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

[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??

 

[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.

 

[JoeWras]

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.

 

[dtbach]

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.

I get it. It's a game that gives me headaches though. Just not worth it to me.

 

[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.

 

[pb4uski]

I get it. It's a game that gives me headaches though. Just not worth it to me.

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.

 

[Marc]

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

 

[razztazz]

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?!

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??

 

[jpeter1093]

"I didn't worry about money all those years just so I could keep worrying about money."

Best quote of the day

 

[gerntz]

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.

 

[RobbieB]

Yeah Baby! I don't go out of my way thinking about minimizing the taxes.

 

[dtbach]

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.

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.

 

[Midpack]

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.

+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...

 

[target2019]

I think the vast number of E-R participants give some weight to taxes. It's one of several variables to consider.

 

[Lawrencewendall]

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.

 

[GenXguy]

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.

 

[scrabbler1]

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.

 

[Bir48die]

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.

 

[pb4uski]

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.

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.

 

[aaronc879]

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.

 

[LOL!]

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.

I'm happy to do Roth conversions in the "space" I have available for that.

I don't "fret about taxes" either, but don't kid yourself: Wishing for massive capital gains is another form of fretting about taxes, isn't it? And so is starting threads like this one.

 

[dtbach]

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.

I plan to do both. Live on some massive capital gains and leave most to the kids. But I also know that sometimes you HAVE to sell if the stock is getting into trouble. I'd rather sell high than let the darn thing fall like a rock.

 

[pb4uski]

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.

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.

 

[pb4uski]

.... But I also know that sometimes you HAVE to sell if the stock is getting into trouble. I'd rather sell high than let the darn thing fall like a rock.

Agreed... all my taxable equities are broad based funds so I don't have that issue like one would have with individual stocks or sector funds.

 

[Dtail]

Currently choosing to maximize ACA subsidies until 65 y.o. to the tune of 23k for DB and I.
Then will most likely play around with when to take SS vs. pay down TIRA until 70.
Tax deferred TIRA at 33% rate many working years, so all in all still was a winning strategy, as retirement taxable income will be at a lower rate.