Basic Tax Planning Question

[Shabby]

So as I plan for retirement, I have a budget built with my estimated costs mortgage, utilities, insurance, travel, food, etc. This adds up to $77k annually. When I am figuring what my nest egg needs to be, what number should I use for taxes? I was figuring I would use 20% for taxes and so I would need a recurring stream of $96k (77k/.80). But wait a sec....I was thinking of being a working guy. My tax burden should be lower because part of the withdrawl is on money I already paid taxes on and part with be dividends right? How should I figure this?

Note, my savings are all held in taxable accounts not 401k or anything like that.

 

[REWahoo]

The best way to do it is run some ""what if" situations in TurboTax or some other tax prep. program. That will give you a basis of what your tax liability can would be today, then you can guess how that might change in the future...

 

[pb4uski]

This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

 

[Original Wally]

Shabby -

Your basic assumption is correct - depending on the cost basis of the underlying assets, the cash you withdraw will only be PARTLY taxable. Your statements probably have the cost basis listed. That will help you decide WHICH items to liquidate as you draw down.

DON'T forget State taxes - here in California you QUICKLY get to the 9%+ marginal rate.

 

[Shabby]

Ran some numbers on TurboTax and my best guess is 10%. This makes a big difference in my calculations which I used 20% for. Very exciting stuff.

Basically I live off of dividends on Bond Funds, bit of principle, some part time work, write off interest on the mortgage, grab social security in 20 years and life should be good.

 

[Animorph]

I use my own software program to do the calculation for each retirement year, including capital gains, IRA's, Roth IRA's, and deductions. Kind of tough to figure out the effects of Roth conversions without including the tax effects. You could do something similar in Excel. I would think i-orp.com would be able to help as well.

 

[obgyn65]

After reading this thread I realize the planned tax rate I am using once FIREd (22%) may be too high.

 

[Midpack]

This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

Son of a gun. I've been using TurboTax since fire was discovered (or thereabouts), and never noticed that site. Nice quick and dirty estimate. Thanks!!!

 

[Free To Canoe]

This one is pretty simple. You can put in your basic information and it will give you an estimate of what your taxes will be. Put in your estimated, interest, dividends, etc. then keep adding capital gains on withdrawals as needed.

TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator

H&R Block has one, too.
Free 2012 Tax Estimator & Tax Return Calculator - H&R Block®

 

[cinman2000]

H&R Block has one, too.
Free 2012 Tax Estimator & Tax Return Calculator - H&R Block®

I was not aware of these either, but unless I am missing something, neither of these calculators model the 0% Capital Gains tax for those of us that can stay in the 15% marginal bracket....back to Excel

 

[LOL!]

I was not aware of these either, but unless I am missing something, neither of these calculators model the 0% Capital Gains tax for those of us that can stay in the 15% marginal bracket....back to Excel

Taxcaster models the 0% long-term cap gains tax rate for low-income folks just fine.

 

[jclarksnakes]

I thought everybody used the TurboTax TaxCaster. It is a very handy tool.

 

[Brett_Cameron]

I have an Excel spreadsheet that models the tax calculations. It has tax parameter inflation escalation as well. Since all of my income and expense projections are escalated by inflation, this fits well.

 

[kaneohe]

Taxcaster models the 0% long-term cap gains tax rate for low-income folks just fine.

so does the H&R Block one................