I pay very little taxes in retirement, do you? (spouse, friend, accident)

[TuborgP]

Originally Posted by cb2008

Lucky you!

I don't consider that lucky, in fact I consider those having high incomes requiring taxes to be the lucky one.

[mathjak107]

exactly . gimmeee the dough and i will gladly pay my fair share of taxes . if all our income was only in the 15% bracket i doubt we would have retired early as we did living here . .

[michgc]

Question: Does it sometimes make sense to start withdrawing IRA/401k money at 59 1/2 to spread out the "income" in order to reduce tax liability? It seems many people put off withdrawing from their IRAs/401k until they are forced to take RMDs at 70 1/2, but after reading on another post on here how higher income can cause SS to be taxed and possibly push you into a higher tax bracket, I'm wondering if this might be a good strategy to spread the income out. I realize that you lose out somewhat on tax-deferred earnings.

We are not yet retired but expect that we will have about $1.5M in IRA/401k when my husband retires in about 8 years at age 59 1/2. Any insight?

[mathjak107]

a retired couple who delays social security can pull 22k of retirement money tax free just using the standard deductions and exemptions .

they can draw 40k and pay 4.50% tax . that is a gift from the tax gods . once you collect ss and take rmds that same money could see 25% tax .

you can take 8 years of 40k and deplete 320k in ira money while growing ss and pay very very little tax and reduce rmd's

[michgc]

Originally Posted by mathjak107

a retired couple who delays social security can pull 22k of retirement money tax free just using the standard deductions and exemptions .

they can draw 40k and pay 4.50% tax . that is a gift from the tax gods . once you collect ss and take rmds that same money could see 25% tax .

you can take 8 years of 40k and deplete 320k in ira money while growing ss and pay very very little tax and reduce rmd's

Thanks, Mathjak. That's what I've been thinking about lately. Right now with my husband working our income straddles the 15%/25% tax bracket each year, otherwise I would convert some IRAs to Roth each year. I've always been in the saving/saving/saving mode, but have never thought of the consequences of withdrawing all of that savings down the line. Thanks to some of your posts, I am trying to come up with a smart plan before it's too late. Of course, I know things can and will change, but I would at least like to be informed.

[mathjak107]

this is why the old school teachings are falling by the way side .

conventional advice was always spend deferred money last . new thinking is if conditions are right spend the deferred money first .

this is an example of where i see many planners drop the ball because they do not understand the 2nd half of the game well enough .

[Willistonite]

Originally Posted by mathjak107

this is why the old school teachings are falling by the way side .

conventional advice was always spend deferred money last . new thinking is if conditions are right spend the deferred money first .

this is an example of where i see many planners drop the ball because they do not understand the 2nd half of the game well enough .

Very good point. Actually I think there are very few financial planners out there that have grasp of the
tax system. Most want to sell you their securities that they make the most commission. Maybe I have
dealt with wrong ones or we don't have very good ones in my area. I found out I have done best to manage my investments myself through my own research and research my retirement financial strategy
using forums like this to develop strategies. Mathjak I respect your opinion more then any financial advisor.
Thank you!

[mathjak107]

thanks , but my advice is only what i would do and not geared for advice for anyone else

[jrkliny]

I wonder what my fair share of taxes should be. I cannot even determine how much I pay in taxes, direct and indirect. Let's see: 8 something percent sales tax, $13k property taxes, a bunch in federal and state income taxes. Should I include all extra money for healthcare that years of deductions for Medicare do not cover. Like $6000/year for supplemental insurance, the thousands my wife paid for donut hole or drugs needed but otherwise not covered? The one that galls me is tax on social security. I paid the equivalent of taxes year after year. Now that I am getting some of it back, I get taxed again.

[GeoffD]

Originally Posted by autocratic

You guys who are paying so much in taxes must be very high income.

Filing single, standard deduction, $200K AGI, your effective Federal income tax rate is a bit more than 20%. With W-2 income, you're also paying 1.45% Medicare and maxing out FICA. Uncle Sam still is only taking around 25%. If you're self-employed, paying both sides of payroll taxes is painful but that's not most people.

Only 6% of wage earners max out their Social Security contribution. That jumped to about $125K this year. You have to be making really big money before Federal income taxes become painful.