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Old 02-17-2020, 07:24 AM   #41
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I hope that you realize that self-employment tax isn't money down the tubes like income taxes are.... you get disability income, survivor and retirement benefits as a result of having paid that tax.... just like W-2 people who pay SS taxes and their employer's pay on their behalf.
All i'm likely to get out of my self employment tax is minimum SS from age 62(or higher if the law changes) until I die probably in my 70's at best. I wish I got disability income. I am too disabled to reasonably do any full time work but not disabled enough to get SS disability. I long for the day that there is a test to determine the amount of pain someone is in and then if the pain is chronic then you shouldn't be expected to work. That's the shape i'm in but can't prove the pain level and because i'm only 40 they won't give me disability. Oh well, not everyone can have a good life.
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Old 02-17-2020, 07:43 AM   #42
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Mostly we have income from our rentals (bought and paid for decades ago), interest from loans,contracts and savings, some dividends and a wee dab of SSI. Brings in way more than we live on, so I'm trying to divest a bit, managing to sell a rental house last year. While I'm fairly complacent it does rankle a bit to be paying the fed and states more than four times what we lived on before taxes last year.

Not really seeing much we would choose to do about it, so take what joy there is in writing big numbers on checks.
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Old 02-17-2020, 08:19 AM   #43
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Am I the only one who doesn't fret about taxes too much?
My wife likes itemizing our taxes. Call it her hobby.

Because we itemize and have done so for decades, our AGI [Adjusted Gross Income] is very low.

I have not paid income taxes since 1985.
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Old 02-17-2020, 08:48 AM   #44
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I pay under 2k but next year I am going under 1k So I guess I don't worry about it. But I don't thank that is what the OP meant
I do worry about the ACA cliff so that limits your tax bill to under 2k for me.
I think there are a couple of guys on this thread not worried about the ACA cliff. LOL
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Old 02-17-2020, 09:04 AM   #45
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I’m with you. I don’t let tax implications determine my investment decisions.
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Old 02-17-2020, 09:25 AM   #46
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OP, we are in the same boat. I had no idea early in my career how our pensions would maximize our income. We sent as much as we could pre tax while working.
My DD always said" If I pay a lot of tax, that means I made a lot money, and that's not a bad place to be".
I don't mind being in this position. I feel very blessed.
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Old 02-17-2020, 10:08 AM   #47
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Probably less of a worry if you live in a LCOL/MCOL area so your required spending is low.

That's my situation, so I don't explicitly plan for taxes in any of the retirement calculators.

Also if most of your "retirement" savings are in taxable instead of traditional tax-deferred (i.e. non-Roth) accounts...where you're paying ordinary income tax on any withdrawals from the latter vs. long-term capital gains rates on withdrawals from the former.
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Old 02-17-2020, 10:14 AM   #48
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We have taxes taken out of our pension checks and have it figured out that we just about break even.
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Old 02-17-2020, 10:58 AM   #49
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Not sure what fret means here. My spending is not at all directly related to my AGI. I spend less than my WR, so I'm really not giving up anything to lower my taxes. My main reason to pay attention to AGI and taxes are mainly to keep MAGI low enough for the subsidy (which usually means controlling Roth conversions, not limiting spending), and to try to optimize Roth conversions vs. later RMDs. I may discuss taxes here and spend some of my time managing them, but I've never "fretted" about them. Not sure why the OP thinks so many of us do.
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Old 02-17-2020, 11:14 AM   #50
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I have decided to become a member of this club. While I will not complain about paying less taxes, I am now of the mindset that I can waste a lot of time over-analyzing the tax savings strategies available to me. So that analysis in more of an academic than applicable interest. We are still enjoying a very comfortable retirement lifestyle.

The majority of our financial assets are in tax deferred accounts, and even Roth conversions will not make a huge dent in them. But we received the past benefit when we contributed, so no need to wring our hands over this.

The easiest action we can choose if taxes become a "worry" would be to move to another state - but we would need more than just that reason to do so.

I am also moving to the view that "fretting" over when to take SS for us, in our circumstances, is also not worth it.
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Old 02-17-2020, 11:56 AM   #51
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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.
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Old 02-17-2020, 12:36 PM   #52
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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.
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Old 02-17-2020, 01:17 PM   #53
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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.
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Old 02-17-2020, 01:35 PM   #54
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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.
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Old 02-17-2020, 01:55 PM   #55
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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.
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Old 02-17-2020, 02:14 PM   #56
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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.
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Old 02-17-2020, 02:22 PM   #57
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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.
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Old 02-17-2020, 02:28 PM   #58
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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.
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Old 02-17-2020, 03:28 PM   #59
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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.)
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Old 02-17-2020, 03:54 PM   #60
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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.
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