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09-15-2021, 07:58 PM
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#1
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Recycles dryer sheets
Join Date: Feb 2013
Posts: 52
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The Tax Man Won’t Leave
We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?
__________________
Still figuring this retirement thing out.
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09-15-2021, 08:01 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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You obviously expected to be in a lower tax bracket when you were retired which is the only reason why someone would do tax-deferred savings. The problem that you have is that you have been much more financially successful than you anticipated when you did that tax deferred savings. Congratulations and enjoy!
__________________
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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09-15-2021, 09:02 PM
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#3
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Full time employment: Posting here.
Join Date: Jul 2014
Posts: 859
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Quote:
Originally Posted by EdL3
What am I missing?
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What are you seeking?
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09-15-2021, 09:08 PM
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#4
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Recycles dryer sheets
Join Date: Dec 2012
Posts: 93
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Making $480,000.00 annually was percentile 99.6% in 2016.
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09-15-2021, 09:27 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: Mar 2016
Posts: 8,968
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I don't think you are missing much.
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09-15-2021, 09:34 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
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Quote:
Originally Posted by EdL3
We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?
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Well, you will have to wait a decade until you get to age for RMDs from your traditional IRA's. And you need to be charitably minded. But when you must take RMDs, you can make up to $100,000 annually of QCD's (qualified charitable distributions) to your favorite charities from your IRA's. Those QCD's will satisfy up to $100,000 of RMD's required, and the monies will go to the charities without you owing any income taxes on them. NOTE: QCD funds must be paid directly from IRA custodian to the charity. Those funds "cannot" come into your possession, and then you give funds yourself to the charity.
The beauty of QCD's is that Uncle Sam (and perhaps Aunt Governor) in effect underwrite a good part of your charitable donations! For those who have sufficient retirement income otherwise without IRA withdrawals, and who wish to give to charity, the IRA QCD route is a Godsend.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
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09-16-2021, 05:03 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,332
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Quote:
Originally Posted by EdL3
:What am I missing?
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A good tax accountant?
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09-16-2021, 05:08 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,313
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Run the tax numbers after the first of you dies - ouch!
__________________
Idleness is fatal only to the mediocre -- Albert Camus
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09-16-2021, 05:09 AM
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#9
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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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Quote:
Originally Posted by donheff
Run the tax numbers after the first of you dies - ouch!
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But it only gets worse for one.
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09-16-2021, 05:19 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by donheff
Run the tax numbers after the first of you dies - ouch!
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Alternative? Have far less money? Give a bunch away?
Clearly it’s a problem of too much pension income! Oh, drat! If only we had less!
__________________
Retired since summer 1999.
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09-16-2021, 05:41 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Jan 2010
Location: dubuque
Posts: 1,163
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good problem to have.
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09-16-2021, 06:08 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2014
Posts: 7,306
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Quote:
Originally Posted by pb4uski
You obviously expected to be in a lower tax bracket when you were retired which is the only reason why someone would do tax-deferred savings.
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This. The conventional wisdom was that you'd be in a lower tax bracket in retirement. With "stealth taxes" such as IRMAA triggered by high AGI, and withdrawals from retirement accounts taxed as ordinary income even if they're dividends or long-term gains, that's not necessarily true anymore.
But who knew that when we were putting money away back then?
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09-16-2021, 06:20 AM
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#13
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Moderator
Join Date: Nov 2015
Posts: 13,846
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My parents often complain about their taxes in retirement, because the premise of 401ks and tax-deferred accounts is you'll be making less in retirement, and in a lower tax bracket.
Well poor them to do better than expected. Between savings, some pensions, SS, and now RMD's. They remark with some exasperation about how it's not true! They are making more now! Oh no! I smile, and sip my coffee, and let them finish, and wait till they start the rant again the next month.
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09-16-2021, 10:36 AM
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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: Apr 2015
Posts: 5,775
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Quoting my DF "If I am higher paying taxes, it means I am making money. It's a good thing".
OP--you have done very well, congratulations. You have options that many people don't.
Charitable donations, Roth conversions, helping family.
Taxes are a part of earnings.
Live life well, be happy.
__________________
Give a Man a fish, he will eat for a day.
Teach a Man to fish, he will eat for a lifetime.
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09-16-2021, 10:49 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,863
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You could, I dunno, stop working. Unless you really like it, have a very expensive lifestyle, or for some reason haven't saved up enough from your income yet.
Then you could Roth convert for the next decade or two (or spend some on yourselves).
Both of these will reduce RMDs.
QCDs, already mentioned, could be done by both of you, so $100K each or $200K total, starting at age 70.5. This would also reduce RMDs.
Oh, and RMD start age is now the year you turn 72, not 70. And the factors have been changed so the amount you're required to take out is a bit less.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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09-16-2021, 11:05 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 9,940
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You're missing my address I'll PM it to you and take that pesky money so you don't have to pay tax on it. I'll be happy to pay the taxes
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09-16-2021, 11:44 AM
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#17
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Recycles dryer sheets
Join Date: Mar 2004
Posts: 257
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Quote:
Originally Posted by EdL3
We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?
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You should have retired sooner?
__________________
too cheap to even use dryer sheets - never mind recycle them!
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09-16-2021, 11:50 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2012
Posts: 6,096
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Quote:
Originally Posted by EdL3
We are blessed to earn $300K annually on our investments. Retirement pension income is $180K. We are in our early 60’s. Our allocation is split 50/50 between bonds & stocks. At the rate we’re going it looks like we’ll be paying the higher tax rate on our IRA withdrawals at 70 after all. What am I missing?
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Well, you could donate your entire RMD to tax-deductible charitable causes, that would keep your taxes somewhat lower .
Otherwise, as others have said, enjoy, and look on the bright side - your money will last longer than you will .
__________________
FIREd date: June 26, 2018 - "This Happy Feeling, Going Round and Round!" (GQ)
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09-16-2021, 11:58 AM
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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: Jan 2018
Location: Tampa
Posts: 11,197
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Quote:
Originally Posted by ivinsfan
You're missing my address I'll PM it to you and take that pesky money so you don't have to pay tax on it. I'll be happy to pay the taxes
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I will split it with you. First world problem wrapped up in a humble brag.
__________________
TGIM
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09-16-2021, 12:24 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: Apr 2010
Posts: 5,830
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I have always considered myself to be extremely fortunate to have been in the top incremental tax bracket for many years.
Would you rather be at the no tax or the lowest tax rate....and what that implies about your income
Be thankful for what you have.
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