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I've been doing the tax planning math this week and don't like the answers I'm coming up with. It's looking like I'm on a trajectory to be one of the "tax torpedo" people where my 401(k)/IRA mandatory distributions barely put me over the point where I'm taxed 85% on my Social Security check. Fortunately, at age 57, I'm still young enough to shift the last $200K of contributions over to a Roth 401(k) where I pay the tax now when I can afford it rather than at age 70 when it will sting much more.
I'd been living in a world of ignorant bliss where I thought my Social Security check would be tax-free and I'm better off deferring paying income tax on my retirement portfolio because I'll be in a lower tax bracket then. Sadly, that common wisdom doesn't apply to me. If I had a couple million in a retirement portfolio, it would be a moot point. I don't so it's become critical to understand what my cash flow will look like and how much tax bite I will face.
It's too soon to plan it but it may be in my interest to shift 401(k) and IRA money to a Roth IRA when I stop working and have zero income years before I start collecting Social Security. As long as I can stay in the 25% bracket in those years, it looks like I have much better cash flow in my 70's. For now, all I can do is shift over to contributing to a Roth.
yep , to many believe what you did. the fact is so much is linked to your taxable income that for most of us we blew it by not doing roths .
unless you can shift the ira money to roths at 15% it is likely not worth doing . once they hit the bracket you are in you are better off the way you are .
buying your own home and not an investment property really does not see much leverage over time . the closer you get to paying it off the money is 100% all yours .
of course you can get lucky early on and flip it for a leveraged profit but then you would really be an investor at heart and not living in it .
homes we consume don't see much leverage because we are living in them using less leverage every year .
leverage is when you are an investor and buy 10- property's , put down 10% on each and have others pay it off as an example . very different situaton than me paying off my own house plus 2 to 3x the purchase price in interest ..
I'm still alittle lost on whether I should put some of the inheritance into a Roth
no can tell you off the cuff. it requires very complex tax calculations and different scenario's being run . all of us have different situations and amounts ..
what you are asking blindly is like asking how long is a rope ?
To all I didnt meant to go out and get a mortgage. I think I put that if you have that still going that can help mitigate some but..... as you all say and I will whole heartedly agree having no mortgage in retirement is the best idea.
no can tell you off the cuff. it requires very complex tax calculations and different scenario's being run . all of us have different situations and amounts ..
what you are asking blindly is like asking how long is a rope ?
Do you have to hire a CPA to do that? I know I can't do it.
controlling what I buy that pays dividends......not sure what that means
No kids, no spouse, no life insurance
I will have a small annuity (taxed by fed and state), small military pension (not taxed by state) and a social security sup till 62 (fully taxable). As near as I can figure it will closely net about what I net now after 401k conributributions, SS etc. I currently have no mortgage or write offs and figure I'll go from the 28% tax bracke to 25%?
I just got an inheritance, and am wondering what to do with it.
Then you are in a similar situation as DW and I. You dont need life insurance and that is good. Less money going out. Second state taxes are what they are and only switching states will change that so unless you are planning on moving than you will be hit by them. If you have any desire to move to another state look into places that are tax friendly and military friendly. Low cost of living states are spread out across the country. You can look here Widgets Magazine It has a good run down of all 50 states and it includes many of the subtle taxes called fees.
Well of course the reason I have no mortgage is that I live in an apt. So one of my planning problems is that my costs are going to go UP in retirement vs. down I also need a new car.
Do you have to hire a CPA to do that? I know I can't do it.
maybe not a CPA but a finanicial planner fee only.
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I also need a new car.
