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Am I the only one who doesn't fret about taxes too much?
02-16-2020, 05:33 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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Am I the only one who doesn't fret about taxes too much?
OK, I don't like paying taxes anymore than the next guy. But I don't have a lot of leeway about it as most of my income is pension, stock and mutual fund dividends and capital gains and IRA distributions.
I have an AGI of approx. $150K. I could work that down to $85K and save a couple of grand in taxes or so but why? I like living on $150K and could probably go to $175K.
I don't let the tax tail wag my income dog.
I know Robbie is probably with me, but who else might be??
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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02-16-2020, 05:37 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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In our case, what we spend has little to do with tIRA withdrawals or Roth conversions... so for me it is a game of optimization and trying to over the rest of my lifetime pay as little as possible and the same for my heirs... that is why I'm more focused on tax planning and Roth conversions... because it doesn't impact what we spend and it's a bit of an entertaining game.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-16-2020, 05:41 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Posts: 11,701
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Generally the more you make, the less you fret. $150k AGI for retirees is in "less fret" territory, especially if $85k is the low end.
__________________
Retired Class of 2018
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02-16-2020, 05:41 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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Quote:
Originally Posted by pb4uski
In our case, what we spend has little to do with tIRA withdrawals or Roth conversions... so for me it is a game of optimization and trying to over the rest of my lifetime pay as little as possible and the same for my heirs... that is why I'm more focused on tax planning and Roth conversions... because it doesn't impact what we spend and it's a bit of an entertaining game.
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I get it. It's a game that gives me headaches though. Just not worth it to me.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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02-16-2020, 05:44 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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AGI doesn't measure how much money we actually spend because a lot of money that is spent is excluded from AGI and taxable income. For instance, all our health insurance premiums are excluded. So is return of capital: Sell $250,000 of shares that we paid $240,000 for and use carryover losses to offset the $10,000 capital gain stills leaves us with $250,000 to spend, but none of that appears in AGI.
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02-16-2020, 05:47 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by dtbach
I get it. It's a game that gives me headaches though. Just not worth it to me.
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The paradox is that unless you play the game at least a little bit for a while, you have no idea whether it makes a significant enough difference to your heirs for you to fret about.
For example, if I take my current plan and eliminate Roth conversions my age 90 net worth is only 60% of what it is with aggresive Roth conversions.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-16-2020, 05:48 PM
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#7
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Recycles dryer sheets
Join Date: Oct 2007
Location: Georgetown
Posts: 422
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I'm with you. Between retirement at 60 and SS at 70 I am going to max out 22% bracket to draw down retirement accounts. I may try to stay below IRMAA starting in 2022 (as 2024 will be first year both wife and I will be on Medicare) but may even put that off for a couple of years. Taxes for 2019 were $28,508 for effective rate of 14.84%, just below the 15% effective rate I have been using in my planning.
Marc
__________________
"Adventure is just bad planning"
Roald Amundsen
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02-16-2020, 05:50 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Apr 2005
Location: Midwest
Posts: 2,960
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TA DA! You are not the only one. My income is far, far less than yours but for some reason I sill get pinged for income taxes. I don't get all the hoo-hah about taxes. It's just a game some people play for relative pennies because it makes them think they are "winning" something....? Like chasing the perfect bond fund for some fractional extra interest vs their current bond fund. (Something else I've stopped doing) Or alternately, rich or poor, paying taxes or not, humans like to always have something to bitch about even if has zero actual impact on their lives.
I didn't worry about money all those years just so I could keep worrying about money. Yes, I don't let the tail wag the dog. If I'm paying taxes that means I MADE MONEY, and a good deal more than a whole lotta people out there. Won't somebody help me cry?!
Quote:
Originally Posted by dtbach
OK, I don't like paying taxes anymore than the next guy. But I don't have a lot of leeway about it as most of my income is pension, stock and mutual fund dividends and capital gains and IRA distributions.
I have an AGI of approx. $150K. I could work that down to $85K and save a couple of grand in taxes or so but why? I like living on $150K and could probably go to $175K.
I don't let the tax tail wag my income dog.
I know Robbie is probably with me, but who else might be??
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02-16-2020, 05:52 PM
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#9
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Recycles dryer sheets
Join Date: Jan 2014
Location: Voorheesville, NY
Posts: 201
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"I didn't worry about money all those years just so I could keep worrying about money."
