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when you say brokerage accounts , any dividends , capital gains and interest could be taxable too . even muni interest is counted .
Yes that's what I thought. So you withdraw 5,000/year from a large sum of money that did not come from a 401. It could be from savings or in our case both post tax savings and the sale of a house. But that money is the result of capital gains, not spending down principal. So that $5,000 is considered income by the IRS obviously and so too by SS? With the Roth withdraw nothing is considered income correct? So I really need to double down on my Roth 401 contribution.
yep , basically any income not already taxed is counted in magi . that is your taxable income before most deductions take place.
so as an example we are living off cash we accumulated in our brokerage account . the cash was already taxed in previous years so it isn't counted but any interest would be . dividends we get on investments in our taxable account and interest count as well .
heavy dividends in a taxable account may not be a good thing if you are trying to control income for a purpose .
The $5k from a non 401k or savings is not income, nor is a rollover from a 401k to a tIRA. If you roll over from a tax deferred 401k to a Roth, that is taxed as income.
depends how the money got there and whether it was taxed yet or not . selling an asset , making 5k and pulling that 5k out may be taxable in that year .
if the money was already taxed then no it is not added to magi .
If you don't have taxes withheld, you need to determine if you have to make estimated quarterly tax payments. Otherwise you may be subject to penalties and interest, on top of any taxes you may owe.
The public policy around taxation of Social Security benefits is pathetic. The thresholds were put in place in 1983 and have never changed. In 1983, $24,000 for a single person household was very good money. Inflation-adjusted, that's $57,000. I'd have a lot less problem with the 50% tax torpedo kicking in at $57K than at $24K. You'd have maybe 5% to 10% of retirees paying tax on their Social Security benefit.
The $5k from a non 401k or savings is not income, nor is a rollover from a 401k to a tIRA. If you roll over from a tax deferred 401k to a Roth, that is taxed as income.
Yes but let's say you have $100,000 in post tax savings earning 5% in capital gains and dividends, So the $5,000 you remove is not coming from the post tax $100,000 principal, it is coming from your gains. Gains you would pay capital gains tax on. Would this $5,000 be counted by SS towards the $32,000?
On another note great points made earlier about being a widow and having your threshold now dropping to the single rate as well as how ridiculous it is that the figures have not been adjusted since 1983.
Yes but let's say you have $100,000 in post tax savings earning 5% in capital gains and dividends, So the $5,000 you remove is not coming from the post tax $100,000 principal, it is coming from your gains. Gains you would pay capital gains tax on. Would this $5,000 be counted by SS towards the $32,000?
We pay taxes as we go on our dividends from post-tax accounts and investments, so no tax is owed on any withdrawals.
I'm not sure what you mean by capital gains in the above example, capital gains usually aren't realized until the asset is sold.
The public policy around taxation of Social Security benefits is pathetic. The thresholds were put in place in 1983 and have never changed. In 1983, $24,000 for a single person household was very good money. Inflation-adjusted, that's $57,000. I'd have a lot less problem with the 50% tax torpedo kicking in at $57K than at $24K. You'd have maybe 5% to 10% of retirees paying tax on their Social Security benefit.
Forward this to your elected officials in DC. Only they can index it to inflation or some other benchmark.
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