obgyn65
Thinks s/he gets paid by the post
Hello W2R - I am planning on 28% average tax rate. Can I ask you how have you been able to reduce it to 14% ? Please feel free to email me if you do not wish to share details on this board. Thank you.
Post retirement tax rate
- Thread starter Chuckanut
- Start date
Once my wife stops working our FIT rate should go from 20+% to about 3% according to Taxcaster. And no more payroll tax. No SS, no pension, no taxable IRA distribution, mostly qualified dividends, some munis, some return of capital and a small amount of taxable interests.
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W2R
Moderator Emeritus
I didn't do anything.
My income consists of my tiny federal pension, my monthly withdrawal from the TSP, and dividends from my taxable accounts. Actually my taxes would be less than they are right now, if I withdrew less from the TSP than I am at present. I am purposely trying to take this taxable income now before I start Social Security, for tax reasons. My house is paid off so I don't need more income to pay a mortgage or rent, and that may help.It sounds likely that my total income is less than what you are planning on for retirement.
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As others have mentioned, ER gives you some opportunities to manage your tax rate. This year will be my first "low" year with a rate somewhere around 4-5% before ROTH conversions. Like many, I will probably convert up through the 15% bracket.
The other thing I did was front end load my charitable deductions during my last high rate year to maximize the deduction value. I am expecting my pre-Roth conversion rate to be in low single digits for 7 more years, then my pension starts and the rate will rise. When RMDs start, game over. During my last couple of high-rate years I pre-funded our charitable deductions through age 69.
The other thing I did was front end load my charitable deductions during my last high rate year to maximize the deduction value. I am expecting my pre-Roth conversion rate to be in low single digits for 7 more years, then my pension starts and the rate will rise. When RMDs start, game over. During my last couple of high-rate years I pre-funded our charitable deductions through age 69.
meierlde
Thinks s/he gets paid by the post
Back when I was paying estimated taxes turbo tax printed the vouchers out as part of the print return for filing entry.
Their help confirms this:
Why Does TurboTax Print Estimated Tax Payment Vouchers? - TurboTax® Software Support
freebird5825
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
My effective tax rate (sez TurboTax) for federal return was 10.55% for 2010. I am still able to itemize, due to school/property taxes plus some other miscellaneous minor deductions. I am filing Single, retirement status FIREd and not drawing SS (age 53).
Both of my current income streams, CSRS federal survivor pension and federal TSP 401(k) converted to fixed annuity, are not taxable by NYS.
I pay fed tax on both, of course.
The NY state income tax burden disappearing is where I saw the biggest advantage for no longer w*rking.
Both of my current income streams, CSRS federal survivor pension and federal TSP 401(k) converted to fixed annuity, are not taxable by NYS.
I pay fed tax on both, of course.
The NY state income tax burden disappearing is where I saw the biggest advantage for no longer w*rking.
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tightasadrum
Full time employment: Posting here.
I've been moving big chunks of money from deferred accounts to roth accounts for several years up to 15% max tax rate. This will be the last year I'll move so much since company pension started in October (although I haven't filed for it yet, timing first three checks for January.) Then in October next year I planned to start SS. But...maybe I should delay that until January 2013 to move more to roth. When I look back to the early years that I contributed to my 401K, you always heard that you would have lower taxes when you retired which would save you a bundle. No one thought to mention that this all changed at 70 1/2. It will be a killer.
I'm also doing Roth conversions to the top of the 15% bracket. I turned 62 last April and will also take SS in January of 2013 as DW turns 62 in Dec of 2012. I want to move as much as possible till that date.
martyp
Thinks s/he gets paid by the post
My DW is still w*rking so our income is still relatively high plus I live in CA so my pension is taxed. This is my first year in ER, starting March 1st, so I still haven't seen what my taxes will be. This is the only big item on my budget planning worksheet that I don't have a good handle on. I extrapolated from last years taxes using Turbo Tax. I'll have to see how that works out.
https://www.eftps.gov/eftps/
All online, payments scheduled in advance for when you want them deducted, no small forms required...
Yep, I've used that for a few years.
The problem with paying estimated tax for a bonus in the 4th (or any) quarter is that you will have to figure your taxes for each of the four quarters and make sure that you paid enough tax in each to satisfy the IRS. That was a real PITA when I had lots of investment transactions and oddball income to account for.
Withheld taxes (and equal quarterly estimated tax payments) are assumed to have been paid throughout the year, so that if the final total is correct you won't have to worry about the timing. I was able to have most of DW's paycheck withheld for the month of December the second time I ran into a bonus problem. That was much easier.
donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
If we find out in time I would do that but we would probably hear about it after my final pension check is issued. I'm not going to worry about it, the amount probably wouldn't throw us off enough to incur a penalty.
