Badger
Thinks s/he gets paid by the post
- Joined
- Nov 2, 2008
- Messages
- 3,414
I am 64 and will retire in a few months. Wife is already retired. We have no mortgage, no debts, and kids have long been on their own. We pay cash for everything and have Medicare and Tricare for Life. We saved and lived on one (teacher’s) salary for the last 20 years. Last year we spent about 50k. We are somewhat frugal and don’t have many “wants” but want to travel and landscape the backyard to make this old house more pleasant during retirement years.
Now I need to figure out when to tap into our savings to be the most tax efficient. Our income base will be:
Social Security (both) 37k (cola)
Pension (wife) 12k (cola)
Pension (me) 10k (non-cola)
Investments (approximate numbers):
tIRA (me) 525k (most in TRP 2010)
tIRA (wife) 350k (Vanguard Wellesley)
roth IRA (me) 75k (in TRP 2010)
roth IRA (wife) 75k (in TRP 2015)
Various stocks 475k
Cash 250k
I have been simplifying our investments to make it easy for my wife to deal with when I am no longer able to make rational decisions or for some other more permanent reason. I figure we will first use the dividends and interest each year from stocks and/or cash since we will have to pay taxes on those anyway. Last year that came to 20k.
If we use roth IRA and cash to add to our income base then tax bracket shouldn’t change but by 70 ½ when we have to withdraw from the tIRA (maybe about 30-40k) we will probably be in a higher tax bracket. But should I leave cash and roth alone and withdraw from the tIRA up to the top of my low tax bracket now to try and keep taxes down at 70½?
How much could I withdraw from the tIRA each year until 70 ½ without increasing my tax bracket? How would you withdraw from the buckets to keep the taxes to a minimum? Will any method make a difference? The government claimed enough of my earnings. Being a responsible citizen all these years just meant I paid standard deduction and therefore maximum taxes on my earnings. No loop holes available for me.
I sure could use some help. Saving was easy but I forgot how to spend money without feeling frivolous or ripped off. I even feel uneasy going to McD without a coupon!
Cheers!
Now I need to figure out when to tap into our savings to be the most tax efficient. Our income base will be:
Social Security (both) 37k (cola)
Pension (wife) 12k (cola)
Pension (me) 10k (non-cola)
Investments (approximate numbers):
tIRA (me) 525k (most in TRP 2010)
tIRA (wife) 350k (Vanguard Wellesley)
roth IRA (me) 75k (in TRP 2010)
roth IRA (wife) 75k (in TRP 2015)
Various stocks 475k
Cash 250k
I have been simplifying our investments to make it easy for my wife to deal with when I am no longer able to make rational decisions or for some other more permanent reason. I figure we will first use the dividends and interest each year from stocks and/or cash since we will have to pay taxes on those anyway. Last year that came to 20k.
If we use roth IRA and cash to add to our income base then tax bracket shouldn’t change but by 70 ½ when we have to withdraw from the tIRA (maybe about 30-40k) we will probably be in a higher tax bracket. But should I leave cash and roth alone and withdraw from the tIRA up to the top of my low tax bracket now to try and keep taxes down at 70½?
How much could I withdraw from the tIRA each year until 70 ½ without increasing my tax bracket? How would you withdraw from the buckets to keep the taxes to a minimum? Will any method make a difference? The government claimed enough of my earnings. Being a responsible citizen all these years just meant I paid standard deduction and therefore maximum taxes on my earnings. No loop holes available for me.
I sure could use some help. Saving was easy but I forgot how to spend money without feeling frivolous or ripped off. I even feel uneasy going to McD without a coupon!
Cheers!