Deleted
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Post by Deleted on Feb 12, 2018 14:59:45 GMT -5
Here's the part that really gets me - the average tax refund is now $3000/year. We (the US tax payers) send in 131 million federal tax returns each year. That means that we, as a population, over-pay our taxes by $400,000,000,000. (That's .4 Trillion). And then each Spring the IRS sends us $.4 trillion in refunded over-payments. Phil- it's not quite that bad. The 131 million figure includes all returns, I'm pretty sure- not just those with refunds. Still, in 2015, which was the first reference I found, they issued $124 billion (so 0.12 trillion) in refunds. Yeah, that's a lot of interest-free money.
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Post by The Walk of the Penguin Mich on Feb 12, 2018 15:42:56 GMT -5
Here's the part that really gets me - the average tax refund is now $3000/year. We (the US tax payers) send in 131 million federal tax returns each year. That means that we, as a population, over-pay our taxes by $400,000,000,000. (That's .4 Trillion). And then each Spring the IRS sends us $.4 trillion in refunded over-payments. Phil- it's not quite that bad. The 131 million figure includes all returns, I'm pretty sure- not just those with refunds. Still, in 2015, which was the first reference I found, they issued $124 billion (so 0.12 trillion) in refunds. Yeah, that's a lot of interest-free money. And roughly half of this ($56 billion) was EITC, which is not money that is withheld.
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Bonny
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Post by Bonny on Feb 12, 2018 16:05:48 GMT -5
Why would that irritate you? If the government can make more money off of the average person it means they need to make less off of you, right? I wondered this too. Why does it matter so much to you? It has absolutely no impact upon your life. Because it's a stupid way to do things. But as dannylion says "People are stupid".
That said, there are even stupider things to do like spend all your earnings and owe the IRS serious money. And get hit with the 25% penalty as well as interest. Agree to a payment plan and make minimum payments so that your debt is 4x what you owed in the first place.
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Deleted
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Post by Deleted on Feb 12, 2018 16:05:57 GMT -5
Phil- it's not quite that bad. The 131 million figure includes all returns, I'm pretty sure- not just those with refunds. Still, in 2015, which was the first reference I found, they issued $124 billion (so 0.12 trillion) in refunds. Yeah, that's a lot of interest-free money. And roughly half of this ($56 billion) was EITC, which is not money that is withheld. The child tax credit and most of the American Opportunity credit are refundable as well.
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Post by The Walk of the Penguin Mich on Feb 12, 2018 16:28:19 GMT -5
I wondered this too. Why does it matter so much to you? It has absolutely no impact upon your life. Because it's a stupid way to do things. But as dannylion says "People are stupid".
That said, there are even stupider things to do like spend all your earnings and owe the IRS serious money. And get hit with the 25% penalty as well as interest. Agree to a payment plan and make minimum payments so that your debt is 4x what you owed in the first place.
When it was just my work income and interest income, it was a hell of a lot easier to estimate taxes. I used to get anywhere from $100-200 refund, and that was ok. But right now, we have about a 2" stack of tax forms and receipts for deductions that need to go to the accountant, and it's a crap shoot as to whether or not we owe this year. I suspect we'll owe because last year we got a refund. It isn't always 'people are stupid'.
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TheOtherMe
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Post by TheOtherMe on Feb 12, 2018 17:10:08 GMT -5
In my early years of tax preparation, I prepared a lot of returns with EITC and Child Tax Credit.
Those can easily result in refunds upwards of $5000. I've seen them at $10000. Those are refundable credits. Those account for a large amount of the high dollar amount refunds.
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Rob Base 2.0
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Post by Rob Base 2.0 on Feb 12, 2018 17:38:04 GMT -5
Hey all I been busy. Here's some updates. We paid about $16K in taxes (I'll pull the exact numbers later)
I checked my withholdings this morning and they were set at (my wife's are similar):
for my retired pay- "married number of exemptions 1" for my regular job-"married but at higher single rate, number of exemptions 2" (not sure why that one was at 2 exemptions)
This AM I set taxes to just take out extra flat amount to about even it out. I just never had this problem before, I always got a refund in the past and LIKED getting a refund in the past (despite Phil's and other's opinions on this). I guess we will just invest less this year to make up for the new tax payments. I still just have a hard time understanding how when I thought we had everything set up to take the right (or close to it) taxes that I have so high a bill. I don't get that having 3 smaller salaries combined could result in so high a tax bill..... I could understand a $1K bill or something......but $4K?? I am afraid to check my state taxes now......
and when I put all our stuff in H&R Block (minus my retirement pay), it shows a $2,500 refund. So I am not understanding how they let me pay so low an amount in my retired pay. I am just frustrated because this is my first time paying taxes in like forever, and to pay such an amount.....
