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Old 01-29-2015, 07:54 PM
 
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What are some good strategies for keeping retirement income low enough to not pay taxes on Soc Sec.?

I was looking at the options of converting a 401K to a Roth IRA (ROTH IRA withdrawals are NOT counted toward the combined income for Soc Sec taxability). But it doesn't look like that makes sense....paying taxes on a half million....just to not pay taxes on 85 percent of my Soc Sec.

I just hate the idea of paying taxes on my Soc Sec.

One strategy could be to not work (earn) ....or pull from the 401k -- so much that to puts me over the earnings threshold. But I'm also not crazy about limiting my income just to avoid taxes.

So I'm looking for options for income that's not counted in the combined income calculation.
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Old 01-29-2015, 10:31 PM
 
Location: Los Angeles area
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It seems to me you're looking for something which doesn't exist - "income that's not counted". But perhaps some tax-savvy poster knows something we don't and will come forward.

What is it with the emotional reaction about paying taxes on your Social Security? It's income. And we pay taxes on our income. In fact SS income gets preferential tax treatment. First, as you noted, only a maximum of 85% of it is ever taxable. Second, people who have little other income will not pay taxes on it at all.

You yourself gave an accurate analysis of your tilting at windmills when you wrote in your OP, "But I'm also not crazy about limiting my income just to avoid taxes". Indeed, I agree with that.
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Old 01-29-2015, 11:05 PM
 
Location: The Triad (NC)
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Quote:
Originally Posted by rdflk View Post
What are some good strategies for keeping retirement income low enough to not pay taxes on Soc Sec.?
I'm looking for options for income that's not counted in the combined income calculation.
Municipal Bonds
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Old 01-29-2015, 11:11 PM
 
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You would have been better to let it ride unless 70. I believe once its distributed you pay on it but not the interest on municipal bonds.
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Old 01-29-2015, 11:25 PM
 
Location: Pennsylvania
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or just move to a state that doesn't tax ss.
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Old 01-30-2015, 02:04 AM
 
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Thanks all. I'm not retired yet. have a ways to go actually. I'm Just thinking ahead and musing about strategies.

Also PAhippo, FYI -- not paying STATE taxes on Soc Sec. has nothing to do with paying FED taxes on Soc. Sec. Lots of states don't tax SS, but the Fed tax is totally different.

Muni bonds...maybe THAT"S why I've heard that Suze Orman is BIIIG into munis. AND she lives in FLA!
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Old 01-30-2015, 02:12 AM
 
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Originally Posted by MrRational View Post
Municipal Bonds
nope , muni interest counts in your magi calculation. Although municipal bond interest income is generally free from federal income tax, the IRS considers that interest part of your "modified adjusted gross income" for determining how much of your Social Security benefits, if any, are taxable.

this is why roths can be so powerful even if tax rates are the same not getting your ss taxed for a lifetime is a major plus.

over over funding a whole life policy 1 dollar below where it becomes a mep can provide an income stream that can be borrowed out does not have to be payed back and all compounding is tax free . over funding carrys no sales fees ,expenses or commissions.

having equities in a roth or taxable account where good tax planning generates zero capital gains taxes or 5%.

a tax deferred annuity can help reduce income.

an immediate annuity can reduce taxable income. unlike a cd which has all the interest you get taxable an immediate annuity really pays no interest but the irs implies one for tax prposes. that 6% withdrawal rate is not interest but considered mostly return of principal with a small piece considered interest based on an irs life expectancy chart that assumes you will live long enough to get all your money back and some money on their dime.l.

all of this is why folks need to spend that money they resist spending for early on help by a tax advisor who specializes in this area.

as i learned to late yoy can't do these things later in life with out huge tax consequences that make them not worth doing , they have to be done decades before.

Last edited by mathjak107; 01-30-2015 at 03:05 AM..
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Old 01-30-2015, 02:15 AM
 
Location: Pennsylvania
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Quote:
Originally Posted by rdflk View Post

Also PAhippo, FYI -- not paying STATE taxes on Soc Sec. has nothing to do with paying FED taxes on Soc. Sec. Lots of states don't tax SS, but the Fed tax is totally different.
You didn't say which tax. Since federal taxes are everywhere, the only variable in terms of paying/not paying would be state taxes.
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Old 01-30-2015, 02:35 AM
 
71,759 posts, read 71,853,273 times
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Quote:
Originally Posted by PAhippo View Post
or just move to a state that doesn't tax ss.
this is wrong information . the fed taxes from zero to 85% of your social security based on your modified adjusted gross income. keep your magi low enough through planning and strategy and you pay zero federal tax instead of 85%.

it involves two moving targets. the more your magi the more your ss gets taxed and the more ss gets taxed the higher your magi causing more ss to get taxed and round and round we go until 85% of your ss is taxed on a federal level.
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Old 01-30-2015, 02:46 AM
 
1,212 posts, read 1,864,856 times
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Quote:
Originally Posted by mathjak107 View Post
nope , muni interest counts in your magi calculation. Although municipal bond interest income is generally free from federal income tax, the IRS considers that interest part of your "modified adjusted gross income" for determining how much of your Social Security benefits, if any, are taxable.

this is why roths can be so powerful even if tax rates are the same not getting your ss taxed for a lifetime is a major plus.

over over funding a whole life policy 1 dollar below where it becomes a mep can provide an income stream that can be borrowed out does not have to be payed back and all compounding is tax free . over funding carrys no sales fees ,expenses or commissions.

having equities in a roth or taxable account where good tax planning generates zero capital gains taxes or 5%.

a tax deferred annuity can help reduce income.

an immediate annuity can reduce taxable income. unlike a cd which has all the interest you get taxable an immediate annuity really pays no interest but the irs implies one for tax prposes. that 6% withdrawal rate is not interest but considered mostly return of principa with a small piece considered interest based on an irs life expectancy chart that you will live long enough to get all your money back and some money on their dime.l.

all of this is why folks need to spend that money they resist spending for early on help by a tax advisor who specializes in this area.

as i learned to late yoy can't do these things later in life with out huge tax consequences that make them not worth doing , they have to be done decades before.



At what age would you ideally start?
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