jIMOh
Thinks s/he gets paid by the post
I was doing some "retirement" adjustment calculations... based on feedback to not base planning off current income, but instead to base it off current expenses.
Here is something I am chewing on:
Wife and I both work and file taxes as married filing jointly. 2007 tax brackets suggest 64k is "over/under" between 25% and 15% tax bracket.
My gross income alone is over 64k. Meaning I have taxes withheld at 25% level.
Based on our take home pay (which drives our expenses), we spend less than 48k per year (of my salary), the 48k is in lower-15%- tax bracket if it is coming from "investments" as opposed to an employer. The difference between Gross and take home accounts for FICA, 401k contributions and taxes paid.
The adjustment changed many of my "charts" I use to track early retirement by at least 8 years (Meaning I can retire at least 8 years earlier than expected based on these projections).
This also blows the Roth assumptions out the window. At one point I was thinking because we are in 25% bracket now, and getting close to 28% bracket (wife works a good job too) we would be in high bracket in retirement. Now I look at "spending" and the income we need is barely above 15% bracket now (we take home only 2/3 of our gross based on 401k deductions and taxes).
This also shows me the cost of working for us is close to 40k, even before we consider travel costs/ clothing costs/ business costs. If we "gross" close to 120k and take home less than 80k, 40k is going somewhere which is not to us.
Curious- Taxes are based on AGI... and I assume AGI figures in gross pay minus deductions and taxes paid... is the assumption to amount needed closer to "take home" pay (which drives spending) or gross pay (which determines tax bracket) to you out there in internet land?
Here is something I am chewing on:
Wife and I both work and file taxes as married filing jointly. 2007 tax brackets suggest 64k is "over/under" between 25% and 15% tax bracket.
My gross income alone is over 64k. Meaning I have taxes withheld at 25% level.
Based on our take home pay (which drives our expenses), we spend less than 48k per year (of my salary), the 48k is in lower-15%- tax bracket if it is coming from "investments" as opposed to an employer. The difference between Gross and take home accounts for FICA, 401k contributions and taxes paid.
The adjustment changed many of my "charts" I use to track early retirement by at least 8 years (Meaning I can retire at least 8 years earlier than expected based on these projections).
This also blows the Roth assumptions out the window. At one point I was thinking because we are in 25% bracket now, and getting close to 28% bracket (wife works a good job too) we would be in high bracket in retirement. Now I look at "spending" and the income we need is barely above 15% bracket now (we take home only 2/3 of our gross based on 401k deductions and taxes).
This also shows me the cost of working for us is close to 40k, even before we consider travel costs/ clothing costs/ business costs. If we "gross" close to 120k and take home less than 80k, 40k is going somewhere which is not to us.
Curious- Taxes are based on AGI... and I assume AGI figures in gross pay minus deductions and taxes paid... is the assumption to amount needed closer to "take home" pay (which drives spending) or gross pay (which determines tax bracket) to you out there in internet land?