U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
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.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 03-06-2017, 11:58 AM
 
10 posts, read 12,363 times
Reputation: 82

Advertisements

I try to maintain a strict budget and am 93.8% successful (one of those SWAG statistics there.) Nonetheless I am trying to employ that ethic as I look at my approaching retiremnet budget. Essentially I can retire from full time employment any time but I am hoping to stick it out until I reach normal retirement age.

I am having difficulty understanding how much of our Social Security benifit will be taxable. I know the 0/50%/85% rule and where they come into play based on our joint benefit. The hard part is determining what portion of our monthly budget is added to the 50% Socical Security benefit amount to figure adjusted gross income.

Here are the components of our retirement income:
  • Social Secuirty benefit
  • Military retirement
  • 401(K) distribution(s)
  • Part-time emloyment
Right off I know that any pay for part-time emoloyment will be considered earned income, no question there. My research to date leads me to believe military retirement is not counted as earned income but I haven't found conclusive statements to that fact when it pertains to this computation. And finally, I am completely in the dark as far as distributions from a traditional 401(k). I am leaning to think that money from a traditional 401(K) since it is pre-tax money it will be considerd earned income.

Using my assumptions and false numbers for the following examples can anyone tell me how correct this would be?

Annual amounts counted towared Social Security benefit eligible for taxation:
Example 1
  • $9,000 Social Security (half of actual joint benefit of $18,000)
  • $0,000 Military retirement (not counted as earned income)
  • $6,000 401(K) distribution(s)
  • $5,000 Part-time employment income
$20,000 adjusted gross income being less than $32,000 means 0% of the Social Security benefit will be taxable. Example 2
  • $11,000 Social Security (half of actual joint benefit of $22,000)
  • $00,000 Military retirement (not counted as earned income)
  • $10,000 401(K) distribution(s)
  • $15,000 Part-time employment income
$37,000 adjusted gross income being more than $32,000 means 50% of the Social Security benefit will be taxable.

Does this look right?
Reply With Quote Quick reply to this message

 
Old 03-06-2017, 01:23 PM
 
Location: Northern CA
43 posts, read 31,987 times
Reputation: 169
oldSarge98


My understanding is that is would be the lesser of the following:
50% of your benefit income OR
Modified AGI in EXCESS of $32,000.


So in your Example 2 (which totals $36,000 and not $37,000)
It would seem that you would only pay taxes on $36,000 - $32,000 = $4,000.


Don't take that to the bank though, let someone else chime in.
Reply With Quote Quick reply to this message
 
Old 03-06-2017, 02:32 PM
 
10 posts, read 12,363 times
Reputation: 82
Quote:
Originally Posted by Clancer13 View Post
oldSarge98
My understanding is that is would be the lesser of the following:
50% of your benefit income OR
Modified AGI in EXCESS of $32,000.
So in your Example 2 (which totals $36,000 and not $37,000)
It would seem that you would only pay taxes on $36,000 - $32,000 = $4,000.
Don't take that to the bank though, let someone else chime in.
Bad math on my part, thanks for the correction.
That's the first time I have come across that calculation, I'll look around to see if I can find that.
Nonetheless I guess what I am really looking to confirm is what part of our monthly "income" will be counted as part of Gross Income.
I found the following on a finacial site addressing Modified Adjusted Gross Income (MAGI):
How to Calculate Your Gross Income (GI)
Your gross income is the money you earned through wages, interests, dividends, rental and royalty income, capital gains, business income, farm income, unemployment and alimony. This is the basis for your AGI calculation.
Gross income includes salary, interest earned, income from investments and basically any income you made through business, trade or investments.
Reading this I don't see where our military retirement payment or the 401(K) falls within the Gross Income definition. Adjusted Gross Income and Modified Gross Income are just adjustments to the Gross Income so if that is 0 they don't come into play.

