Am I the only one who doesn't fret about taxes too much?

[Which Roger]

Like other common topics on this forum, it depends. Everybody's situation is different. Some have a lot of control over their income and sources of income and therefore the taxes they pay, and for them it makes sense to focus on tax implications. Other have little control, so it's not worth worrying much about. Also, in the threads I follow, I don't see anybody blinding following a strategy of minimizing taxes without considering the broader financial picture. Nobody, for example, sticks all of their money under the mattress so they have 0 income. And nobody knowingly purchases an investment that they know will lose money just so they can take a capital loss to offset a gain elsewhere.

 

[bada bing]

It depends on individual situation, but I'm finding that for me, the period between RE and RMD is rather important to optimize. It will make a rather significant difference in my lifetime finances to "fret" a bit about how that period is managed while I will have some discretion in how much income to claim . I am currently going through a big severance package offer at megacorp and it seems like a lot of my work peers who are on a course for a package/unemployment are rather oblivious to long term planning strategies.

It isn't the group that posts here, but in general it seems there is too little "fretting" about taxes rather than too much. Good for the treasury but bad for a lot of individual outcomes.

 

[Mr._Graybeard]

When we were on ACA, we made a point of staying under the cliff -- not that it was difficult. In 2019 we qualified for Medicare but didn't file for SS, so we did a pretty significant Roth conversion last year. This year we're filing for SS income ... we'll probably make some smaller Roth conversions as the brackets permit.

Like dtbach, we're in Wisconsin, which has a state income tax. We pay it like we pay the light bill. So I guess we're aware of tax advantages as they crop up, and use them, but overall don't worry about the cost of citizenship. There are bigger fish to fry. We're 66 and the Great Beyond is yawning in the distance.

 

[Winemaker]

While I have always tried to minimize expenses, and taxes are the biggest expense, I have tried to play the game and have failed. First world problem, but i already have a head of white hair at 61.

 

[Vacation4us]

Up until 5 minutes ago I would have said I don’t worry about taxes. Once we retire at the end of this year we will live solely off DH pension. So minus the standard deduction we will be in the 22% bracket and taxes will automatically be withheld.

BUT I just found out dear hubby only paid 3K more in Federal taxes than me while making 58k more. Houston we have a problem. To make matters worse I ruined DH day. He was all gleeful until I explained the problem to him. Can you say BIG bill like in the 10k range. Took the wind right out of his sails.

Another good reason to retire the less you make the less they take. Having DH change his withholding ASAP for 2020.

 

[Splash]

If I didn't have much flexibility or influence on how much I could save or if the savings were insignificant then I wouldn't give a hoot either. However, I do have the ability to save significant money in taxes and health insurance premiums. For example, by managing our ACA MAGI during the 3 years since we retired, we have saved $60k in insurance premiums for the same coverage. To me, that is worth the effort.

 

[Major Tom]

I'm not paying any taxes so far in retirement, thanks to the 0% tax rate on qualified dividends and long-term capital gains for those at lower income levels. However, I have never minded paying taxes in the past because - surprise, surprise - higher taxes mean that you have made more money. Funny how that works! Contrary to what some folk seem to think, the government don't take all of your money. They actually leave you most of it to spend however you like. Fun times!

In other words, I'm with dtbach. I'm not going to sweat this stuff.

 

[pb4uski]

Up until 5 minutes ago I would have said I don’t worry about taxes. Once we retire at the end of this year we will live solely off DH pension. So minus the standard deduction we will be in the 22% bracket and taxes will automatically be withheld.

BUT I just found out dear hubby only paid 3K more in Federal taxes than me while making 58k more. Houston we have a problem. To make matters worse I ruined DH day. He was all gleeful until I explained the problem to him. Can you say BIG bill like in the 10k range. Took the wind right out of his sails.

Another good reason to retire the less you make the less they take. Having DH change his withholding ASAP for 2020.

When I assess what I am paying in taxes, I focus on the total tax.... not the amount due or refund... what I am paing net... at the end of the day is the important number.

It's unclear from your post what you or DH are focusing on.

 

[friar1610]

I worked on my taxes earlier today and was thinking about all the folks I read about on this site and Bogleheads who claim to pay little or no taxes because of their income sources. Not the case with us - virtually everything is a taxable source: military pension, SS (85% of it), RMDs, dividends and interest. But on my first pass through, it looks like my effective Federal tax rate is about 11% of AGI or 14% of Taxable Income which, although I'd rather not pay it, doesn't seem awful. And I'm fortunate that Massachusetts taxes neither military pensions nor SS, so our state tax is very low. We are also below the first IRMAA increase but feel like we have plenty to be comfortable and well traveled so no real complaints on taxes. (This opinion will change a bit when/if there is only one of us filing as a single.)

 

[scrabbler1]

The only time in the last few years I spent more than the usual amount of time trying to minimize my taxes was before the recent tax law change. A few times since the ACA began, I ran the numbers a lot to see if I should "bunch" my deductions. I was near the old Standard Deduction at the time, so if I could bunch some deductions into the even-numbered years to inflate my itemized deduction, I would get "bumped up" to the Standard Deduction in the odd-numbered years and save a few hundred dollars in taxes.


This worked well as long as I didn't have some unusual event which disrupted the usual flow of income and deductions. I also had to estimate my total taxes over a 2-year period to compare bunching to non-bunching, not easy to do. I had to also include the effect of a later-year state property tax rebate which had to be added back as income if I had itemized the previous year.


With the recent tax law having increased the Standard Deduction, that put an end to bunching because I will probably never have to itemize again.

