Math/tax question

[cute fuzzy bunny]

Almost anywhere would be cheaper tax-wise than California except for possibly New York, New Jersey and New England.

Thats why I said "early retiree".

My property taxes are fixed for life, with only small increases allowed, until I decide to move. We dont pay much in income taxes. I buy most big ticket items on the internet and like a weasel dont pay sales tax on it. Most of the rest of the stuff we buy isnt taxed with a sales tax.

So the actual tax bite isnt that bad. Many equally nice places to live whack the hell out of you on property taxes. Cant get away from those too easily.

Plus theres nice weather, low humidity, no serious bugs, no hurricanes, no earthquakes in my area, no tornadoes, low likelihood of drought in our area, and there are a half dozen places within a few hours drive that people from all over the world come to vacation at...so no need to pay big bucks to travel or take a vacation.

Yep...take a vacation...from being on permanent vacation...

 

[jIMOh]

Spoken like a true Californian.

Almost anywhere would be cheaper tax-wise than California except for possibly New York, New Jersey and New England.

Ohio is the 5th highest tax burden in the USA.

NY exempts the first 20k retirement income per person from state tax (so I am told).

The OP need to give themselves some tax choices in retirement- if all money is tax deferred there are only a given number of options.

Add a Roth account in and options change
Add a taxable account in and options change
add muni bonds, dividend stocks and more to taxable account for even more options.
Add an annuity for even more options.

The choices should be able to lower the tax bracket.
Roth conversions should also be considered.

 

[2B]

Add a Roth account in and options change
Add a taxable account in and options change
add muni bonds, dividend stocks and more to taxable account for even more options.
Add an annuity for even more options.

At least you listed the annuity last. I don't see where they would beat laddered CDs IMHO but that's already been beaten to death.

I definitely agree with a diversification of assets to address taxable income. It's an important topic that I think many people neglect in the period leading up to retirement and afterwards.

I knew a guy so proud of himself that he paid zero income tax. I asked about why he didn't take out some from his IRA. He was very smug about not having to do that until 70 1/2. I could not convince him to use up his low tax brackets now with a Roth conversion.

 

[Nords]

Lawman, let me elaborate on a point that's been mentioned in other posts.

If you retire early (before a pension has to pay out, before you take Social Security) then your earned income will plummet to... zero. At that point, while you're living off your dividends and perhaps selling equities, you can elect to roll over your tax-deferred investments to an IRA and then convert that IRA to a Roth IRA. You'll pay tax at the income tax-bracket rates, but starting from zero and with a standard deduction you can convert quite a bit every year and pay tax within the 10-15% brackets. After the conversion, Roth IRA withdrawals are not taxed.

Another option to lower RMDs would be to start a 72(t) withdrawal when you're younger than 59.5. But you'd be losing the advantage of tax-deferred compounding.

And finally, the longer you delay taking SS, the less taxes you'll pay on everything (including the SS distributions).

My problem with that is that so far I havent seen a state with taxes that would be lower for an early retiree (income tax doesnt matter, low sales/property/investment) that wouldnt suck to live in.

*Ahem.* Remember those old Bloomberg articles ranking the nation's top tax-friendly states for retirees? Remember which state happened to be #1 a couple of years and has lowered its income-tax rates since then?

But maybe you'd prefer cheap real estate and Prop 13.

 

[2B]

*Ahem.* Remember those old Bloomberg articles ranking the nation's top tax-friendly states for retirees? Remember which state happened to be #1 a couple of years and has lowered its income-tax rates since then?

But maybe you'd prefer cheap real estate and Prop 13.

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