Questions about taxes at age 70...401k, SS, and pension

thefed · 06-17-2007, 07:51 PM

Sooo...of all people, MY grandpa...MY grandfather is asking me to help him through is plans for retirement. He's 70, his body isnt working too well, and hes afraid to talk about it with my grandma...very set in her ways.

Basically, I'm a bit confused about the tax aspect of the whole thing. He has 1200/mo coming from soc security. 1600/mo from his city pension. And 125k in a 401k. How are taxes accounted for?

Does soc security take taxes out, or do you pay @ the end of the year? Does the figure he got from soc security saying "you will be recieving 1200/mo" mean that is before or after taxes?

Does a pension usually deduct them for you, or do you pay at the end of the year? Same thing... i assume his figure of 1600 he'll get is before tax.

401k withdrawals I assume are taxed at the end of the year, at his rate when you add in the pension and soc security. Correct? Is it typical, or even possible, to simply use the 401k in april to come up with the previous years tax $....and then pay those taxes next year...and so on?

Basically looking for some good general info on taxes for him at this stage in his life. Maybe a good link or 2?

Thanks

JustCurious · 06-17-2007, 08:10 PM

Home Page - NAPFA - The National Association of Personal Financial Advisors

old woman · 06-17-2007, 09:36 PM

He can have withholding taken from his pension. His withdrawals from his 401K or IRA are taxable and his SS and his wife's SS will be taxable since he has some income. They should pay estimated taxes in April, June, Sept and Jan the following year. If he hasn't started taking his 401K he may end up double taxed the first year since he will have two withdrawals. When he is 70.5 he has until April 15 the following year to withdraw based on life expectancy tables in Publication 590 but if he waits he will need to withdraw again by 12-31 so twice in one year. The amount the SS gave him is what he gets before Medicare is deducted. SS may be non taxable if his income is too low or could be partially taxable. He can go to a planner or plug the amounts into some tax software to see what his tax liability might be. Make sure the year he retires he pays in at least as much as his liability then in future years 100% of the year before on the 15th of each of the months Apr, Jun, Sep and Jan.
He should talk to his wife even if she is set in her ways she might want to know about his problems.

Bikerdude · 06-17-2007, 10:05 PM

Based upon his income alone (SS & pension) he does not owe any federal income tax. Even if he takes 5K from his 401K he will only owe about $15.00 in tax. You will have to add Grandma's SS to this to get a accurate estimate. Use this link to calculate taxable SS.

How Much Of My Social Security Benefit May Be Taxable?

thefed · 06-17-2007, 10:16 PM

Quote:

Originally Posted by Bikerdude

Based upon his income alone (SS & pension) he does not owe any federal income tax. Even if he takes 5K from his 401K he will only owe about $15.00 in tax. You will have to add Grandma's SS to this to get a accurate estimate. Use this link to calculate taxable SS.

How Much Of My Social Security Benefit May Be Taxable?

interesting. how did you calculate that?

thefed · 06-18-2007, 08:34 PM

Quote:

Originally Posted by Bikerdude

Based upon his income alone (SS & pension) he does not owe any federal income tax. Even if he takes 5K from his 401K he will only owe about $15.00 in tax. You will have to add Grandma's SS to this to get a accurate estimate. Use this link to calculate taxable SS.

How Much Of My Social Security Benefit May Be Taxable?

ive toyed with this calculator, and have not come up with your figures. can you guide me?

Bikerdude · 06-18-2007, 10:53 PM

Quote:

Originally Posted by thefed

ive toyed with this calculator, and have not come up with your figures. can you guide me?

Maybe I should have said "additional" tax on SS income.