Best quote of the day
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02-16-2020, 05:54 PM
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#10
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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SS & RMD after QCD's makes up about 50% of our income. To get rid of a lot of the rest I'd have to go to all state-specific muni bonds & non DIV stocks. Well, we do need more income - to give away to relatives - and the investment choices then left would get kinda narrow. Net, will pay the taxes.
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02-16-2020, 06:05 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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Yeah Baby! I don't go out of my way thinking about minimizing the taxes.
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02-16-2020, 06:14 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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Quote:
Originally Posted by LOL!
AGI doesn't measure how much money we actually spend because a lot of money that is spent is excluded from AGI and taxable income. For instance, all our health insurance premiums are excluded. So is return of capital: Sell $250,000 of shares that we paid $240,000 for and use carryover losses to offset the $10,000 capital gain stills leaves us with $250,000 to spend, but none of that appears in AGI.
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Well, I could do that all day long but my goal is to have massive capital gains not sell for zero and spend the money.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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02-16-2020, 06:14 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,148
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Quote:
Originally Posted by pb4uski
In our case, what we spend has little to do with tIRA withdrawals or Roth conversions... so for me it is a game of optimization and trying to over the rest of my lifetime pay as little as possible and the same for my heirs... that is why I'm more focused on tax planning and Roth conversions... because it doesn't impact what we spend and it's a bit of an entertaining game.
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+1. I myopically over prioritized minimizing taxes for most of my working years, and my first 8 years of retirement - letting taxes influence my asset allocation, tax deferrals, rebalancing, etc. too much. Hindsight is a wonderful thing.
I finally woke up in 2019, and now I’m aggressively doing Roth conversions for the next 6-7 years, which means voluntarily paying taxes up to the max of the 22% bracket. So I can’t say I don’t care about taxes, but I missed the tax forest for the trees for too long. The OP probably has better perspective than I did re: taxes...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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02-16-2020, 06:18 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,669
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I think the vast number of E-R participants give some weight to taxes. It's one of several variables to consider.
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02-16-2020, 06:20 PM
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#15
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Full time employment: Posting here.
Join Date: Feb 2017
Location: Severn
Posts: 947
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While I was in the accumulation stage, I was as high as the 25% bracket and dropped down to the 22% bracket. Historical expenses says that I can maintain current lifestyle (including Fed/state taxes) in the 12% bracket with a buffer. My game plan is to convert 401(k) (Rule of 55) to the top of 12% bracket for the next 17 years. I'm 55 now. Just did a 27k conversion paying 12% tax on it. When RMDs kick in, I'll probably convert to the top of the 22% bracket (or whatever it is then). IMO, that's equivalent to making 10% by not paying the extra 10% in taxes. Only been RE for 8 months and 2020 will be my first full year RE, so I may be way off base on my logic.
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02-16-2020, 06:22 PM
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#16
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Thinks s/he gets paid by the post
Join Date: May 2019
Posts: 2,637
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I don't fret about taxes, I simply take steps to minimize them while living the lifestyle that I want to. That's easy enough. I'm more concerned about keeping my income under the ACA PCT threshold, which is easy enough as well.
I don't have kids, so I also don't concern myself with what any heirs might receive.
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02-16-2020, 06:24 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,679
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The ACA and its premium subsidies have changed how I look at income and income taxes. Income which gets taxed very lightly or not at all can still cost me at tax time because my ACA subsidy will decrease or even get eliminated.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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02-16-2020, 06:29 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Jul 2015
Location: Beaverton
Posts: 1,382
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I'm in the "not fretting" category for the same reasons as the OP. There is little that isn't pre-determined in my case. About 20% of my budget is from taxable accounts to somewhat lower my tax owed but generally have the same amount in CG's. Still taxed but obviously at lower levels.
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Jump in, the water's warm.
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02-16-2020, 06:33 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by dtbach
Well, I could do that all day long but my goal is to have massive capital gains not sell for zero and spend the money.
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I'm letting my taxable accounts sit there and grow.... why sell and pay taxes on capital gains when that tax liability goes "poof" to nothing when we die because of stepped up basis?
If I needed to use them for spending then it would be a whole different story.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-16-2020, 06:34 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Posts: 5,340
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I'm self employed and expect to make $14-15K/yr. I will pay nothing in Federal tax and nearly nothing in State tax. I will have to pay over $2K in self employment tax. That $2K tax is a killer. I hate paying that. If I had $150K in income I would have no problem paying up to $50K in tax. The more you make the less it hurts. If I was FIRED and could safely live on $150K/yr then trying to reduce taxes would not enter my mind.
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