Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Tax estimate
Old 06-25-2007, 10:04 AM   #1
Recycles dryer sheets
piano88's Avatar
 
Join Date: Dec 2005
Posts: 62
Tax estimate

Hi,
I want to estimate my taxes once I begin drawing income from retirement funds. Here are the particulars:
I will be withdrawing approx. $80,000 per year for expenses
$60,000 from tax deferred sources (IRAs and 403b accounts)
$20,000 from non-qualified investments (4% SWR on $500,000 pool of stocks, mutual funds)
State Tax: I live in NY State. The 2006 tax rate for $80,000 income is 6.85%. I donít know how NYS treats tax deferred income and if our State law differentiates by source of investment funds. Total: $5480
Federal: My estimate of federal tax liability is $8245 (tax deferred income) plus $3000 (15% capital gains, dividends on $20,000 non-qualified investments) for a total of $11,245.
So, my estimate of federal and state tax liability on $80,000 draw is about $16,725, or about 21% of the $80,000.
No social security for another 10 years. Small pension of $6000 not factored into above.
That seems like a huge amount of federal and state taxes. Is my methodology flawed?
Thanks,
Piano
__________________

__________________
piano88 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-25-2007, 11:06 AM   #2
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by piano88 View Post
Hi,
That seems like a huge amount of federal and state taxes. Is my methodology flawed?
Thanks,
Piano
No, your expectations are.
BTW, don't forget you will have fed std deductions (8-16K) and then the
next chunk (~8-15k) is at 10%, don't know if NY is the same.
Get yourself a tax program and run the numbers for more exact
figure.
TJ
__________________

__________________
teejayevans is offline   Reply With Quote
Old 06-25-2007, 11:13 AM   #3
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
One problem is that you don't pay tax on the amount of money you use from your non-tax defered income, but on how much taxable income they generate through dividends, interest, and capital gains. So your $20,000 of withdrawals from your stock and mutual fund may very well differ from the actual amount of income generated.

For federal tax rough estimates, the Dinkytown calculator is pretty easy to use. 1040 Tax Calculator - Financial Calculators from Dinkytown.net
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 06-25-2007, 11:15 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Do you do your own taxes now? Get out your copy of TurboTax and plug in your numbers in retirement. You did not write whether you were married, filing jointly and had 5 kids still living at home or not.

Without running the software, I do not think you can "estimate" your taxes so well. If you don't have the software, get it and use it. It will help you plan and save you a bundle.
__________________
LOL! is offline   Reply With Quote
Old 06-25-2007, 11:20 AM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by LOL! View Post
Do you do your own taxes now? Get out your copy of TurboTax and plug in your numbers in retirement.
TurboTax's website estimator also does a good job without having to plug through all the excrutiating details of the computer-based interviews & forms. It's relatively easy (and very fast) to change a couple parameters and immediately view the results.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
thanks
Old 06-25-2007, 11:34 AM   #6
Recycles dryer sheets
piano88's Avatar
 
Join Date: Dec 2005
Posts: 62
thanks

Thanks for the helpful feedback and links.

Piano
__________________
piano88 is offline   Reply With Quote
Old 06-25-2007, 05:22 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Apr 2007
Posts: 1,304
Great pointer to estimator site Nords... thanks
__________________

__________________
Life is GREAT!
megacorp-firee is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
tri-country tax evasion? lazygood4nothinbum FIRE and Money 2 12-30-2006 08:03 PM
Taxes tryan Other topics 0 12-08-2006 08:45 AM
When are estimated tax payments necesary? WanderALot FIRE and Money 12 04-18-2006 05:54 PM
Tax compliance costs 22c for every dollar collected cute fuzzy bunny Other topics 15 01-19-2006 03:36 AM
Bush floats a national sales tax dex FIRE and Money 22 08-17-2004 08:15 AM

 

 
All times are GMT -6. The time now is 02:48 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.