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Old 06-27-2019, 09:28 AM
 
Location: NYC
2,908 posts, read 1,588,036 times
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Quote:
Originally Posted by HeelaMonster View Post
First, congrats on being in what appears to be great financial shape! But please help me understand the sentences above... Given the context, I assume this means you are RECEIVING those amounts annually (and not that those are the total amounts you "have"). If so, you are receiving 103k per year, and indicate that "leaves you 40k at the 12% bracket."

That's the point I get confused, because current tax brackets (Married Filing Jointly) are:
$0-19,400 (for 10%)
$19,401-78,950 (for 12%)
$78,951-168,400 (for 22%)

I could well be misunderstanding, but how does $103k or $143k leave you still sitting in the 12% bracket? (I'm not questioning your circumstances... just trying to make sense of numbers, and apply them to my own planning).
The way I read it they have pension income of $42K + SS income of $23K; 50% of SS = $12.5 + $42K pension = $54.4K annual taxable income: 12% bracket. ($38K is after-tax funds in the bank already.)
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Old 06-27-2019, 09:30 AM
 
394 posts, read 157,047 times
Reputation: 1103
I live in California. We are taxed for everything.
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Old 06-27-2019, 09:30 AM
 
476 posts, read 94,825 times
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Quote:
Originally Posted by Hefe View Post
The way I read it they have pension income of $42K + SS income of $23K; 50% of SS = $12.5 + $42K pension = $54.4K annual taxable income: 12% bracket. ($38K is after-tax funds in the bank already.)
Aha, OK.... and thanks! I figured it was a reading comprehension problem (on my part).
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Old 06-27-2019, 10:17 AM
 
Location: Proxima Centauri
4,815 posts, read 1,987,719 times
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Is there an HR number associated with the bill?
This is definitely a middle class bill. Does it have Republican support?
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Old 06-27-2019, 10:23 AM
 
Location: Proxima Centauri
4,815 posts, read 1,987,719 times
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Quote:
Originally Posted by elnrgby View Post
Btw, this proposal of Congressman Larson (D) from CT has been around for a long time, and I don't think it has any chance of passing during Trump presidency. In addition to increasing the minimum SS income, raising the SS taxability threshold to $50k (in AGI+half SS amount), and computing COLA so that it takes into account higher medical expenses of the elderly, the bill also calls for increasing SS taxes by 1.2% of all income below $130'sk (2.4% increase for self-employed people like me who pay all of their SS taxes, rather than 50% being paid by the employer... since we are our own employer), plus also the same tax on all income above $400k (right now, no SS tax is paid on income above around $130s - per Larson, there would be no SS tax on income between $130sk and $400k, but anything earned above $400k, as well as of course below $130s k, would be taxed for SS). Larson also wants to combine SS pension and disability into the same fund.



Trump people are in favor of raising minimum age when one can collect the full amount of SS to 70, which would produce roughly the same savings for SS, by decreasing SS payout for each SS recipient over lifetime (and decreasing it very dramatically for those who start collecting SS at the age of 62).


There. I personally think Trump's approach is fairer to people who work in general, while some elements of Larson's approach favor the middle-middle class (ie, people who typically do save for retirement, but cannot realistically save more than $1M), the group of people who receive the worst tax flogging in general so probably deserve a bit of a break in their old age :-). I'm a centrist and a swing voter, not married to a particular party, so would just have to think more about this if it becomes a major issue in the next election.

Don't be too surprised if the republicans are for this with a big election coming. It also fits into their Grover Norquist mind set to bust the budget and go after entitlements.
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Old 06-27-2019, 01:12 PM
 
Location: Grovetown, Ga
21 posts, read 14,768 times
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Quote:
Originally Posted by Hefe View Post
The way I read it they have pension income of $42K + SS income of $23K; 50% of SS = $12.5 + $42K pension = $54.4K annual taxable income: 12% bracket. ($38K is after-tax funds in the bank already.)
That is correct except that doing approx 40K in conversions pushes 85% of the SS (roughly 19300 into the taxable column so we have 42K pension + 19300 taxable ss + 40K conversion comes to little over 100K. The 12% bracket was 77,400 in 2018 + 24K standard deduction + add'l 1,300 for DH being over 65. Basically, married filing joint can actually have 102,700 at 12% if one over 65. Things get a little more complicated when you have to calculate in interest, dividends, and LT cap gains but if you hold of doing some of the conversions in Nov or Dec when you should have pretty accurate numbers to plug in, you can push it right up to the edge of 12% - which I do.
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Old 06-27-2019, 01:38 PM
 
476 posts, read 94,825 times
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Quote:
Originally Posted by goingstrong View Post
That is correct except that doing approx 40K in conversions pushes 85% of the SS (roughly 19300 into the taxable column so we have 42K pension + 19300 taxable ss + 40K conversion comes to little over 100K. The 12% bracket was 77,400 in 2018 + 24K standard deduction + add'l 1,300 for DH being over 65. Basically, married filing joint can actually have 102,700 at 12% if one over 65. Things get a little more complicated when you have to calculate in interest, dividends, and LT cap gains but if you hold of doing some of the conversions in Nov or Dec when you should have pretty accurate numbers to plug in, you can push it right up to the edge of 12% - which I do.
Thanks for providing additional context for numbers in your original post. I follow you now.

But now the last sentence raises another question I've been wondering about. Namely, timing of these tax-efficient moves. Other than making educated guesses about the amount of additional income one may have coming in during the year ("prior performance is no guarantee of future"... etc), I can't think of any good, easy way to estimate where one will fall in the tax brackets, to know how much room you have to do some conversions. Does anyone have any tricks for that, other than simply waiting til late in the year, and then making some quick conversions in December?? We typically don't get confirmations from mutual funds until the new year, so I'm seeing the room (or need) for lots of guess work or bird-dogging information.

Last edited by HeelaMonster; 06-27-2019 at 01:52 PM..
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Old 06-27-2019, 03:09 PM
 
Location: Grovetown, Ga
21 posts, read 14,768 times
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Also I wonder if it is wise to continue doing conversions if there is a possibility that the ss taxibility threshold will be increased in the next year or two. The current thresholds have been in place since the early 80's and I would think there would be bipartisan support to increase them. But then I am more logical than political.
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Old 06-27-2019, 03:34 PM
 
Location: SoCal
13,227 posts, read 6,331,374 times
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Quote:
Originally Posted by goingstrong View Post
Also I wonder if it is wise to continue doing conversions if there is a possibility that the ss taxibility threshold will be increased in the next year or two. The current thresholds have been in place since the early 80's and I would think there would be bipartisan support to increase them. But then I am more logical than political.
As the current version of the house, it only extents 2 more years. Nothing to get too excited about.
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Old 06-27-2019, 03:48 PM
 
476 posts, read 94,825 times
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Quote:
Originally Posted by goingstrong View Post
Also I wonder if it is wise to continue doing conversions if there is a possibility that the ss taxibility threshold will be increased in the next year or two. The current thresholds have been in place since the early 80's and I would think there would be bipartisan support to increase them. But then I am more logical than political.
...Keep talking on that point...

My gut response is that... IF you are in a situation where (a) you are going to get hammered by RMD if account left alone, and (b) you can stay in the 10 or 12% bracket... then it remains reasonable to keep doing conversions. In other words, it pays to keep whittling down those future RMDS while you have the opportunity, regardless of what happens with SS taxability threshold. But I may be overlooking something (as I often am!) and am interested in hearing your reasoning?
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