72t distributions as part of an income strategy

I spend a large amount each year for income taxes alone, Federal and state.
No point in detailing the approximate amount but I think some folks aren't doing their math so well...
 
I spend a large amount each year for income taxes alone, Federal and state.
No point in detailing the approximate amount but I think some folks aren't doing their math so well...
I'm not sure what you're referring to. Taxes paid, total income (before taxes), other? Sorry. Not trying to be dense (heh, heh, it comes naturally I guess. :facepalm: )
 
I'm not sure what you're referring to. Taxes paid, total income (before taxes), other? Sorry. Not trying to be dense (heh, heh, it comes naturally I guess. :facepalm: )
It's pretty simple.
We each have a gross income from all sources and then an Adjusted Gross Income which is less than Gross Income because only 85% of SS, at most, is taxed.

From there, we eventually get to total tax owed, both Federal and state. Subtracting that, we are left with something we could call Net Income, which we are free to spend on things like food, shelter, clothing, utilities, and other frivolous expenses.

Now, what was the question?
 
But wait.
There are additional expenses that sometimes appear to be one-time things but really are not.
New vehicles, a new roof, stuff like that.

And then the recreational component: European river cruises, month long road trips, etc.

So it's incredibly easy to low-ball your actual expenses...
 
I spend a large amount each year for income taxes alone, Federal and state.
No point in detailing the approximate amount but I think some folks aren't doing their math so well...
It's pretty simple.
We each have a gross income from all sources and then an Adjusted Gross Income which is less than Gross Income because only 85% of SS, at most, is taxed.

From there, we eventually get to total tax owed, both Federal and state. Subtracting that, we are left with something we could call Net Income, which we are free to spend on things like food, shelter, clothing, utilities, and other frivolous expenses.

Now, what was the question?
I guess the question was why you were questioning people's math (if that's what you were doing - I guess from your response, that WAS what you were doing). I didn't see any faulty math myself, but I already hinted at being a bit dense.

Thanks for your response.
 
I was questioning the math .
$3k per month in retirement is very little for most situations nowadays.
I suspect the OP was not including additional expenses in that amount...
 
Lol.

When I posted my spending of 60k a year, multiple people questioned it.
I promise I won't question yours since I spend $250K to $300K a year. :biggrin: One day when we stop travelling and golfing, we will probably go down to about $150K.
 
I was questioning the math .
$3k per month in retirement is very little for most situations nowadays.
I suspect the OP was not including additional expenses in that amount...
I am a simple traveler and spend the majority of my time outside of the US in places where the cost of living is a pittance. I have no liabilities of which to speak. I don't pay Federal income tax, if I can help it, and absolutely don't pay State tax of any sort except for vehicle registrations. I also have an LLC in which to write off many expenses. So, yes, my cost of living for last few years has been about $35k.

The price of everything in the US is out of hand, comparatively. Examples:
1. Doctor visit in Mexico - $3
2. Custom made leather pouch on the spot in Nicaragua - $1
3. 52-ounce tomahawk ribeye in Panama grocery store - $9
4. Swank AirBnB in Bogotá - $25 per night
5. Rotisserie chichen lunch more than one person could eat in Medellin - $2

I'm not about bad debt and stuff. I'm about experience.
 
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I was questioning the math .
$3k per month in retirement is very little for most situations nowadays.
I suspect the OP was not including additional expenses in that amount...
Okay, I finally get it. Sorry.

Amazingly, some folks can live on quite small expenditures. Exactly how they do it, I'm not sure. I know several in that category.
 
Okay, I finally get it. Sorry.

Amazingly, some folks can live on quite small expenditures. Exactly how they do it, I'm not sure. I know several in that category.
My at home expenditures for food and utilities are rather small.
My month long road trips with lodging and meals every day drive the numbers up a lot.
Same for my European trips.
YMMV...
 
^^^^^^^^

My parents were both gone by 2000 so that sets the time frame, but they lived on less than $1000/month. Of course, they never traveled and rarely ate out. They owned their modest house and a paid for car. Their savings were in a checking account and a savings account.
 
I live in not LCOL FL (paid off home but have HOA/Insurance which isn't cheap) and my cash flow out is about $3K/mo ignoring a couple lumpy expenses (really only my A/C system and auto replacement) with the OP's strategy it should be easy to liv. I could get down to $36k/year pretty easy and with sinking funds in place for the lumps without too much pain.... 1/4-1/3 of my spending falls under entertainment. We all have different "needs." Realistically, I'll probably start spending more in the coming years but I'm content where I am and don't see spending more money making me any happier so I'm not going to spend just to spend. I actually struggle with getting rid of stuff I don't use now.... I am not deprived at all!

To the OP, I'd spend brokerage first and let the IRA ride (and convert to Roth it if makes sense to do so) -especially as you have enough to cover your first 12.5 years. In my situation, my taxable accounts were much smaller than my tax-deferred and I'd need to access those funds before 59.5. Even so, the market has been kind to me 4 years in and even though I'm drawing from those accounts, the balance has actually had a slight increase! I've postponed when I'll start my SEPP (once started, can't stop) by a couple more years from when I thought I would since my taxable is not depleting as fast as anticipated.

If you choose to start SEPP I'd consider the RMD method. It's what I intend to use (you can always change to it once -the only exception) as the benefits to me are:
-Increasing payments as the portfolio grows/life span decreases (sort of a COLA over the SEPP period)
-Gets more money out of the account over the time I'm doing SEPP (whether spent or reinvested) lowering RMDs in the future. Being single and receiving PTC, conversions are sub-optimal.
-If the market craters it will reduce the amount being taken out during the low market (I'd rather ride the recovery tax deferred). Also, the method will not deplete the account before 59.5.
 
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