What was your magic Number? Was : Survey finds $880,000 is magic number

[hnzw_rui]

Quote:

Originally Posted by Trix55 I think it's interesting to hear everyone talk about their millions in the bank, and I wonder if these are the same folks who claim to be in the 10 or 15% tax bracket?

Since tax brackets are based on income and not net worth, it's entirely possible. Of course, if the millions are in a 401k or traditional IRA, that might mean significant tax bills once RMDs hit.

Another things, couple have a higher income range for the 15% bracket vs single. As has been mentioned, there are also itemized deductions, etc.

[daylatedollarshort]

Quote:

Originally Posted by Trix55 I think it's interesting to hear everyone talk about their millions in the bank, and I wonder if these are the same folks who claim to be in the 10 or 15% tax bracket?

Here are a couple of examples of millions in net worth and no or very small federal income tax bills:

How Retirees Pay Zero Taxes

"To illustrate, let’s invent a retired couple who live outside Boston. They own a $2 million home, have $7 million stashed away at their broker and haul in $200,000 a year in dividends, interest, Social Security and distributions from publicly traded partnerships. They have $30,000 in deductions, including $20,000 for property tax and $5,000 for a donation.

Type this example into Intuit’s TurboTax program and the federal income tax bill that comes out is $17."

[hnzw_rui]

This was a pretty interesting book I read last year:
http://www.amazon.com/The-Power-Zero.../dp/0989000192

Alas, doesn't really apply for me as I expect to have COLA'd pension matching 100% of my AGI by the time I retire.

[Car-Guy]

Quote:

Originally Posted by Trix55 I think it's interesting to hear everyone talk about their millions in the bank, and I wonder if these are the same folks who claim to be in the 10 or 15% tax bracket?

Many are (including me). Once retired, in effect, I really have a choice what tax bracket I will be in until I'm over 70. While in our 60's, many of us choose to withdraw just enough from our IRA's and/or 401k's each year to stay at the top of a lower tax bracket so when we do hit 70.5, and RMD's kick-in, we won't be forced to withdraw as much at higher tax rates. It's a common theme on this board.

[Trix55]

Thanks. I'll download a copy of the Power of Zero and get to reading!

Sent from my SM-G900V using Early Retirement Forum mobile app

[Texan1636]

Our magic number is whatever number we have at the end of 2016. Hopefully will be $8 million or a bit more, but that will depend on the equity markets not tanking between now and then. 7/8 is in taxable and we have a lot of basis (as have accumulated mainly over past 10 years from very high compensation I've received during those years), so we likely are among those who will pay very little tax in early years of retirement. We have paid a TON of taxes over the past ten years, so I don't feel badly about that.

[stlguy57]

2.5M in investable assets not including real estate or personal property.

[gcgang]

I don't understand how they can have $200k in dividends and pay $17, unless they count tax free interest as dividends.


Sent from my iPad using Early Retirement Forum

[eta2020]

Quote:

Originally Posted by gcgang I don't understand how they can have $200k in dividends and pay $17, unless they count tax free interest as dividends. Sent from my iPad using Early Retirement Forum

Make that couple's 7000000 investment split between equities and Municipal bonds with equities generating 90k and Bonds generating 110k and they have 0% federal taxes.... and do not need any deductions to get to 0%.

[RunningBum]

Quote:

Originally Posted by gcgang I don't understand how they can have $200k in dividends and pay $17, unless they count tax free interest as dividends.

Did you read it?

Quote:

How is that possible? The main reason is the government’s gentle treatment of most stock dividends. The usual rate is 15%, but a couple enjoys a 0% rate up to the point where their taxable income hits $70,700. Another reason is that, in our hypothetical case, three-fourths of the couple’s $3 million bond portfolio is invested in municipal bonds. Also contributing: a foreign tax credit, untaxed distributions from energy partnerships and a $3,000 capital loss writeoff.

Not sure how it is these days, but I used to find that muni bonds only made sense when I was in a higher tax bracket. This mythical couple may be paying minimal taxes, but they probably could be doing better after taxes with higher yielding bonds.

[sanfanciscotreat]

The article did not mention whether the couple had any IRAs, which would trigger RMDs and SS income.

[sanfanciscotreat]

I would like to see the utilities, insurance, upkeep etc on a 2 million dollar home outside Boston.

[z-d-g]

$3.1m total net worth was our number.

[haha]

Quote:

Originally Posted by hnzw_rui This was a pretty interesting book I read last year: The Power of Zero: How to Get to the 0% Tax Bracket and Transform Your Retirement: David McKnight: 9780989000192: Amazon.com: Books Alas, doesn't really apply for me as I expect to have COLA'd pension matching 100% of my AGI by the time I retire.

Yes, I am sincerely sorry for your very difficult situation.

[ziggy29]

Quote:

Originally Posted by sanfanciscotreat I would like to see the utilities, insurance, upkeep etc on a 2 million dollar home outside Boston.

And property taxes. Ouch.

[audreyh1]

Quote:

Originally Posted by Trix55 I think it's interesting to hear everyone talk about their millions in the bank, and I wonder if these are the same folks who claim to be in the 10 or 15% tax bracket?

Sure - you can easily be in the 15% tax bracket with millions in the bank. A large net worth does not necessarily translate into a large annual income. And in such cases income can often be managed to mostly come from qualified dividends, long-term capital gains, and tax-exempt interest.

[ziggy29]

Quote:

Originally Posted by audreyh1 Sure - you can easily be in the 15% tax bracket with millions in the bank. A large net worth does not necessarily translate into a large annual income. And in such cases income can often be managed to mostly come from qualified dividends, long-term capital gains, and tax-exempt interest.

And even where interest is not tax-exempt, in this era of sub-1% yields on savings, even a $2 million bank balance might get you just $10-15K a year.

Of course, I think people who have that much in regular savings accounts (as opposed to laddered CDs, bonds and such) are probably doing it wrong.

[daylatedollarshort]

Here is another zero income tax scenario, this one from the Wall Street Journal geared towards a consultant or small business owner:

"You can also write off all legitimate business expenses. Mr. Charney emphasizes that this only applies to legitimate expenses.

He didn't say, but everyone seems to understand, that this can be quite a flexible term. Even if you buy a computer, a cellphone and a car primarily for business use, you can use them for personal purposes as well. If you happen to take a business trip to Florida in, say, January, no one is going to stop you from enjoying the sunshine or taking a dip in the pool."


ROI: How to Avoid Paying Income Taxes - WSJ

[bingybear]

I gave up on magic numbers and just said F&*k|t... RE... make it work!

It's a balancing act... how much you have... and how much you can spend... just a pushmepullyou.

[aja8888]

Quote:

Originally Posted by daylatedollarshort Here is another zero income tax scenario, this one from the Wall Street Journal geared towards a consultant or small business owner: "You can also write off all legitimate business expenses. Mr. Charney emphasizes that this only applies to legitimate expenses. He didn't say, but everyone seems to understand, that this can be quite a flexible term. Even if you buy a computer, a cellphone and a car primarily for business use, you can use them for personal purposes as well. If you happen to take a business trip to Florida in, say, January, no one is going to stop you from enjoying the sunshine or taking a dip in the pool." ROI: How to Avoid Paying Income Taxes - WSJ

I have been operating like this article since 1998. Plus, I have a solo 401k. I put almost $50K in it this March for 2014.