We're self-employed and pay estimated taxes. We obviously have fairly erratic income. There are ways to address this. The easiest one is to pay 100% of the tax you paid for the previous tax year, in four equal installments, as your "estimated taxes". Even if you made more money this year, you just pay the extra tax in april and you won't get a penalty.
The other way is to pay 90% of the actual tax you owe, in four equal installments. Useful if you expect much lower tax bill this year compared to last.
The other way is to pay on a quarterly basis roughly what you think you really owe (ie., a good estimate) and not do equal installments at all. This is useful if you expect low income in the first half of the year, and high income in the second half or the last quarter. But in April you have to fill out another form and show each quarter's income. (We did it once in 2008 when we moved state in the 2nd quarter, and didn't do much work in the 1st quarter as the house was busy being decorated and we were busy packing. Normally we pay based on the last year's taxes, but that killed our cash flow in the first half of the year when we needed the money for repairs and moving expenses etc.)
The other way is to pay 90% of the actual tax you owe, in four equal installments. Useful if you expect much lower tax bill this year compared to last.
The other way is to pay on a quarterly basis roughly what you think you really owe (ie., a good estimate) and not do equal installments at all. This is useful if you expect low income in the first half of the year, and high income in the second half or the last quarter. But in April you have to fill out another form and show each quarter's income. (We did it once in 2008 when we moved state in the 2nd quarter, and didn't do much work in the 1st quarter as the house was busy being decorated and we were busy packing. Normally we pay based on the last year's taxes, but that killed our cash flow in the first half of the year when we needed the money for repairs and moving expenses etc.)
justplainbll
Recycles dryer sheets
Depends on the skills you developed when you were employed and how successfully you can utilize these skills after retirement.
Every GOP candidate has a new tax plan, and while I know the chances are slim any of these will make it to law - what if one did? What if we move to more of a consumption tax with much lower income taxes (like the 9-9-9 plan)? How would that work with all of the people with Roth IRA's, Roth 401k's and those converting to Roth's - that may have already paid taxes at a 30%+ rate?
I also have a taxable portfolio with well over six figures of unrealized capital gains. Since most of these new tax plans say they will exempt L/T cap gains and dividends, should I sit tight on these gains for a while to see how it turns out?
Just one more reason these major tax change plans will never work, but it's something to think about.
I also have a taxable portfolio with well over six figures of unrealized capital gains. Since most of these new tax plans say they will exempt L/T cap gains and dividends, should I sit tight on these gains for a while to see how it turns out?
Just one more reason these major tax change plans will never work, but it's something to think about.
Ed_The_Gypsy
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Nords, what is a 'pension'
?
justplainbll
Recycles dryer sheets
The consumption tax is likely to punish those with substantial holdings on which income tax has already been paid. It promises to be an additional tax on money that has already been taxed.
To stimulate the economy
, the exemption of L/T cap gains and dividends might exclude assets acquired prior to the enactment of the exemption.
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The consumption tax is likely to punish those with substantial holdings on which income tax has already been paid. It promises to be an additional tax on money that has already been taxed.
To stimulate the economy
I would think that any major tax law change would have some grandfathering in it, which would get complex. Anyway, I would sure like to see the elimination of ferderal taxes on cap gains and dividends!
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I don't know of any example where changes in American tax law included grandfather clauses. Perhaps an example would be allowing some form of depreciation schedule that had already been started by a given taxpayer of company.
Ha
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OP
OP
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
A consumption tax is a great way to get tax dollars out of all those middle class Joes and Janes who have been putting money away in tax privileged savings. What a great idea for politicians who can't limit their spending!!
W2R, is this your effective tax rate after subtractions such as deductions and exemptions, etc. If it is then mine too is about 13.3. Even though the US tax structure can be complicated for some folks I hope Congress doesn't change a thing. I know one thing that flat tax business the Republicans are touting wouldn't do me any favors.
W2R
Moderator Emeritus
No, you're right - - I didn't take any deductions or exemptions into account, so it's not completely accurate. I just took the simple route - - divided the taxes paid by my income. Your tax rate is lower than mine.
W2R
Moderator Emeritus
No big deal - - we went through worse and survived in 2008-2009, right? Let's just hang on for the ride, and then we can ride the rollercoaster back up.
Oh, I'm not worried just making small talk. I'm just anxious to get to my 100th post so maybe I won't be considered a newbie anymore. I enjoy you and others expertise here. Thank you.No big deal - - we went through worse and survived in 2008-2009, right? Let's just hang on for the ride, and then we can ride the rollercoaster back up.
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