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Old 04-05-2012, 02:57 PM   #21
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aha, OK, guess that works provided the couple has no other income, such as from tIRA or SS
That's one of the things that makes the example a tad far-fetched.
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Old 04-05-2012, 03:15 PM   #22
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That's one of the things that makes the example a tad far-fetched.
Not the $10MM portfolio?

Besides, SS and RMD's don't have to apply to anyone under 70, which is lots of folks. Until then . . .

Edit to add: Aren't SS payments kind of like a reverse tax? The government sending me money? If they take some back as a "tax" or given me less to start with, does it matter?
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Old 04-05-2012, 04:09 PM   #23
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It is pretty well-known around here that wealthy retired folks should not have to pay any income taxes in retirement, so this thread is a surprise to me.

So I will link yet again: Bogleheads • View topic - How to pay ZERO taxes in retirement with 6-figure expenses
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Old 04-05-2012, 04:36 PM   #24
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Congrats, 1.6% kicks butt. I yearn to pay a lower rate. Then I might take part in some protest marches, bond with the po-folks sucking up 99 weeks of unemployment and eternal gubment handouts, rail against the evil rich oppressors. Retirement could be fun!
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Old 04-05-2012, 04:47 PM   #25
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I just realized that if you keep your annual income in the 15% tax bracket you pay 0% tax on qualified dividends. I plan to live of $14k rental income and $14k of dividends. Assuming those dividends are all qualifying and I just take the standard deduction and one exemption I end up paying $450 tax.
I take $9500 off my regular income for my standard deduction and one exemption leaving $4500 to be taxed at the 10% level which is $450. There is no tax due on the $14k of qualified dividends as I'm in the 15% tax bracket. Combine this with a ROTH and you can almost say goodbye to taxation.
Better enjoy that now, as the dividend taxation scheme expires at yearend 2012. Who knows what may replace it?

Ha
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Old 04-07-2012, 04:46 AM   #26
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I appreciate this thread - I really have to look at tax laws for my taxes beginning next year. Everything's starting to change, in our circumstances.
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Old 04-07-2012, 11:05 AM   #27
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Our tax code is in love with passive income. So much so, it is quite possible for a retiree living off of a large portfolio to pay almost nothing in taxes. Consider the case of a married couple with a $10MM portfolio, split evenly between muni bonds and individual stocks yielding 3% a piece. That portfolio will generate $300,000 in annual income and a tax payment of just $8,970 . . . for an effective tax rate of 2.9%.
And then the market goes down 30% and you pay 8 grand in taxes in each of the next ten years until you "break even". lol
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Old 04-07-2012, 01:27 PM   #28
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That's one of the things that makes the example a tad far-fetched.
DW wondered what made me chuckle as I was reading this thread. When the $10M port was mentioned, I sorta flashed back to the old Steve Martin bit about not paying taxes on $1M. It was something like: "First, get a million dollars. Don't pay the taxes. If the IRS ever comes asking about it say 'I forgot.'"

On a bit more serious note, I think all of this discussion points out the reasons one needs to carefully plan one's retirement savings BEFORE they get close to the big day. Having a lot in deferred accounts makes it difficult to avoid taxes in retirement. The other side of that argument is that you will pay more taxes when w*rking. So, as someone mentioned, they get you one way or the other. True, you can play lots of games through out your life to avoid taxes, but none of us gets out of here without being skinned to some extent. If the gators don't getcha, the skeeters will. YMMV
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Old 04-07-2012, 01:42 PM   #29
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And then the market goes down 30% and you pay 8 grand in taxes in each of the next ten years until you "break even". lol
Or it goes up 30% and I still pay $8K . . . not sure what the point is.
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Old 04-07-2012, 03:52 PM   #30
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Or it goes up 30% and I still pay $8K . . . not sure what the point is.
I didn't read your post very well. I now see where you stated investment in individual stocks not stock mutual funds. My bad. Nonetheless, it seems unfair to tax someone taking that much risk that much just to keep pace with inflation.
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Old 04-07-2012, 04:13 PM   #31
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I didn't read your post very well. I now see where you stated investment in individual stocks not stock mutual funds. My bad. Nonetheless, it seems unfair to tax someone taking that much risk that much just to keep pace with inflation.
And someone with 10 million in savings would have most likely paid 5 million in income taxes getting there.
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