in taxes! Up to 85% of your SS can be subject to taxation (a totally different matter), and that will be at whatever rate you are paying depending on your total income, which rate will be way, way lower than 85%.

The way you have formulated many of your questions above makes them unclear to me. Most pensions provide for you to designate the amounts you want withheld for taxes, exactly as if you were working for the money, but you will have to contact your particular pension for details on that. Is that part of what you were asking?

You mentioned Medicare, but I could not understand what you were asking. When you sign up for Medicare, there will be a monthly premium amount for the Part B coverage, and that amount is about $115 for most people and it will be deducted from your SS payments. If your income is high enough, the amount is larger than $115, but if your income is that high (over $85,000 yearly for a single taxpayer) you don't have to worry about it because you can easily afford the extra.

Is there a colleague at work whom you consider to be level-headed and who seems to be knowledgeable about these matters? Perhaps someone also nearing retirement? If so, try to sit down with that person and get some explanations. Also, your HR department, or perhaps a pension office at your work, can be helpful, as they are used to helping people understand these things.
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Old 08-02-2011, 10:01 PM
 
Location: Central Florida
973 posts, read 1,489,255 times
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Quote:
Originally Posted by Escort Rider View Post
I hope to find time soon to look for that formula, but I am wondering if you understood me correctly (or if I expressed myself poorly) because the situation is not as draconian as you seem to think. Let's be clear on the 85%. They will not be taking 85% of your SS in taxes! Up to 85% of your SS can be subject to taxation (a totally different matter), and that will be at whatever rate you are paying depending on your total income, which rate will be way, way lower than 85%.

The way you have formulated many of your questions above makes them unclear to me. Most pensions provide for you to designate the amounts you want withheld for taxes, exactly as if you were working for the money, but you will have to contact your particular pension for details on that. Is that part of what you were asking?

You mentioned Medicare, but I could not understand what you were asking. When you sign up for Medicare, there will be a monthly premium amount for the Part B coverage, and that amount is about $115 for most people and it will be deducted from your SS payments. If your income is high enough, the amount is larger than $115, but if your income is that high (over $85,000 yearly for a single taxpayer) you don't have to worry about it because you can easily afford the extra.

Thank you...and you were clear about the 85% as I understood it perfectly. I was just in la-la land not knowing it could be taxed!

And sorry for my unclear questions, but you got the first one right and confirmed what I thought I needed as you waded through my babbling (which was due to getting the bejeezes scared out of me as I am usually very lucid!).

As far as my second question, it was inane to say the least, so no wonder you had problems with it, but I got it figured out.

Again, thanks for your help and input....this is a new stage I am entering in, and just hope I am not making a mistake!!!!
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Old 08-02-2011, 10:18 PM
 
Location: Los Angeles area
14,018 posts, read 17,729,443 times
Reputation: 32304
Quote:
Originally Posted by Americanwoman54 View Post
Thank you...and you were clear about the 85% as I understood it perfectly. I was just in la-la land not knowing it could be taxed!

And sorry for my unclear questions, but you got the first one right and confirmed what I thought I needed as you waded through my babbling (which was due to getting the bejeezes scared out of me as I am usually very lucid!).

As far as my second question, it was inane to say the least, so no wonder you had problems with it, but I got it figured out.

Again, thanks for your help and input....this is a new stage I am entering in, and just hope I am not making a mistake!!!!
You're welcome. I'm happy to be helpful. In addition to all the above, there is the matter of state income taxes. A few states do not have an income tax at all; if you live in one of them just disregard the rest here. Most states do not tax Social Security benefits at all, regardless of your income. Even California, a high-tax state, does not tax them. But a few states do, and you will want to find out if you live in one of them. Some states give you various sorts of breaks on pension income and some do not. Again, you will want to inquire about your state. (I suggest www.kiplinger.com as they have a retirees guide to state taxes). For example, California gives no break at all for pension income, which is treated exactly as if it were your salary. Pennsylvania gives generous breaks. A whole separate area to check out - just what you wanted, eh?

Edited to add: just noticed you are in central Florida - hadn't noticed that yet when I wrote the above.
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Old 08-02-2011, 10:37 PM
 
48,516 posts, read 83,901,398 times
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Quote:
Originally Posted by Americanwoman54 View Post
What is this due to may I ask? Not a pension, right?
You don't have to make much of a icome to pay taxes on 85% of SS. But that is 15% tax free w2hich is better than most other income types.
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Old 08-03-2011, 06:07 AM
 
Location: Florida
2,291 posts, read 4,944,698 times
Reputation: 5236
I pay taxes on my SS because due to my earning from investments and having to take a lifetime schedule of my deceased Dad's IRA's and certain annuitys. Actually that tax kicks in at a pretty low AGI rate, I was shocked. For me as a single it is about 35K.
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Old 08-05-2011, 01:32 PM
 
Location: Tennessee
34,674 posts, read 33,681,492 times
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Quote:
Originally Posted by Rtom45 View Post
OK, so I've been waiting my turn and watching the retiring in 1 year threads. If everything goes as planned, my wife and I will be retired at the end of July next year (2012). Any words of advice as we get closer to the time? We've been watching finances, we've been planning things to do once retired, we've been investigating retirement destinations, etc. From your experience, are there things we might be missing or things we should be doing?
You will be home during the week in the daytime. So, if you decide to move in retirement consider the things that are available for you to do in your new location, during the daytime on a weekday. Some places are better than others in that regard.
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