 

[Vacation4us]

When I assess what I am paying in taxes, I focus on the total tax.... not the amount due or refund... what I am paing net... at the end of the day is the important number.

It's unclear from your post what you or DH are focusing on.

My focus today is that I believe my husband under withheld. He assumed married “ zero” meant that we would not owe more. Tax bracket is still in the 24% tier. Not complaining about the income or the tax owed but the withholding misstep.

 

[RunningBum]

Federal taxes have been e-filed. State return is in a sealed, stamped envelope to be dropped in the mail tomorrow.

 

[Ed_The_Gypsy]

I don't worry at all.

The year before I turned 70.5, we installed big solar panels on our roof. The then 30% Federal tax credit made it possible for me to move almost all of my TIRA into my Roth. We get a check for the next few years from the power company and I have every confidence that power costs will go up.

Now, we live comfortably on our maxed SS plus my tiny pensions and pay zero income taxes. We also live in a no-income-tax state.

My RMDs plus SS & pension are below the taxable limit. We could even earn another $11k before needing to pay. I do file, because I have withholding on my RMDs. I have to check to see if I even have to file anymore; if not, no more withholding.

Sometimes being poor works out.

 

[Ed_The_Gypsy]

I should point out that I had been over-thinking this for years. The light bulb went on only at the last minute.

 

[rk911]

Up until 5 minutes ago I would have said I don’t worry about taxes. Once we retire at the end of this year we will live solely off DH pension. So minus the standard deduction we will be in the 22% bracket and taxes will automatically be withheld.

BUT I just found out dear hubby only paid 3K more in Federal taxes than me while making 58k more. Houston we have a problem. To make matters worse I ruined DH day. He was all gleeful until I explained the problem to him. Can you say BIG bill like in the 10k range. Took the wind right out of his sails.

Another good reason to retire the less you make the less they take. Having DH change his withholding ASAP for 2020.

ouch! a little more C&C...communication and coordination next year.

 

[Carple Tunnal]

I spent some effort thinking about taxes because it allowed me to retire years earlier than if I had ignored taxes. Saved me years of fretting at the office.

 

[Fermion]

I fret. In 2018 when I sold the bulk of that Endocyte, I had something around $240,000 in gains off of a $40,000 investment and it was all short term. I ended up paying over $50,000 in federal tax. Why couldn't they just let me keep my money...I worked hard for it...all those mouse clicks and stuff.

 

[harley]

You might have been able to write off the medical charges for the carpal tunnel syndrome.

 

[homestead]

I don't worry at all.

The year before I turned 70.5, we installed big solar panels on our roof. The then 30% Federal tax credit made it possible for me to move almost all of my TIRA into my Roth. We get a check for the next few years from the power company and I have every confidence that power costs will go up.

Now, we live comfortably on our maxed SS plus my tiny pensions and pay zero income taxes. We also live in a no-income-tax state.

My RMDs plus SS & pension are below the taxable limit. We could even earn another $11k before needing to pay. I do file, because I have withholding on my RMDs. I have to check to see if I even have to file anymore; if not, no more withholding.

Sometimes being poor works out.

Yeah you are in the sweet spot. No taxes on your SS, 0 tax bracket, No state tax. Your RMD's will go up a little each year but sound like you have an 11k buffer for that.

 

[pb4uski]

My focus today is that I believe my husband under withheld. He assumed married “ zero” meant that we would not owe more. Tax bracket is still in the 24% tier. Not complaining about the income or the tax owed but the withholding misstep.

Like the old Fram oil filter commercial.... pay me now or pay me later.

I'd much rather be underwithheld and owe than be due a refund.... especially with identy theft... thieves can't steal taxes due.

 

[Carple Tunnal]

I'd much rather be underwithheld and owe than be due a refund.... especially with identy theft... thieves can't steal taxes due.

All that is needed to make online payments to IRS on your behalf is your name, SSN, and address used to file in a previous year. Although I have had not had this happen, I like to protect my information, just in case.


I also try to avoid being owed a refund. Even my checking account earns better interest than letting the IRS hold it.

 

[GR111]

I know people who are completely locked in to various stocks for fear of paying taxes, and I am doing my best not to be like that. I just grit my teeth and make the best trades I can while reminding myself about not letting tails wag dogs. I remember Peter Lynch wrote long ago that taxes are a good problem to have.

 

[NW-Bound]

I fret. In 2018 when I sold the bulk of that Endocyte, I had something around $240,000 in gains off of a $40,000 investment and it was all short term. I ended up paying over $50,000 in federal tax. Why couldn't they just let me keep my money...I worked hard for it...all those mouse clicks and stuff.

To make up for the "friction loss", you just have to click harder and more often.

It's too bad they don't allow income averaging any more. The last time I could use that was in the early 80s.


PS. Just saw harley's suggestion about the medical expense write off. Or can you write it off on business expense instead, which may be more favorable due to having no deductible?

You might have been able to write off the medical charges for the carpal tunnel syndrome.

 

[NW-Bound]

I know people who are completely locked in to various stocks for fear of paying taxes, and I am doing my best not to be like that. I just grit my teeth and make the best trades I can while reminding myself about not letting tails wag dogs. I remember Peter Lynch wrote long ago that taxes are a good problem to have.

+1

I would have to go back to 2000 to see how much money I could have if I just sold my high flyers and paid the taxes.

 

[Bryan Barnfellow]

I have to pay federal taxes to the US and federal, canton, and commune taxes to Switzerland. So, I do fret about getting it right.

-BB