Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
by shielding as much income from being counted in your magi as possible such as doing roths . or understanding enough about retirement planning to avoid taking that extra 1k so you don't lose 1/2 of it to tax
And this is why the birth rate among bright, educated professional women is so low. There's simply too much opportunity cost. If you're making $10.00/hour in a service sector job, there is little opportunity cost to popping out as many kids as you want.
From a social engineering point of view, it's the opposite of what you'd want. Educated, engaged parents tend to produce children with good economic outcomes. That's who society wants reproducing because their offspring will be the ones driving the economy.
Yeah, that brings about a thought from the Bible: "the meek shall inherit the earth."
by shielding as much income from being counted in your magi as possible such as doing roths . or understanding enough about retirement planning to avoid taking that extra 1k so you don't lose 1/2 of it to tax
A bit more detail:
The Social Security "tax torpedo" pretty much only matters for people with IRA/401(k) balances of $350K to $800K. They get nailed by required minimum distributions that push their AGI up over the threshold where Social Security goes from tax-free to 50% taxed; or 50% taxed to 85% taxed. If you have more than that, you have enough income that you're paying 85% tax on your Social Security check no matter what you do and that portion of your income is small relative to everything else so it's not painful to pay the tax.
A Roth strategy doesn't work for everybody. If you're in the 28% bracket or higher and paying big state income taxes, it's better to defer now and pay the tax later; particularly if you plan to move to a low tax state. It's at least good to be aware that it's possible.
Most retired people have Social Security, so they will get by. Social Security is a benefit that they would have paid into for their entire working lives and to which they are fully entitled. If they truly run out of money, they will have to change their lives, but they should be able to live frugal lives.
Most retired people have access to Medicare as well.
Some retired people are in the last group to have pensions as well.
It sounds great until you look at the Social Security check and Medicare/supplemental premiums for those "most people".
Most people start collecting at age 62 or not much past age 62. They don't get very big checks. In January, the category "retired workers" got a $1,362.64 check. A bit more than $16,000/year.
Link: https://www.ssa.gov/policy/docs/quic...stat_snapshot/
On top of that, they have a Medicare premium to pay. They can't afford a decent supplemental so they go with a low/no cost option with lousy coverage.
So the average retiree is hovering a bit above poverty level after you back out their Medicare premium. I'm not sure how you pay for housing, utilities, food, clothing, and Rx drugs on $1,200/month. That's renting a room and eating beans & rice.
in this case it has nothing at all to do with rmd's what so ever .
it merely has to do with marginal tax rates when you bump the limits of getting your ss taxed.
why you have to be so careful with the taxing of ss is you have two moving targets involved which can make for some crazy increases in marginal tax rates..
kitces gives great examples of how marginal rates can respond by adding only a few dollars more to agi when dealing with ss. these really explain well what you are up against
one thing you will note is incomes are NOT very high at all!.
Harry is an individual with $36,000 of income but a hefty $22,000/year of Social Security benefits. His Social Security provisional income is $36,000 + $11,000 = $47,000, which is $13,000 over the upper threshold for individuals. As a result, $15,550 of his Social Security benefits are subject to taxation (which is 50% of the amount from $25,000 to $34,000, plus 85% of the excess of provisional income above the $34,000 threshold), which puts his AGI at $51,550. Even after a standard deduction and one personal exemption, Harry's taxable income would be $51,550 - $6,100 - $3,900 = $41,550, which places him in the 25% tax bracket.
If Harry now takes an additional $1,000 from his IRA, his provisional income increases to $48,000, his taxable Social Security benefits increase to $16,400, and his AGI rises to $53,400. The net result: Harry's AGI increased by $1,850 for "just" a $1,000 IRA withdrawal, and with a 25% tax bracket his liability will be $1,850 x 25% = $462.50, which equates to a whopping $462.50 / $1,000 = 46.25% marginal tax rate!
" Jeremy and Martha have an AGI of $28,000 (and no tax-exempt or foreign income), and receive combined Social Security benefits of $14,000. As a result, their provisional income is $28,000 + $7,000 (half of Social Security benefits) = $35,000, which is $3,000 above the $32,000 threshold. This means that 50% x $3,000 = $1,500 of their Social Security benefits are subject to taxation, which ultimately increases their AGI to $28,000 + $1,500 = $29,500."
"Continuing the earlier example of Jeremy and Martha, if the couple decides to take another $1,000 out of their IRA, this will increase their AGI by $1,000 to $29,000. As a result, it will also increase their provisional income by $1,000, which leaves them $4,000 above the threshold, resulting in $2,000 of their Social Security benefits being taxable. In the end, this means Jeremy and Martha end out with a total AGI of $31,000... their AGI increased by $1,500 even though they only took out a $1,000 IRA withdrawal due to the taxation of Social Security benefits! If the couple is subject to the 15% tax bracket, their additional tax liability on $1,500 of income is $225, which equates to a marginal tax rate of $225 (additional taxes) / $1,000 (additional income) = 22.5%. In other words, even though the couple is in the 15% tax bracket, their $1,000 IRA withdrawal is subject to a 22.5% marginal tax rate due to the formulas triggering taxation of Social Security benefits!"
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Donald and Sarah have an AGI of $44,000 and receive combined Social Security benefits of $24,000. As a result, their provisional income is $44,000 + $12,000 = $56,000, which is $12,000 above the upper $44,000 threshold. This means that $16,200 of benefits are subject to taxation (which is technically 50% of the amount from $32,000 to $44,000 plus 85% of the excess above $44,000), which ultimately increases their AGI to $44,000 + $16,200 = $60,200.
Continuing the earlier example of Donald and Sarah, if they decide to take out another $1,000 from their IRA, their provisional income will rise to $57,000, and another $1,000 x 85% = $850 of Social Security benefits will be subject to taxation. This increases their AGI by $1,850, which leads to $277.50 of additional taxes. The end result: Donald and Sarah face a $277.50 / $1,000 = 27.75% marginal tax rate even though they're in "just" the 15% tax bracket, due to their greater income triggering taxation of additional Social Security benefits at 85 cents on the dollar!
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Paul and Megan have an AGI of $58,000 and receive combined Social Security benefits of $24,000. As a result, their provisional income is $58,000 + $12,000 = $70,000, which is $26,000 above the upper $44,000 threshold. This means that $20,400 of benefits are subject to taxation (which is the maximum 85% of the $26,000 excess above the upper threshold, capped out at 85% of their total Social Security benefits), which ultimately increases their AGI to $58,000 + $20,400 = $78,400.
Continuing the earlier example of Paul and Megan, if they decide to take out another $1,000 from their IRA, their provisional income will increase to $71,000. However, since they are already capped at 85% of their maximum Social Security benefits being subject to taxation, their AGI simply increases to $59,000 + $20,400 = $79,400. In other words, because the maximum amount of Social Security benefits were already subject to taxation, another $1,000 of income simply increases their AGI by... $1,000! Assuming the couple is subject to the 15% tax bracket (which they should be after personal exemptions and itemized deductions), the additional taxes on $1,000 of income will be $150, which means their 15% tax bracket really does mean a 15% marginal tax rate!
retirement here is a privilege for those who can self sustain , not a right . the gov't puts a safety net in place but was never intended to support you .
I'm not talking about a government safety net. Read the original question again.
let us know how not saving for retirement works out for you . hope you enjoy the life it affords you on just ss whether you like it or not . the system is what it is whether you want to accept that fact or not .
show us all where it is written retirement is a "right"
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
