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Old 12-07-2007, 06:09 AM
 
84 posts, read 271,349 times
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I have worked on this calculation for the past couple of years.

If the objective is to leave this world with no estate (spending all of your money), you sort of have to work backwards.

If I calculate to die at age 90 with no money left and want to live on $7000 net a month in today's dollars, it looks like I need around $1.7 million at age 62 which is just 2 years away.

Of course, we will continue to have a mortgage until mid 2013 and I am budgeting for long term health insurance and meds.

So, if we are living fine on $4000 net, I am hoping that the $7k will let us enjoy more travel, golf etc. With all the free time, I am worried about spending so much more money than we are now...........
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Old 01-11-2008, 01:49 PM
 
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Military medical coverage at 60, military retirement at 60 of about 10k todays $'s, pensions for me and my wife of about 8K, again todays $'s and probablly about 1.1 mil in the 401k/IRA at age 55 (15 years).
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Old 01-13-2008, 05:55 AM
 
1,831 posts, read 4,797,543 times
Reputation: 661
Quote:
Originally Posted by mrschilicook View Post
As far as "income" in retirement...remember that you pay no state/federal income tax, no more investment into 401K/Stock programs, no SS, HSA, etc. and your no longer trying SAVE any money.
First of all ... thanks for a great post ... but I am totally confused by this statement.

I thought pension income and anything you draw from your 401K is taxable so ... to say no federal or state income tax (unless you're in a no income tax state) ... makes no sense to me.

Unless you're talking about your own after tax savings?


Last edited by sheri257; 01-13-2008 at 07:20 AM..
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Old 01-13-2008, 07:33 AM
 
Location: DC Area, for now
3,517 posts, read 12,054,907 times
Reputation: 2141
Quote:
Originally Posted by sheri257 View Post
First of all ... thanks for a great post ... but I am totally confused by this statement.

I thought pension income and anything you draw from your 401K is taxable so ... to say no federal or state income tax (unless you're in a no income tax state) ... makes no sense to me.

Unless you're talking about your own after tax savings?

I don't know about her situation but I know that my future pension is taxable by both fed. and state. Some states don't tax pensions or give you an exemption for a certain amount. The deferred amount in ret. accounts is taxable. The amount you have already paid tax on is not taxable so the complexity of taxes increases. Money out of Roth IRAs is not taxable as you have already paid tax on the investment amount and the earnings are not taxable. But the money out of traditional IRAs is taxable. My 401k money will be taxable as it was all deferred so the money taken out has to be taxed.

We each need to consider our own situations or you may get some rude surprises.
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Old 01-13-2008, 02:38 PM
GLS GLS started this thread
 
1,985 posts, read 4,848,399 times
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Originally Posted by Tesaje View Post
.....We each need to consider our own situations or you may get some rude surprises.
Good points. However, I have considered my own situation carefully and STILL am rudely surprised.
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Old 01-13-2008, 03:58 PM
 
Location: Forests of Maine
30,687 posts, read 49,469,539 times
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Quote:
Originally Posted by sheri257 View Post
First of all ... thanks for a great post ... but I am totally confused by this statement.

I thought pension income and anything you draw from your 401K is taxable so ... to say no federal or state income tax (unless you're in a no income tax state) ... makes no sense to me.

Unless you're talking about your own after tax savings?

Both Federal pensions and 401K are taxable income by the Fed, and by most states.

However; both the Fed and state income tax systems have assortments of 'deductions' and 'exemptions'.

In Maine for example; the combined effect of both deductions and exemptions together add up to more than my federal pension. Which leaves all of my pension income tax-free.

In my circumstance I earn a considerable amount beyond my pension [from income streams coming from our home business and from my investment portfoilo], and I am able to keep it below that threshold.

So even though we reside in a state with income taxes, we still pay none.
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Old 01-13-2008, 06:57 PM
 
Location: home...finally, home .
8,236 posts, read 18,521,294 times
Reputation: 17765
We each need to consider our own situations or you may get some rude surprises

As many times as I have looked at those charts, I still get confused as to the rules of taxing pensions. The 9% exemptions and all. I guess I just don't understand what they mean in plain financial terms.
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Old 01-13-2008, 11:00 PM
GLS GLS started this thread
 
1,985 posts, read 4,848,399 times
Reputation: 2408
Quote:
Originally Posted by looneytoon View Post
I have worked on this calculation for the past couple of years.

If the objective is to leave this world with no estate (spending all of your money), you sort of have to work backwards.

If I calculate to die at age 90 with no money left and want to live on $7000 net a month in today's dollars, it looks like I need around $1.7 million at age 62 which is just 2 years away.

Of course, we will continue to have a mortgage until mid 2013 and I am budgeting for long term health insurance and meds.

So, if we are living fine on $4000 net, I am hoping that the $7k will let us enjoy more travel, golf etc. With all the free time, I am worried about spending so much more money than we are now...........
I hope you are not super-sensitive, but I am sitting here laughing hysterically that I am getting sound financial advice from someone called "looneytoon".
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Old 01-14-2008, 09:23 AM
 
Location: Branson Area
880 posts, read 2,586,118 times
Reputation: 710
Default Clarification and more

I'm sorry...that sentence was a bit confusing. I meant that when your figuring out your expenses, based upon your current income, you need to factor in the fact that you won't be withholding Fed/State taxes out of whatever "income" you draw like you do with a paycheck. So your real income in retirement is closer to what your net is when working. ie...if you make 100K/yr today that's a net of probably ~70K (or less) after taxes, 401K, insurance, stock options or whatever else you have taken out of your paychecks. If your figuring you need 80% of your current income to live on in the future, figure 80% of your net (what you really live on today). In this example, 80% of 70K is about $56K as a minimum. Yes, you will pay Fed. tax on your income choices in most cases, but it's far less. Plus the taxable amount depends on the source. Cap. gains vs. IRA, etc. Some states tax SS some don't. It's all very complicated but I can tell you, from experience, that focusing on income taxes is often the wrong focus for some, and perhaps most, retiree's. Property taxes can kill you and often WAY exceed any income tax.

In our experience with our friends who are retired, you spend to you income in retirement just like most of us do when we work. So if you take a pay cut, you'll adjust accordingly. We spend alot less than when we worked, but we don't feel like we've changed our lifestyle at all. We actually travel more, eat out more (but at less pricey places), etc. But we spend less on clothes and "stuff".

Hope this clarifies my oh so poorly worded comments.

Last edited by mrschilicook; 01-14-2008 at 09:27 AM.. Reason: update
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Old 01-14-2008, 09:38 AM
 
Location: Branson Area
880 posts, read 2,586,118 times
Reputation: 710
We have had to buy private insurance for the past 5 years (this is the last year for my husband who will be 65 in July). We basically bought insurance to cover us for major events with a deductable of $5500 and then 100% coverage. The difference between this and getting a plan that covered with a low deductable and co-pays was enormous....$3k-$5k/yr. We use Assurant Health which was the best insurance at the lowest cost we could find at the time. You can lock the rates for 2 years. They then rose about $1200 year for the past three years. We moved to the Branson MO area last year and they went down about the same amount. After this year, we only pay for me which is about $3500/yr. In three years we will both be on plans paid for by medicare. Some good plans around here which require no additional payments by the individual.
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