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Old 04-25-2018, 05:26 AM   #141
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Bit of a thread jack, but didn't want to start another thread. I'm retiring this year or next. My wife,who is 3 years younger, will work another year or two. So if I take SS at 62 and my wife is working if we file jointly, will my SS be taxed? Should we file separately? Should I wait to collect?
To calculate how much of your SS is taxable
https://www.fool.com/retirement/2016...etirement.aspx
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Old 04-25-2018, 06:19 AM   #142
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Originally Posted by Lawrencewendall View Post
To calculate how much of your SS is taxable
https://www.fool.com/retirement/2016...etirement.aspx
Note that the baseline is 25k for Single and 32k for Married, so one gets something of a marriage penalty related to the taxing of SS.
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Old 04-25-2018, 06:54 AM   #143
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Note that the baseline is 25k for Single and 32k for Married, so one gets something of a marriage penalty related to the taxing of SS.
But remember, not all income is taxable.

In general, the Social Security Administration defines “earned income” as “income from wages or net earnings from self-employment.” For example, earnings may include bonuses, commissions, and severance pay. Investment income, pensions, capital gains, and inheritances are not considered wages. Other types of payment made by an employer may be considered earnings under certain conditions.

https://www.aarp.org/work/social-sec...ngs_limit.html
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Old 04-25-2018, 07:55 AM   #144
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But remember, not all income is taxable.

In general, the Social Security Administration defines “earned income” as “income from wages or net earnings from self-employment.” For example, earnings may include bonuses, commissions, and severance pay. Investment income, pensions, capital gains, and inheritances are not considered wages. Other types of payment made by an employer may be considered earnings under certain conditions.

https://www.aarp.org/work/social-sec...ngs_limit.html
Good to know. I have a pension, albeit a small one, but now can take that income out of my spreadsheet for analyzing how much SS is taxable.
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Old 04-25-2018, 09:02 AM   #145
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Good to know. I have a pension, albeit a small one, but now can take that income out of my spreadsheet for analyzing how much SS is taxable.
Be careful. The AARP article concerns the question of earned income relative to reducing benefits, not the taxation of those benefits.

Using the referenced Motley Fool calculator, both pension payments and IRA withdrawals will increase the amount of SS subject to taxation.
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Old 04-25-2018, 09:17 AM   #146
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Your best bet is to use TT or the What-If worksheet in TT as it does the calculation.
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Old 04-25-2018, 09:19 AM   #147
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Be careful. The AARP article concerns the question of earned income relative to reducing benefits, not the taxation of those benefits.

Using the referenced Motley Fool calculator, both pension payments and IRA withdrawals will increase the amount of SS subject to taxation.
Ahhh
Okay back to the original spreadsheet and will use an SS tax calculator to confirm.
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Old 04-25-2018, 09:25 AM   #148
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There is no tax savings on growth of Roth. Multiplication is commutative.

You either leave it in the IRA, it grows X% and then you pay tax on that X% growth.
--or-- you convert IRA to Roth, pay tax now, and the now-reduced Roth grows X%.
This example assumes the taxes are paid from IRA money.

If one is able to pay the taxes from non-IRA money you now have more money in the tax sheltered account (the Roth).

I realize the money to pay your taxes isn't magic - it came from taxable accounts.

Example: $100,000 in IRA. To convert this you have to pay $16,500 in taxes (assuming roughly 12% federal plus 4.5% state tax (Ohio in my case). You end up with $100,000 inside the ROTH (not $83,500). You have $16,500 tax advantaged money compounding tax free.

Am I wrong?
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Old 04-25-2018, 09:26 AM   #149
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I just spent a little more time with the Motley Fool calculator, and got a wake-up call about converting to Roth after starting SS at FRA.

With SS and other income (Int/Div/Cap gains) I will be limited to about $15,000 in conversions (staying in the 12% bracket). But the conversions will increase the taxes on SS by $1,500! Effectively a 10% additional tax on those conversions.

So, if we take SS at FRA, looks like conversions do not make sense. We could defer SS longer, of course.

Time to re-think the plan. We have 3+ years before FRA, so no urgency yet.
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Old 04-25-2018, 09:36 AM   #150
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.... Am I wrong?
In most cases you are right.... one exception might be where the funds used to pay the tax are also tax free in the taxable account... like domestic equities where qualified dividends and LTCG are 0% if your taxable income is low enough. Then it is a push.
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Old 04-25-2018, 10:16 AM   #151
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Be careful. The AARP article concerns the question of earned income relative to reducing benefits, not the taxation of those benefits.