I put in married filing jointly. 15% tax bracket. $19,200 per yr. pension($1,600/mo. x 12) plus $14,400 in SS ($1,200/mo. x 12). Hit submit. Result = no additional tax due on SS income

Running a tax program says they owe $170.00 in total tax if that's what you're talking about. Not much to worry about IMHO.

thefed · 07-29-2007, 11:53 AM

Well my grandpa was hospitalized (psych ward) saturday ebcause he is having a serious breakdown, all revlving around his retirement plans! Apparently i wasnt getting thru to him that he'd be okay...he lost it

nteresting i find this post today. my grandfather, 73 yrs old, was hospitalized the other day for excessive depression/mental breakdown
I came here asking for some advice because he was ovewhelmed by the possibility of retiring....its been a declining battle and finally he lost it. Coudnt get him out of the car the other day , he proclaimed "Theyre gonna take my car! I just put a full tank of gas in this thing! Gas is too expensive for them to take this from me. Then if they get the house, im gonna get stuck somewhere without air conditioning....that wont be good etc etc" Keep in mind he will be bringing in 50k during retirement and has a nice little nest egg to supplement. I think the sudden change of scenery (forced to stop working due to back probs...the vicodin they had him on began this spiral downward) really got to him. hes always been the most straight-forward, loveable, SHARP guy...but it all went down hill a few months back

its a bummer FINANCES can do that to you

OAG · 07-29-2007, 01:54 PM

As long as the Federal Tax bill is less than $1K no withholding required, just pay the tax with the return.

FYI you can take his last tax return and work forward from there. You can also download a FREE tax program (2006) from the TAX ACT site (File Taxes Online - Do Taxes FREE - File Taxes With TaxACT) and just run the numbers being sure to include all income including Grandma's. Should give your a reasonable estimate of the situation (minor adjustments would be needed to bring the numbers to the 2007 level).

haha · 07-29-2007, 02:54 PM

Quote:

Originally Posted by thefed

Well my grandpa was hospitalized (psych ward) saturday ebcause he is having a serious breakdown, all revlving around his retirement plans! Apparently i wasnt getting thru to him that he'd be okay...he lost it

nteresting i find this post today. my grandfather, 73 yrs old, was hospitalized the other day for excessive depression/mental breakdown
I came here asking for some advice because he was ovewhelmed by the possibility of retiring....its been a declining battle and finally he lost it. Coudnt get him out of the car the other day , he proclaimed "Theyre gonna take my car! I just put a full tank of gas in this thing! Gas is too expensive for them to take this from me. Then if they get the house, im gonna get stuck somewhere without air conditioning....that wont be good etc etc" Keep in mind he will be bringing in 50k during retirement and has a nice little nest egg to supplement. I think the sudden change of scenery (forced to stop working due to back probs...the vicodin they had him on began this spiral downward) really got to him. hes always been the most straight-forward, loveable, SHARP guy...but it all went down hill a few months back

its a bummer FINANCES can do that to you

Sorry to hear this Fed. Maybe he will snap back quickly. Nice of you to be there for him.

Ha

**Martha** · 07-30-2007, 12:43 PM

Fed, it is more than the finances, if it is finances at all. So don't feel bad about not getting through to him that all will be ok. I hope he gets back on track quickly.

06-17-2007, 07:51 PM	#1
thefed Thinks s/he gets paid by the post Join Date: Oct 2005 Posts: 1,467	Questions about taxes at age 70...401k, SS, and pension Sooo...of all people, MY grandpa...MY grandfather is asking me to help him through is plans for retirement. He's 70, his body isnt working too well, and hes afraid to talk about it with my grandma...very set in her ways. Basically, I'm a bit confused about the tax aspect of the whole thing. He has 1200/mo coming from soc security. 1600/mo from his city pension. And 125k in a 401k. How are taxes accounted for? Does soc security take taxes out, or do you pay @ the end of the year? Does the figure he got from soc security saying "you will be recieving 1200/mo" mean that is before or after taxes? Does a pension usually deduct them for you, or do you pay at the end of the year? Same thing... i assume his figure of 1600 he'll get is before tax. 401k withdrawals I assume are taxed at the end of the year, at his rate when you add in the pension and soc security. Correct? Is it typical, or even possible, to simply use the 401k in april to come up with the previous years tax $....and then pay those taxes next year...and so on? Basically looking for some good general info on taxes for him at this stage in his life. Maybe a good link or 2? Thanks

