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09-26-2011, 01:19 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Those lucky enough to ER with substantial taxable funds can use the years of low earned income before retirement withdrawals are made to do IRA to ROTH conversions keeping the amounts rolled over in the 10% or 15% tax brackets. I aim to rollover around 300k in the 9 years I'll have before I start making retirement account withdrawals.
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09-26-2011, 03:03 PM
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#3
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Recycles dryer sheets
Join Date: Jan 2011
Location: Desert SW
Posts: 358
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I agree with nun. One benefit of ER is that tax strategies can pay off big in the interim from ER to collecting SS, or taking RMD's at age 70. Many investors get all hung up about reducing investment costs by a few basis points (although this is still very important), tax savings stratagies can bring a 10% or more savings. Each individual situaton can be unique, so it pays to think it through or see a tax advisor, if need be.
__________________
Retired in 2011 at 54
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09-26-2011, 03:04 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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That is our plan.
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09-26-2011, 03:06 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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And all the tax-loss harvesting that you did in 2008 and 2009 means that withdrawing from your taxable accounts is essentially tax-free anyways.
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09-26-2011, 03:17 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,671
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Right, I'm never paying CG tax again.
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09-26-2011, 06:10 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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Probably people know this already. Assuming you've done Roth conversions and have a bundle in it now, it's good to produce a table for yourself with your tax deductions thrown in using TurboTax. Columns of interest could be:
1) IRA withdrawals (income stream #1) in $10k increments maybe
2) SS that is taxable (from TurboTax 1040 result)
3) Roth withdrawals (tax free, income stream #3)
4) Fed tax
5) state tax
6) Fed marginal rate (from #4)
7) state marginal rate (from #5)
8) combined marginal rate (from #4 and #5)
We will be taking IRA withdrawals + SS + Roth, where Roth is set so as to keep the combined marginal rate low.
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09-27-2011, 06:44 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Mar 2007
Posts: 1,860
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This is sort of my plan as well. I plan to take 401k withdrawals (which by that time will be rolled to an IRA) only up to the 15% tax bracket top (currently $69k for joint filers), then top off any additional needed amounts with taxable funds, Roths, etc.
I'm sick and tired of paying nearly 40% of my income in taxes (combined federal, state, local, FICA, medicare, etc.)
Quote:
Originally Posted by Lsbcal
Probably people know this already. Assuming you've done Roth conversions and have a bundle in it now, it's good to produce a table for yourself with your tax deductions thrown in using TurboTax. Columns of interest could be:
1) IRA withdrawals (income stream #1) in $10k increments maybe
2) SS that is taxable (from TurboTax 1040 result)
3) Roth withdrawals (tax free, income stream #3)
4) Fed tax
5) state tax
6) Fed marginal rate (from #4)
7) state marginal rate (from #5)
8) combined marginal rate (from #4 and #5)
We will be taking IRA withdrawals + SS + Roth, where Roth is set so as to keep the combined marginal rate low.
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__________________
"Live every day as if it were your last, and one day you'll be right" - unknown
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