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Old 04-18-2011, 11:12 AM   #21
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Midnighter777, it really will make a difference if you are pulling money out of your tax deferred accounts (401k, IRA) or your taxable accounts or Roth. Say you make $100k a year from a job. If you pull $100k out of your tax deferred 401k or IRA, everything else being equal, you will pay the same in taxes as you did from the $100k job. If you take the same 100k from your taxable accounts, then you pay the lower rate on dividends and cap gains, and pay nothing on withdrawn principle. Also, when taking from your taxable account, you may have muni bonds that throw off fed and state tax free interest. So, this issue of taxes is pretty individual and depends a lot on how and where you saved, and in what it is invested if it is in a taxable account.

I'm not FIREd yet, but for my own planning purposes, I keep my estimated tax rate at about 25% of income after itemized deductions. I believe this is a high estimate, but you never know. I have run several tax calculators based on my own investment situation (60% equity with an estimated 2.5% dividend yield, 40% bonds of which most are tax free munis yielding around 5.8%) and find that this 25% figure can equate to about 6-8% effective over all my income streams. All of that is from taxable accounts. 6 year after I FIRE, my deferred compensation plan starts paying out. When that happens, uncle Sam, and uncle Jerry in California start to cash in, for 10 years. This is simply too far off to estimate, as the tax laws are likely to change dramatically between now and the start of the payout in 8-10 years.

Good luck.

R
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Old 04-18-2011, 11:33 AM   #22
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Originally Posted by Zero View Post
I'd be interested in your opinion of the "correctness" of the Bankrate calculator, if you have a few minutes to try it out. My own assessment was that it covered the vast majority of tax situations and performed very well against TurboTax.

I'm interested because I plan to use it as part of my own future planning.
Sorry, I clicked on your link because I had never heard of that calculator and was curious about it, but it appears to need something downloaded that I don't have on the Mac. So I'll just turn it around and provide you the link for Taxcaster (also made by TT) TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

I think I like it better than the HR Block one because it's easier to play what if w/o having to enter data all over again. You can also enter gross SS w/o having to figure the taxable part.....kind of looks like yours might require the taxable part but I might be wrong.
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Old 04-18-2011, 11:37 AM   #23
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Originally Posted by Zero View Post
I'd be interested in your opinion of the "correctness" of the Bankrate calculator, if you have a few minutes to try it out. My own assessment was that it covered the vast majority of tax situations and performed very well against TurboTax.

I'm interested because I plan to use it as part of my own future planning.
I just tried it and found it quite helpful looking ahead at 2011. There are small bracket changes between 2010 and 2011, but not meaningful.

As far as accuracy, seems very likely that it would be accurate. If there is one thing computers do well it is add and subtract, and the relevant algorithm once you have categorized income is straightforward.

This beats loading up my TTax files with dummy tax scenarios, I thank you for posting it.

Ha
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Old 04-18-2011, 12:32 PM   #24
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Quote:
Originally Posted by kaneohe View Post
Sorry, I clicked on your link because I had never heard of that calculator and was curious about it, but it appears to need something downloaded that I don't have on the Mac. So I'll just turn it around and provide you the link for Taxcaster (also made by TT) TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

I think I like it better than the HR Block one because it's easier to play what if w/o having to enter data all over again. You can also enter gross SS w/o having to figure the taxable part.....kind of looks like yours might require the taxable part but I might be wrong.
I tried this one also. For me, the plus is that SS is entered as received. But I like the format and output of the one at Bankrate better.

I suppose there may be situations in the future when my SS is not taxed to the max, but it hasn't happened yet. I restart this year after my payback and refile, so I will have a partial SS payment this year relative to expected payments in future years.

Ha
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Old 04-18-2011, 01:34 PM   #25
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Originally Posted by Rambler View Post
Midnighter777, it really will make a difference if you are pulling money out of your tax deferred accounts (401k, IRA) or your taxable accounts or Roth. Say you make $100k a year from a job. If you pull $100k out of your tax deferred 401k or IRA, everything else being equal, you will pay the same in taxes as you did from the $100k job. If you take the same 100k from your taxable accounts, then you pay the lower rate on dividends and cap gains, and pay nothing on withdrawn principle. Also, when taking from your taxable account, you may have muni bonds that throw off fed and state tax free interest. So, this issue of taxes is pretty individual and depends a lot on how and where you saved, and in what it is invested if it is in a taxable account.

I'm not FIREd yet, but for my own planning purposes, I keep my estimated tax rate at about 25% of income after itemized deductions. I believe this is a high estimate, but you never know. I have run several tax calculators based on my own investment situation (60% equity with an estimated 2.5% dividend yield, 40% bonds of which most are tax free munis yielding around 5.8%) and find that this 25% figure can equate to about 6-8% effective over all my income streams. All of that is from taxable accounts. 6 year after I FIRE, my deferred compensation plan starts paying out. When that happens, uncle Sam, and uncle Jerry in California start to cash in, for 10 years. This is simply too far off to estimate, as the tax laws are likely to change dramatically between now and the start of the payout in 8-10 years.

Good luck.

R
Thank you for explaining that there is difference if I am taking money out of my tax deferred accounts (401k, 437) or my taxable accounts or Roth. Initially, most of the withdrawal money will come from my taxable accounts. Twelve years from my planned early retirement date, I will be eligible for a defined benefit pension and then after that I will be eligible for Social Security too.

The 6-8% effective tax rate over all of your income streams is useful to know. Thanks.
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Old 04-18-2011, 10:54 PM   #26
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I just tried it and found it quite helpful looking ahead at 2011. There are small bracket changes between 2010 and 2011, but not meaningful.

As far as accuracy, seems very likely that it would be accurate. If there is one thing computers do well it is add and subtract, and the relevant algorithm once you have categorized income is straightforward.

This beats loading up my TTax files with dummy tax scenarios, I thank you for posting it.

Ha
Hey, glad it was useful. I found it to be really easy to use and covered just the right amount of typical income sources to make it useful to most folks' tax situation.

I used it to try to predict taxes for some what-ifs last year involving IRA conversion to Roth and it really helped determine my thresholds and I was able to keep in the bracket I wanted.
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Old 04-19-2011, 12:08 AM   #27
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I used it to try to predict taxes for some what-ifs last year involving IRA conversion to Roth and it really helped determine my thresholds and I was able to keep in the bracket I wanted.
Yes, that is what I am trying to do also. I made a pretty good spreadsheet that projects some years into the future, and categorizes incoem by type, and in which both the brackets and the rates are variables. But this calculator is a great check on that, as well as being quick.

Ha
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Old 04-19-2011, 07:25 AM   #28
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Anyone know where ther might be a state tax estimator?
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