06-17-2007, 10:05 PM	#4
Bikerdude Full time employment: Posting here. Join Date: Jul 2006 Posts: 547	Based upon his income alone (SS & pension) he does not owe any federal income tax. Even if he takes 5K from his 401K he will only owe about $15.00 in tax. You will have to add Grandma's SS to this to get a accurate estimate. Use this link to calculate taxable SS. How Much Of My Social Security Benefit May Be Taxable? __________________ “I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan

07-29-2007, 01:54 PM	#9
OAG Thinks s/he gets paid by the post Join Date: Jun 2006 Location: Dublin, Ohio Posts: 1,928	As long as the Federal Tax bill is less than $1K no withholding required, just pay the tax with the return. FYI you can take his last tax return and work forward from there. You can also download a FREE tax program (2006) from the TAX ACT site (File Taxes Online - Do Taxes FREE - File Taxes With TaxACT) and just run the numbers being sure to include all income including Grandma's. Should give your a reasonable estimate of the situation (minor adjustments would be needed to bring the numbers to the 2007 level). __________________ Proud Vietnam Veteran: Cu Chi 66, 1 Bde, 25ID & Pleiku 66-67 41st Sig Bn 1st STRATCOM - Army Retired Jun 1979.

07-30-2007, 12:43 PM	#11
Martha Administrator Join Date: Feb 2004 Location: minnesota Posts: 10,065	Fed, it is more than the finances, if it is finances at all. So don't feel bad about not getting through to him that all will be ok. I hope he gets back on track quickly. __________________ . Do not rely on the information provided--my posts are not to be taken as legal advice. Needless to say you must consult with your legal representative. I am not responsible for errors. If I offended you with cya I apologize. If I did not, I tried.

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06-17-2007, 08:10 PM	#2
JustCurious Recycles dryer sheets Join Date: Sep 2006 Posts: 460	Home Page - NAPFA - The National Association of Personal Financial Advisors

06-17-2007, 09:36 PM	#3
old woman Recycles dryer sheets Join Date: Dec 2005 Posts: 266	He can have withholding taken from his pension. His withdrawals from his 401K or IRA are taxable and his SS and his wife's SS will be taxable since he has some income. They should pay estimated taxes in April, June, Sept and Jan the following year. If he hasn't started taking his 401K he may end up double taxed the first year since he will have two withdrawals. When he is 70.5 he has until April 15 the following year to withdraw based on life expectancy tables in Publication 590 but if he waits he will need to withdraw again by 12-31 so twice in one year. The amount the SS gave him is what he gets before Medicare is deducted. SS may be non taxable if his income is too low or could be partially taxable. He can go to a planner or plug the amounts into some tax software to see what his tax liability might be. Make sure the year he retires he pays in at least as much as his liability then in future years 100% of the year before on the 15th of each of the months Apr, Jun, Sep and Jan. He should talk to his wife even if she is set in her ways she might want to know about his problems.

07-29-2007, 11:53 AM	#8
thefed Thinks s/he gets paid by the post Join Date: Oct 2005 Posts: 1,467	Well my grandpa was hospitalized (psych ward) saturday ebcause he is having a serious breakdown, all revlving around his retirement plans! Apparently i wasnt getting thru to him that he'd be okay...he lost it nteresting i find this post today. my grandfather, 73 yrs old, was hospitalized the other day for excessive depression/mental breakdown I came here asking for some advice because he was ovewhelmed by the possibility of retiring....its been a declining battle and finally he lost it. Coudnt get him out of the car the other day , he proclaimed "Theyre gonna take my car! I just put a full tank of gas in this thing! Gas is too expensive for them to take this from me. Then if they get the house, im gonna get stuck somewhere without air conditioning....that wont be good etc etc" Keep in mind he will be bringing in 50k during retirement and has a nice little nest egg to supplement. I think the sudden change of scenery (forced to stop working due to back probs...the vicodin they had him on began this spiral downward) really got to him. hes always been the most straight-forward, loveable, SHARP guy...but it all went down hill a few months back its a bummer FINANCES can do that to you

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