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Old 04-12-2017, 01:42 PM
 
Location: Haiku
4,089 posts, read 2,576,815 times
Reputation: 6035

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Quote:
Originally Posted by lieqiang View Post
We're closer to 3% right now because of current low cost of living situation overseas, but I'd be comfortable going up to about 4.2% since with social security (at 70% of what they say it will be) SWR calculators all still have us at or close to 100% historical success. Flexibility in withdrawal strategies can play a big role too, there are lots of studies on different ways relatively minor tweaks based on portfolio performance can make a big difference. Flexibility in expenses is also a plus, if we move back to the US and get uneasy on finances can easily flee back to cheaper living overseas since we know it suits us. Good cheap curry and foot massages for the win.

That said, who cares if someone is more conservative than they need to be? If they are comfortable with their lifestyle at 2% withdrawal rate then lucky them. Who knows what the future holds, maybe having that extra cheese will come in handy.
I recently analyzed our tax situation. I had not thought much about taxes previously, but it turns out the combination of starting SS and starting RMDs, both around 70/71, is a big wallop, tax wise. I had always assumed our current withdrawal rate of about 3.2% would go way down when I start SS but it actually barely goes down since most of the increase from SS is eaten up with the big jump in taxes. For us, it is an almost 4x jump from what we currently pay.
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Old 04-12-2017, 04:58 PM
 
71,595 posts, read 71,751,865 times
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if you think it is bad now , it gets worse when you lose a spouse . filing single and losing an ss check coupled with those rmd's can be very painful .
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Old 04-12-2017, 05:56 PM
 
Location: R.I.
979 posts, read 606,070 times
Reputation: 4242
Quote:
Originally Posted by TwoByFour View Post
I recently analyzed our tax situation. I had not thought much about taxes previously, but it turns out the combination of starting SS and starting RMDs, both around 70/71, is a big wallop, tax wise. I had always assumed our current withdrawal rate of about 3.2% would go way down when I start SS but it actually barely goes down since most of the increase from SS is eaten up with the big jump in taxes. For us, it is an almost 4x jump from what we currently pay.
At age 70 when I claim my higher social security benefit combined with my FERS pension and TSP/401K withdrawals filing single as I am already a widow, what I will pay in combined Federal and State taxes will be about $1,000 less than the amount I will be withdrawing annually from my TSP/401K according to the online Turbo tax and Smart Asset tax calculators. So pretty much Uncle Sam and my State gets my TSP and I keep the gross amounts of my social security and pension. It is what it is, and fortunately I can live fairly comfortably on my after tax retirement income which both those income sources are COLA adjusted.
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Old 04-12-2017, 10:04 PM
 
Location: RVA
2,167 posts, read 1,266,787 times
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Quote:
Originally Posted by TwoByFour View Post
I recently analyzed our tax situation. I had not thought much about taxes previously, but it turns out the combination of starting SS and starting RMDs, both around 70/71, is a big wallop, tax wise. I had always assumed our current withdrawal rate of about 3.2% would go way down when I start SS but it actually barely goes down since most of the increase from SS is eaten up with the big jump in taxes. For us, it is an almost 4x jump from what we currently pay.
Really!? How is that possible? So pulling 3.2% now (and living entirely off that?) is mostly tax free, I assume? So that would mean under say $40k/yr? Then max SS at 70 plus RMDs (which are typically more than 3.2%) means you have way more income now that you HAVE TO TAKE. BUT actually, IF you were living on that amount now, (which would require a much higher WR than your current 3.2%), you should find your taxes would drop overall. Right? So you are only paying 4x more in taxes, because you are in a higher tax bracket with much higher income, right? Welcome to the Tax Torpedo. Your post sort of makes it sound like you would be paying 4x in taxes for near the same amount of income. I suppose you could donate just enough to drop you under the Tax Torpedo income level and save all those taxes.
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Old 04-13-2017, 12:26 AM
 
1,734 posts, read 1,949,697 times
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Quote:
Originally Posted by michigangreg View Post
i am one of the fortunate ones that only has to draw 2%. It nets me $16.70 month extra income.
good one!!! Rothflmao!!!
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Old 04-13-2017, 09:55 AM
 
Location: Columbia SC
8,971 posts, read 7,745,489 times
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I am 75 and withdrawing at about a 4% rate not including my RMD's. This allows me to maintain a comfortable life style. As I age I expect to kick up the withdrawal rate as it is only me and I have no need to leave anything to anyone.
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Old 04-13-2017, 10:13 AM
 
Location: Haiku
4,089 posts, read 2,576,815 times
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Quote:
Originally Posted by Perryinva View Post
Really!? How is that possible?
1) Going from 15% tax bracket to 25% bracket
2) Going from withdrawals that are taxed as capital gains (which are largely not taxed, because of being in the 15% bracket) to withdrawals that are taxed as ordinary income.

Net result: SS will provide a 28% boost in income, but 70% of that boost will go to the increased taxes, so net income boost is closer to 8%.
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Old 04-13-2017, 11:17 AM
 
Location: Paranoid State
13,047 posts, read 10,442,710 times
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Quote:
Originally Posted by TwoByFour View Post
I had always assumed our current withdrawal rate of about 3.2% would go way down when I start SS but it actually barely goes down since most of the increase from SS is eaten up with the big jump in taxes. For us, it is an almost 4x jump from what we currently pay.
Sad but true for many of us.
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Old 04-13-2017, 11:24 AM
 
29,782 posts, read 34,871,258 times
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Quote:
Originally Posted by SportyandMisty View Post
Sad but true for many of us.
It seems as if there is a range where a lot of this is more impactful. Below you have a margin of protection and above you are already hit and being hit more is not as impactful and depending on future medical cost could become minimal. Our hit becomes magnified when the first one passes.
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Old 04-13-2017, 12:06 PM
 
Location: Albuquerque NM
1,660 posts, read 1,525,919 times
Reputation: 3640
Welcome to my world! Single and pension alone ensures 85% of SS is taxed and 25% tax bracket. SS and/or 401k withdrawals start to trigger 28% tax bracket, higher Medicare Part B premiums, and potential future SS means testing. Never qualified for a tax credit and paying school taxes for children I never had. No tax break for helping out needy relatives. But I'm fortunate to have those "problems." Deferred taxes on your 401k were always a temporary benefit to be taxed in the future. If your RMDs are that much higher than your normal withdrawals, you must have done very well in the market or you chose to LBYM in retirement.
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