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Basic Tax Planning Question
Old 12-04-2012, 01:09 PM   #1
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Basic Tax Planning Question

So as I plan for retirement, I have a budget built with my estimated costs mortgage, utilities, insurance, travel, food, etc. This adds up to $77k annually. When I am figuring what my nest egg needs to be, what number should I use for taxes? I was figuring I would use 20% for taxes and so I would need a recurring stream of $96k (77k/.80). But wait a sec....I was thinking of being a working guy. My tax burden should be lower because part of the withdrawl is on money I already paid taxes on and part with be dividends right? How should I figure this?

Note, my savings are all held in taxable accounts not 401k or anything like that.
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Old 12-04-2012, 01:16 PM   #2
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The best way to do it is run some ""what if" situations in TurboTax or some other tax prep. program. That will give you a basis of what your tax liability can would be today, then you can guess how that might change in the future...
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Old 12-04-2012, 02:16 PM   #3
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This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator
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Old 12-04-2012, 02:23 PM   #4
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Shabby -

Your basic assumption is correct - depending on the cost basis of the underlying assets, the cash you withdraw will only be PARTLY taxable. Your statements probably have the cost basis listed. That will help you decide WHICH items to liquidate as you draw down.

DON'T forget State taxes - here in California you QUICKLY get to the 9%+ marginal rate.
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Old 12-04-2012, 03:19 PM   #5
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Ran some numbers on TurboTax and my best guess is 10%. This makes a big difference in my calculations which I used 20% for. Very exciting stuff.

Basically I live off of dividends on Bond Funds, bit of principle, some part time work, write off interest on the mortgage, grab social security in 20 years and life should be good.
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Old 12-04-2012, 09:55 PM   #6
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I use my own software program to do the calculation for each retirement year, including capital gains, IRA's, Roth IRA's, and deductions. Kind of tough to figure out the effects of Roth conversions without including the tax effects. You could do something similar in Excel. I would think i-orp.com would be able to help as well.
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Old 12-05-2012, 06:35 AM   #7
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After reading this thread I realize the planned tax rate I am using once FIREd (22%) may be too high.
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Old 12-05-2012, 09:03 AM   #8
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Quote:
Originally Posted by pb4uski View Post
This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator
Son of a gun. I've been using TurboTax since fire was discovered (or thereabouts), and never noticed that site. Nice quick and dirty estimate. Thanks!!!
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Old 12-05-2012, 09:42 AM   #9
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Quote:
Originally Posted by pb4uski View Post
This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

H&R Block has one, too.
Free 2012 Tax Estimator & Tax Return Calculator - H&R Block®
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Old 02-14-2013, 04:41 PM   #10
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I was not aware of these either, but unless I am missing something, neither of these calculators model the 0% Capital Gains tax for those of us that can stay in the 15% marginal bracket....back to Excel
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Old 02-14-2013, 06:08 PM   #11
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I was not aware of these either, but unless I am missing something, neither of these calculators model the 0% Capital Gains tax for those of us that can stay in the 15% marginal bracket....back to Excel
Taxcaster models the 0% long-term cap gains tax rate for low-income folks just fine.
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Old 02-14-2013, 06:16 PM   #12
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I thought everybody used the TurboTax TaxCaster. It is a very handy tool.
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Old 02-14-2013, 06:18 PM   #13
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I have an Excel spreadsheet that models the tax calculations. It has tax parameter inflation escalation as well. Since all of my income and expense projections are escalated by inflation, this fits well.
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Old 02-14-2013, 09:16 PM   #14
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Taxcaster models the 0% long-term cap gains tax rate for low-income folks just fine.
so does the H&R Block one................
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