SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I am 48. For the first time in my life, I calculated an estimate of my tax torpedo situation. I'd like people to review my math to make sure that I did the math essentially correctly given my assumptions.
My key assumptions:
1. The current tax brackets (the new ones) stay the same until my RMD's start. (Yes, I know they revert in 8 years - I'm choosing to ignore that.)
2. SS benefits estimates are in current dollars.
3. Tax brackets increase by chained CPI.
4. I do everything in nominal dollars.
So here's what I did:
RMD:
My birthday is May 1969. I figure I'll turn 70.5 in 2039 and have to take my first RMD that year based on the balance at the end of 2038, which is basically 21 years from now.
I took my current IRA balance and multiplied by 1.x%^21, where x is my estimated nominal rate of return to get my IRA balance at the end of 2038.
I looked up my RMD factor at age 70 and find it to be 27.4. I divide the result of the previous paragraph by 27.4 to get my 2039 RMD amount.
SS:
I looked up my age 70 SS benefits online. It's monthly, so I multiply by 12. It's in present year dollars, so I multiply by 1.y%^21, where y is my estimate of SS COLAs.
I assume 85% is taxable, so I multiply the previous result by 85% to get my taxable SS amount in 2039 dollars.
AGI:
I take my RMD plus my SS minus the standard deduction of $12K. (I think the standard deduction also increases by chained CPI but I chose to ignore that here.) The result is my taxable AGI in 2039.
Tax brackets:
I take the new tax bracket breakpoints from a Forbes article for my filing status and multiply by 1.02^21, because I believe they used chained CPI and it seems that chained CPI this millenium has run at just about 2%. This gives me the 2039 bracket breakpoints.
Torpedo:
I compare my 2039 AGI to the 2039 tax brackets and find that I fill some of the lower ones and part of one of the middle ones, which becomes my marginal rate. Like most who do this exercise, this marginal bracket in 2039 is a few brackets higher than what I pay today, so I should consider Roth converting more between now and then.
So my main question is, did I get the math fundamentally correct? That is, did I make any errors in the above logic which could materially affect the resulting conclusion?
My key assumptions:
1. The current tax brackets (the new ones) stay the same until my RMD's start. (Yes, I know they revert in 8 years - I'm choosing to ignore that.)
2. SS benefits estimates are in current dollars.
3. Tax brackets increase by chained CPI.
4. I do everything in nominal dollars.
So here's what I did:
RMD:
My birthday is May 1969. I figure I'll turn 70.5 in 2039 and have to take my first RMD that year based on the balance at the end of 2038, which is basically 21 years from now.
I took my current IRA balance and multiplied by 1.x%^21, where x is my estimated nominal rate of return to get my IRA balance at the end of 2038.
I looked up my RMD factor at age 70 and find it to be 27.4. I divide the result of the previous paragraph by 27.4 to get my 2039 RMD amount.
SS:
I looked up my age 70 SS benefits online. It's monthly, so I multiply by 12. It's in present year dollars, so I multiply by 1.y%^21, where y is my estimate of SS COLAs.
I assume 85% is taxable, so I multiply the previous result by 85% to get my taxable SS amount in 2039 dollars.
AGI:
I take my RMD plus my SS minus the standard deduction of $12K. (I think the standard deduction also increases by chained CPI but I chose to ignore that here.) The result is my taxable AGI in 2039.
Tax brackets:
I take the new tax bracket breakpoints from a Forbes article for my filing status and multiply by 1.02^21, because I believe they used chained CPI and it seems that chained CPI this millenium has run at just about 2%. This gives me the 2039 bracket breakpoints.
Torpedo:
I compare my 2039 AGI to the 2039 tax brackets and find that I fill some of the lower ones and part of one of the middle ones, which becomes my marginal rate. Like most who do this exercise, this marginal bracket in 2039 is a few brackets higher than what I pay today, so I should consider Roth converting more between now and then.
So my main question is, did I get the math fundamentally correct? That is, did I make any errors in the above logic which could materially affect the resulting conclusion?