Age 73 Tax Planning (currently 67)

[Route246]

I'm trying to plan for 6 years from now. We are comfortably FI and plan to be in 6 years. Looking at this table today:

Tax Rate	For Single Filers	For Married Individuals Filing Joint Returns	For Heads of Households
10%	$0 to $11,000	$0 to $22,000	$0 to $15,700
12%	$11,000 to $44,725	$22,000 to $89,450	$15,700 to $59,850
22%	$44,725 to $95,375	$89,450 to $190,750	$59,850 to $95,350
24%	$95,375 to $182,100	$190,750 to $364,200	$95,350 to $182,100
32%	$182,100 to $231,250	$364,200 to $462,500	$182,100 to $231,250
35%	$231,250 to $578,125	$462,500 to $693,750	$231,250 to $578,100
37%	$578,125 or more	$693,750 or more	$578,100 or more

I think we will be in the 24% bracket. RMD estimate $3M*4%=$120K plus about $70K*85%=$60K SS puts us at a minimum of $180K income. Dividend and interest income might add $40K or more depending on AA. We plan to make charitable contributions depending on how we feel financially. Assuming these are just budgetary numbers subject to change is my planning valid or am I missing something?

As a salaryman/wage slave (well-paid, albeit) I never really worried about taxes as I've been W-2 all my life with minor 1099 contracts here and there on the side.

But, once my wages go to zero (probably within a 12-month window at this point) I need to be writing quarterly checks to IRS and Cal FTB so it becomes a little more annoying as this is real money coming out of our bank account.

We plan to use charitable giving to keep us safely within a bracket or Medicare threshold if necessary as we would rather give to charity than to the government. Is this a sound strategy and starting point as far as thinking about this?

 

[GrayHare]

Unsure what you are planning beyond possible charitable donations, so difficult to evaluate. What is RMT? Note that other than QCDs, charitable giving has no impact on what you might pay for Medicare IRMAA because IRMAA is calculated before charitable giving.

 

[SecondCor521]

Your questions are a bit vague, but here are some hopefully helpful thoughts:

1. Your profile says you're in California. You'll probably have California income taxes too to consider.

2. In the next 6 years things will probably change. The tax brackets get adjusted for inflation annually. In 2026 the TCJA expires and unless Congress changes the tax laws again, the tax brackets get more aggressive - smaller brackets and somewhat higher rates. Your $3M IRA might grow (or shrink), and your SS will change between now and then.

3. You can do QCDs starting at age 70.5 up to $105K per taxpayer per year. AFAIK they are the most tax efficient way to do charitable giving, and they count towards your RMDs as well. So you could get that $180K down to $75K if you wanted to.

4. If you don't want to do quarterly estimates, you can have taxes withheld from your RMD instead. It's a method that's talked about regularly here. You can also have taxes withheld from your SS benefits if you like.

5. The IRMAA brackets are different from the federal income tax brackets, and are based on MAGI, not TI. So in essence you'll have a variety of intermixed thresholds to which to optimize. IRMAA brackets are also adjusted for inflation.

 

[SevenUp]

Using Qualified charitable distributions would be the best way to implement your charitable inclinations.

Roth Conversion with Social Security and Medicare IRMAA might be useful for you.

 

[Lorenzo]

"Age 73 tax planning." So is this about RMDs?

 

[obsessed]

With just your RMDs and Social Security income your federal marginal rate will be 22% ($120k + $60k - $29k std deduction = $151k). Your effective rate would be in the range of 16%-17%. Interest income would push this up but dividends (assuming long term treatment) would be taxed at the capital gains rate. Then add in Cali tax.

Making charitable contributions just to avoid taxes does not work. You would need to donate $100 to save maybe $25 in taxes. You could juice this up with something like a Donor Advised Fund if you have highly appreciated taxable assets but still net negative to you.

I would look into Roth conversions between when you end employment and when RMD's kick in.

 

[TheWizard]

Definitely do moderate Roth conversions after quitting employment and before starting RMDs.
Take a levelizing approach so that your AGI goes up 3% per year, ruffly.

