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Questions about taxes at age 70...401k, SS, and pension
Old 06-17-2007, 07:51 PM   #1
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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
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Old 06-17-2007, 08:10 PM   #2
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Old 06-17-2007, 09:36 PM   #3
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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.
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Old 06-17-2007, 10:05 PM   #4
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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?
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Old 06-17-2007, 10:16 PM   #5
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Quote:
Originally Posted by Bikerdude View Post
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?
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Old 06-18-2007, 08:34 PM   #6
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Quote:
Originally Posted by Bikerdude View Post
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?
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Old 06-18-2007, 10:53 PM   #7
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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.
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Old 07-29-2007, 11:53 AM   #8
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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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Old 07-29-2007, 01:54 PM   #9
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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).
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Old 07-29-2007, 02:54 PM   #10
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Quote:
Originally Posted by thefed View Post
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
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Old 07-30-2007, 12:43 PM   #11
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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.
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