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Need Tax Help
Old 12-19-2018, 12:11 PM   #1
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Need Tax Help

My wife (46) and I (48) are planning on retiring in 2 years or less. I have done a lot of research and calculations, but I'm not sure if I'm missing something, so I was hoping to get some of you to help double-check my work. Our plan is to live off of my military pension and her VA Disability for the first few years until her military pension (Guard - receives it at 60) kicks in and we eventually start withdrawing from TSP and (hopefully) SS.

Here are our income projections for the first few years of retirement.

Me - retired military with $44K income ($38K in taxable income, after SBP and VA disability is deducted)
Her - VA disability with $24K income (all non-taxable)

With that, we would have an income approximately $68K/yr, but only $38K taxable. We are looking to retire in KY, which does not levy state taxes on military pensions if taxable income is below $41K, so it appears that the only taxes we would be paying would be Federal.

That said, if we file 'married, filing jointly' and take the $24K standard deduction (we probably won't have enough to itemize), we would only be paying federal tax on $14K, or about $1400/yr (~$120/month).

That sounds good to me, as we would be happy only paying that amount each year...but, I'm not sure if I'm missing something important regarding taxes. Note: I'm not including other taxes, such as property/auto taxes, as that is already figured into our budget. I'm just trying to predict what our income tax will be in retirement.

Anyone see anything that I'm overlooking?

Thanks in advance for your help.
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Old 12-19-2018, 12:15 PM   #2
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Looks like you have it right. And you will be in the 0% capital gains bracket. And you will have lots of room to do IRA conversions, if you have any. So start checking into that.

The next phase of taxes will be when SS kicks in. Might want to take a look at that, but you have a while to figure that out.

And then finally, RMD's @ 70.5. Maybe this doesn't apply, but always good to take a peek early and determine if you need to consider the tax impacts, if any.

Other than that, enjoy ER!

Just a note, the MFJ std deduction is $24,500 now. At least until 2022 or so when the Trump tax cuts kick out.
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Old 12-19-2018, 12:24 PM   #3
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Thanks for the reply. I did think about the standard deduction not staying the same. I went back a few years and saw that it was around $12K during the previous administration, so I anticipate that we may see that go down in the future. As long as it doesn't drop much below that previous mark, it should only mean another $100 or so a month in taxes, which we should be able to handle without too much difficulty.

I'm not familiar with IRA conversions, or capital gains (I'm smart about a lot of things, but understanding something like "standard deduction" is about as advanced as my financial knowledge goes ). Any good articles or websites you'd recommend about taking advantage of those conversions?

Thanks again.


Quote:
Originally Posted by corn18 View Post
Looks like you have it right. And you will be in the 0% capital gains bracket. And you will have lots of room to do IRA conversions, if you have any. So start checking into that.

The next phase of taxes will be when SS kicks in. Might want to take a look at that, but you have a while to figure that out.

And then finally, RMD's @ 70.5. Maybe this doesn't apply, but always good to take a peek early and determine if you need to consider the tax impacts, if any.

Other than that, enjoy ER!

Just a note, the MFJ std deduction is $24,500 now. At least until 2022 or so when the Trump tax cuts kick out.
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