Can anyone verify that military retirement and/or distributions from a 401(K) are NOT counted in the determination of Gross Income for the purpose of determining taxing Social Security benefits?
Reply With Quote Quick reply to this message
 
Old 03-06-2017, 03:15 PM
 
Location: OH>IL>CO>CT
5,231 posts, read 8,392,545 times
Reputation: 7185
Sorrry, both are included in MAGI for SS taxation.

According to the IRS at http://www.irs.gov/publications/p525...link1000229267 military retirement is taxable like any other pension
Quote
"Military retirement pay. If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. "

Re 401k, see https://www.irs.gov/instructions/i10...1.html#d0e3371 Scroll down to "Line 16a" where it says:
"Lines 16a and 16b
Pensions and Annuities
You should receive a Form 1099-R showing the total amount of your pension and annuity payments before income tax or other deductions were withheld. This amount should be shown in box 1 of Form 1099-R. Pension and annuity payments include distributions from 401(k), 403(b), and governmental 457(b) plans."

BTW, there is an on-line calculator that can show you the effect of taxation on SS benefits at;
How much of my social security benefit may be taxed? | Calculators by CalcXML

It also shows you the worksheet detail on how the tax is arrived at.
Reply With Quote Quick reply to this message
 
Old 03-06-2017, 06:08 PM
Status: "Re-edit status" (set 15 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,152 posts, read 1,890,030 times
Reputation: 3185
See papageek.com ( PapaGeek's Journal ) for a good table and spreadsheet on SS taxation.
YMMV
Reply With Quote Quick reply to this message
 
Old 03-06-2017, 06:24 PM
 
4,572 posts, read 7,055,913 times
Reputation: 4222
Be sure to have fed tax taken out of your SS Check and/or pension checks unless you plan to pay the tax quarterly. If you don't pay it during the year and owe more than $1000 at the end of the year
, you'll be penalized. Also some states tax SS so Check on that too. 401k, IRA distributions are classified as pensions and are taxable.
Reply With Quote Quick reply to this message
 
Old 03-07-2017, 02:46 AM
 
71,511 posts, read 71,694,121 times
Reputation: 49088
ny does not tax ss nor the first 20k in pension and ira money . finally a perk for living here
Reply With Quote Quick reply to this message
 
Old 03-07-2017, 04:26 AM
 
Location: Central Massachusetts
4,800 posts, read 4,844,519 times
Reputation: 6377
oldsarg98 as reed303 says military retirement is federally taxable. It may not be taxed in your state. Some states do exempt pensions and distributions from pension plans but not all. But your posts appear to be asking for federal taxation computation.

Your military pension is taxable. Your TSP, 401k, tIRA distributions are taxable. If you receive VA disability benefits, those are not taxable. If your VA disability rating is 50% or higher you will not get a reduction from your military pension pay. If it is 10 to 40% your military pension will be reduced by the VA disability pay.

As you might guess and do get right your computations are not far off. Just know that if you are married or single you taxable rates are very different. You get a better deal if you file jointly most times. If you really want a good idea of what your taxes will be use tax software like TT or TaxAct or HR Block tax software. Put in your estimated income to include all pension and 401k distributions ensure you put your ages forward so that you will get a closer approximation of the taxes due.
Reply With Quote Quick reply to this message
 
Old 03-07-2017, 05:22 AM
 
Location: Albuquerque
1,708 posts, read 2,581,267 times
Reputation: 1095
Go to smartasset.com
Reply With Quote Quick reply to this message
 
Old 03-08-2017, 05:30 AM
 
Location: East of the Sun
449 posts, read 340,257 times
Reputation: 591
As a combat related disabled Vet I find that taxing military retirement benefits is a terrible way to treat people. Nobody can get rich on retirement/disability benefits. Those with less than 50% Va benefits and cannot work are not really able to afford very much in the first place. Perhaps if folks started bugging elected officials, especially in election years, states might reconsider taxing military retirement benefits.
Reply With Quote Quick reply to this message
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.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top