Using the referenced Motley Fool calculator, both pension payments and IRA withdrawals will increase the amount of SS subject to taxation.
ok. I was lazy and grabbed the first article I saw. Here is from the SSA:

"Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. "

https://faq.ssa.gov/ics/support/KBAn...2&hitOffset=32

https://www.ssa.gov/planners/retire/annuities.html
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Old 04-25-2018, 10:36 AM   #152
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ok. I was lazy and grabbed the first article I saw. Here is from the SSA:

"Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. "

https://faq.ssa.gov/ics/support/KBAn...2&hitOffset=32

https://www.ssa.gov/planners/retire/annuities.html
I still think you are incorrect. These two items from SSA refer to Benefits, not taxation, and they do not agree with the Motley Fool calculator.

When I get the chance I will try pb4uski's suggestion and run some "what ifs" in TT.
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Old 04-25-2018, 11:06 AM   #153
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I still think you are incorrect. These two items from SSA refer to Benefits, not taxation, and they do not agree with the Motley Fool calculator.

When I get the chance I will try pb4uski's suggestion and run some "what ifs" in TT.
From the second link:

"You may have to pay income tax on pensions, annuities, interest, or dividends, but you do not pay Social Security taxes."

It doesn't get any clearer than that IMO.
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Old 04-25-2018, 11:26 AM   #154
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That is correct. You do not pay SS TAX on those earnings (FICA). You need to go to the tax codes, not SSA, to determine the portion of SS that is taxed!
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Old 04-25-2018, 01:38 PM   #155
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I think you guys are confusing two different concepts. One is if you have a certain amount of income then your SS benefit may be reduced. The other, and the one at hand, is that if you have certain sources of income then it impacts how much of the SS benefits that you receive are subject to income tax.
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Old 04-25-2018, 01:46 PM   #156
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This example assumes the taxes are paid from IRA money.

If one is able to pay the taxes from non-IRA money you now have more money in the tax sheltered account (the Roth).

I realize the money to pay your taxes isn't magic - it came from taxable accounts.

Example: $100,000 in IRA. To convert this you have to pay $16,500 in taxes (assuming roughly 12% federal plus 4.5% state tax (Ohio in my case). You end up with $100,000 inside the ROTH (not $83,500). You have $16,500 tax advantaged money compounding tax free.

Am I wrong?
Of course you are correct. You can pay the taxes from additional already-taxed money and thus end up with more ROTH funds.

But similarly, if you start with more money in the tIRA, you'll end up with more money after taxes.

As you indicated, it isn't magic. The tax man taketh from somewhere.
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Old 04-25-2018, 02:08 PM   #157
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I think you guys are confusing two different concepts. One is if you have a certain amount of income then your SS benefit may be reduced. The other, and the one at hand, is that if you have certain sources of income then it impacts how much of the SS benefits that you receive are subject to income tax.
Bingo! One is what you pay in SS taxes (FICA) on income, the other is what you pay in federal taxes on SS.

But I think your earlier post is the best recommendation. Run it through TT and see what IT says.

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Good to know. I have a pension, albeit a small one, but now can take that income out of my spreadsheet for analyzing how much SS is taxable.
This was the post that prompted my original comment on the topic.
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Old 04-25-2018, 02:12 PM   #158
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Close but no cigar... it was more if your SS benefit will be reduced because of other earned income.... not relating to the payment of SS taxes...

https://www.ssa.gov/pubs/EN-05-10069.pdf
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Old 04-25-2018, 02:33 PM   #159
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Close but no cigar... it was more if your SS benefit will be reduced because of other earned income.... not relating to the payment of SS taxes...

https://www.ssa.gov/pubs/EN-05-10069.pdf
OK. It depends which post is being considered.

You are correct the the post by garyt asked about reduced BENEFITS. Then the Motley Fool calculator was posted, which does NOT address this issue. Then Dtail asked if his pension income would affect the taxes on his SS income, which was the question I was addressing.

So, I agree that we both gave reasonable answers, to different questions.

No harm, no foul. Carry on.
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Old 04-26-2018, 05:52 AM   #160
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This example assumes the taxes are paid from IRA money.

If one is able to pay the taxes from non-IRA money you now have more money in the tax sheltered account (the Roth).

I realize the money to pay your taxes isn't magic - it came from taxable accounts.

Example: $100,000 in IRA. To convert this you have to pay $16,500 in taxes (assuming roughly 12% federal plus 4.5% state tax (Ohio in my case). You end up with $100,000 inside the ROTH (not $83,500). You have $16,500 tax advantaged money compounding tax free.

Am I wrong?
In terms of tax benefit doesn't matter where the money to pay the tax came from, either the IRA or outside money.

But, yes, if you convert from an IRA and pay the tax with outside money, you have effectively contributed extra money to the Roth. The way it was explained to me was that this make a Roth "bigger" than an IRA -- because you can slide extra money in.
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