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Should pension and SS amounts be reduced by est taxes?
Old 02-07-2014, 10:23 AM   #1
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Should pension and SS amounts be reduced by est taxes?

When inputting yearly amounts for any pension and ss benefits, should the amounts be reduced by what estimated tax bracket I would be in?

So, for instance if my monthly pension will be $1200/month for a yearly amount of $14,400, and after retirement I estimate that my combined Fed and St (CA) tax bracket will be say 33%, should the amount I input into Firecalc be:

$14,400*(1-33%) = or $9648?

Thanks!
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Old 02-07-2014, 10:40 AM   #2
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No don't discount the pension or SS. Firecalc doesn't do taxes. Just take the gross income amount from your Firecalc run and then discount all the income using your appropriate tax situation.

Here's a fun online tax calculator you could use:

1040 Tax Calculator
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Old 02-07-2014, 10:56 AM   #3
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Originally Posted by MasterBlaster View Post
No don't discount the pension or SS. Firecalc doesn't do taxes. Just take the gross income amount from your Firecalc run and then discount all the income using your appropriate tax situation.

Here's a fun online tax calculator you could use:

1040 Tax Calculator

Seems like I would get better results by taking current estimated expenses and apply my estimated combined tax bracket after retirement to expenses, along with Pension and SS benefits doing the same to get a better idea of the drain against saved assets.

I see many here have mentioned doing their own calculations and spreadsheets...same here...pretty elaborate (imo) - which accounts for taxes against the asset type (taxable, TD, and taxfree). But it is a static model for given returns I input, and not iterative like Firecalc.

Taxes wreak havoc on my results - so was simply wondering if 'better' results would be had by burdening expenses and benefits with tax estimates.
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Old 02-07-2014, 11:14 AM   #4
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I'd say you can account for taxes either way (just be consistent), either a reduction in income, or count it as additional 'spending'.

Just be aware of the difference between a marginal tax bracket and your effective tax rate. If you want to charge your pension at 33% combined (I'm assuming that is your marginal rate?), then the 'first part' of your income would be at a lower average rate.


-ERD50
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Old 02-07-2014, 11:17 AM   #5
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I'd say you can account for taxes either way (just be consistent), either a reduction in income, or count it as additional 'spending'.

Just be aware of the difference between a marginal tax bracket and your effective tax rate. If you want to charge your pension at 33% combined (I'm assuming that is your marginal rate?), then the 'first part' of your income would be at a lower average rate.


-ERD50
got it - thanks!
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