And definitely use QCDs for charitable contributions that you do after age 70.5...

 

[Al18]

FYI the TCJA is expiring 12/31/25. Unless Congress acts to change this, you will be in the 25% tax bracket after 1/1/26

 

[TheWizard]

FYI the TCJA is expiring 12/31/25. Unless Congress acts to change this, you will be in the 25% tax bracket after 1/1/26

Probably.
I don't recall exact details, but back when TCJA started, they didn't just change the tax bracket rates, they also changed the range of taxable income applicable to each rate...

 

[Route246]

Unsure what you are planning beyond possible charitable donations, so difficult to evaluate. What is RMT? Note that other than QCDs, charitable giving has no impact on what you might pay for Medicare IRMAA because IRMAA is calculated before charitable giving.

Sorry, I made the correction. Should be RMD.

IRMAA is a consideration. Thank you for that impact of QCD, I couldn't figure out what the significance is (ex. cash out IRA and then make charitable contribution vs QCD).

 

[Route246]

Thank you. I now understand the benefit of QCD once I turn 70-1/2.

Using Qualified charitable distributions would be the best way to implement your charitable inclinations.

Thank you. I will definitely be discussing this with my CPA.

Roth Conversion with Social Security and Medicare IRMAA might be useful for you.

Yes, mostly about RMD but also it is for 6 years from now so plenty of time to do planning and prep now.

"Age 73 tax planning." So is this about RMDs?

Roth is rough at this time due to our tax bracket. Will definitely consider it once the paychecks go to zero.

Definitely do moderate Roth conversions after quitting employment and before starting RMDs.
Take a levelizing approach so that your AGI goes up 3% per year, ruffly.

And definitely use QCDs for charitable contributions that you do after age 70.5...

 

[Sunset]

.......
Yes, mostly about RMD but also it is for 6 years from now so plenty of time to do planning and prep now.

Roth is rough at this time due to our tax bracket. Will definitely consider it once the paychecks go to zero.

Rougher than the 22% tax bracket of RMD + SS + Interest + Dividends ?

Consider if one of dies, the tax rate will then be 24% -> 32% for the same income.

We are doing conversions and aiming to stay below the first IRMAA line, this year. This year we may have crossed into the 24% bracket just a little.

 

[RetiredHappy]

I'm trying to plan for 6 years from now. We are comfortably FI and plan to be in 6 years. Looking at this table today:

Tax Rate	For Single Filers	For Married Individuals Filing Joint Returns	For Heads of Households
10%	$0 to $11,000	$0 to $22,000	$0 to $15,700
12%	$11,000 to $44,725	$22,000 to $89,450	$15,700 to $59,850
22%	$44,725 to $95,375	$89,450 to $190,750	$59,850 to $95,350
24%	$95,375 to $182,100	$190,750 to $364,200	$95,350 to $182,100
32%	$182,100 to $231,250	$364,200 to $462,500	$182,100 to $231,250
35%	$231,250 to $578,125	$462,500 to $693,750	$231,250 to $578,100
37%	$578,125 or more	$693,750 or more	$578,100 or more

I think we will be in the 24% bracket. RMD estimate $3M*4%=$120K plus about $70K*85%=$60K SS puts us at a minimum of $180K income. Dividend and interest income might add $40K or more depending on AA. We plan to make charitable contributions depending on how we feel financially. Assuming these are just budgetary numbers subject to change is my planning valid or am I missing something?

As a salaryman/wage slave (well-paid, albeit) I never really worried about taxes as I've been W-2 all my life with minor 1099 contracts here and there on the side.

But, once my wages go to zero (probably within a 12-month window at this point) I need to be writing quarterly checks to IRS and Cal FTB so it becomes a little more annoying as this is real money coming out of our bank account.

We plan to use charitable giving to keep us safely within a bracket or Medicare threshold if necessary as we would rather give to charity than to the government. Is this a sound strategy and starting point as far as thinking about this?

With standard deductions + over 65 yo deductions, it is $29,200+3,000 = $32,200. It gets your taxable amount to $187,800 which is still at the 22% tax bracket.