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Deleted
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Post by Deleted on Feb 12, 2018 17:54:31 GMT -5
Hey all I been busy. Here's some updates. We paid about $16K in taxes (I'll pull the exact numbers later)
I checked my withholdings this morning and they were set at (my wife's are similar):
for my retired pay- "married number of exemptions 1" for my regular job-"married but at higher single rate, number of exemptions 2" (not sure why that one was at 2 exemptions)
This AM I set taxes to just take out extra flat amount to about even it out. I just never had this problem before, I always got a refund in the past and LIKED getting a refund in the past (despite Phil's and other's opinions on this). I guess we will just invest less this year to make up for the new tax payments. I still just have a hard time understanding how when I thought we had everything set up to take the right (or close to it) taxes that I have so high a bill. I don't get that having 3 smaller salaries combined could result in so high a tax bill..... I could understand a $1K bill or something......but $4K?? I am afraid to check my state taxes now......
and when I put all our stuff in H&R Block (minus my retirement pay), it shows a $2,500 refund. So I am not understanding how they let me pay so low an amount in my retired pay. I am just frustrated because this is my first time paying taxes in like forever, and to pay such an amount.....
"They" have nothing to do with your tax situation. There isn't even anything particularly outstanding about your claiming "married and 1." Ditto for your regular job with "married and 2." Those are choices you made. Do you think "they" are supposed to question your having a few extra hundred dollars in additional withholding? Your HR dept. doesn't care. This is what is called the "marriage penalty" so I'm surprised that you are encountering it for the first time. Two wage earners married to each other have always had to deal with the fact that the second income should be taxed at a higher rate. It's why I have always had extra $$$ taken from my salary when I worked two jobs. I get a reminder of this when DH's Social Security is taxed, but he hasn't had anything withheld. You must have been withholding too much (or your wife didn't earn much) if this is the first time you have encountered it.
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Rob Base 2.0
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Post by Rob Base 2.0 on Feb 12, 2018 18:05:33 GMT -5
Hey all I been busy. Here's some updates. We paid about $16K in taxes (I'll pull the exact numbers later)
I checked my withholdings this morning and they were set at (my wife's are similar):
for my retired pay- "married number of exemptions 1" for my regular job-"married but at higher single rate, number of exemptions 2" (not sure why that one was at 2 exemptions)
This AM I set taxes to just take out extra flat amount to about even it out. I just never had this problem before, I always got a refund in the past and LIKED getting a refund in the past (despite Phil's and other's opinions on this). I guess we will just invest less this year to make up for the new tax payments. I still just have a hard time understanding how when I thought we had everything set up to take the right (or close to it) taxes that I have so high a bill. I don't get that having 3 smaller salaries combined could result in so high a tax bill..... I could understand a $1K bill or something......but $4K?? I am afraid to check my state taxes now......
and when I put all our stuff in H&R Block (minus my retirement pay), it shows a $2,500 refund. So I am not understanding how they let me pay so low an amount in my retired pay. I am just frustrated because this is my first time paying taxes in like forever, and to pay such an amount.....
"They" have nothing to do with your tax situation. There isn't even anything particularly outstanding about your claiming "married and 1." Ditto for your regular job with "married and 2." Those are choices you made. Do you think "they" are supposed to question your having a few extra hundred dollars in additional withholding? Your HR dept. doesn't care. This is what is called the "marriage penalty" so I'm surprised that you are encountering it for the first time. Two wage earners married to each other have always had to deal with the fact that the second income should be taxed at a higher rate. It's why I have always had extra $$$ taken from my salary when I worked two jobs. I get a reminder of this when DH's Social Security is taxed, but he hasn't had anything withheld. You must have been withholding too much (or your wife didn't earn much) if this is the first time you have encountered it.
I know, I know. It's just that's the way I have always put my taxes into HR in the past and never had a problem before, first time in like 20 years.
Just to see a $6K swing going from $2500 refund (without retired pay) to owing $4K (after putting in retired pay) is a shock. Still recovering. I just always thought it was hard to "owe" taxes unless you had unusual income (you own a business or some other unusual thing).
Please don't rub it in
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tallguy
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Post by tallguy on Feb 12, 2018 18:53:56 GMT -5
"They" have nothing to do with your tax situation. There isn't even anything particularly outstanding about your claiming "married and 1." Ditto for your regular job with "married and 2." Those are choices you made. Do you think "they" are supposed to question your having a few extra hundred dollars in additional withholding? Your HR dept. doesn't care. This is what is called the "marriage penalty" so I'm surprised that you are encountering it for the first time. Two wage earners married to each other have always had to deal with the fact that the second income should be taxed at a higher rate. It's why I have always had extra $$$ taken from my salary when I worked two jobs. I get a reminder of this when DH's Social Security is taxed, but he hasn't had anything withheld. You must have been withholding too much (or your wife didn't earn much) if this is the first time you have encountered it.
I know, I know. It's just that's the way I have always put my taxes into HR in the past and never had a problem before, first time in like 20 years.
Just to see a $6K swing going from $2500 refund (without retired pay) to owing $4K (after putting in retired pay) is a shock. Still recovering. I just always thought it was hard to "owe" taxes unless you had unusual income (you own a business or some other unusual thing).
Please don't rub it in
Look at it this way. You and your wife earned $85,000 at your jobs. Assuming standard deduction and including no other factors or dependents, it is 85,000 - 12,700 - 8100 = 64,200 taxable income. For your $46,000 military pay, the first $11,700 fills your 15% bracket, while the rest is in the 25% bracket. That means that the additional tax resulting from the pension is $10,330. Obviously your true numbers will be different, but a quick check shows that withholding looks like $4400 at the level you claimed. That is about a $6,000 difference right there. Cutting exemptions to zero and having an additional amount withheld from one of the jobs will fix the problem.
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Rob Base 2.0
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Post by Rob Base 2.0 on Feb 12, 2018 19:44:37 GMT -5
I know, I know. It's just that's the way I have always put my taxes into HR in the past and never had a problem before, first time in like 20 years.
Just to see a $6K swing going from $2500 refund (without retired pay) to owing $4K (after putting in retired pay) is a shock. Still recovering. I just always thought it was hard to "owe" taxes unless you had unusual income (you own a business or some other unusual thing).
Please don't rub it in
Look at it this way. You and your wife earned $85,000 at your jobs. Assuming standard deduction and including no other factors or dependents, it is 85,000 - 12,700 - 8100 = 64,200 taxable income. For your $46,000 military pay, the first $11,700 fills your 15% bracket, while the rest is in the 25% bracket. That means that the additional tax resulting from the pension is $10,330. Obviously your true numbers will be different, but a quick check shows that withholding looks like $4400 at the level you claimed. That is about a $6,000 difference right there. Cutting exemptions to zero and having an additional amount withheld from one of the jobs will fix the problem.
This AM I set my retirement pay to take $300 extra in taxes per month. Also I set my pay from work to take an extra $75 per pay period. I need to reduce some of my investments to make up some of the difference. Now I don't want to look at state taxes.....
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hoops902
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Post by hoops902 on Feb 12, 2018 19:51:07 GMT -5
"They" have nothing to do with your tax situation. There isn't even anything particularly outstanding about your claiming "married and 1." Ditto for your regular job with "married and 2." Those are choices you made. Do you think "they" are supposed to question your having a few extra hundred dollars in additional withholding? Your HR dept. doesn't care. This is what is called the "marriage penalty" so I'm surprised that you are encountering it for the first time. Two wage earners married to each other have always had to deal with the fact that the second income should be taxed at a higher rate. It's why I have always had extra $$$ taken from my salary when I worked two jobs. I get a reminder of this when DH's Social Security is taxed, but he hasn't had anything withheld. You must have been withholding too much (or your wife didn't earn much) if this is the first time you have encountered it.
I know, I know. It's just that's the way I have always put my taxes into HR in the past and never had a problem before, first time in like 20 years.
Just to see a $6K swing going from $2500 refund (without retired pay) to owing $4K (after putting in retired pay) is a shock. Still recovering. I just always thought it was hard to "owe" taxes unless you had unusual income (you own a business or some other unusual thing).
Please don't rub it in
Having 2 good-paying incomes is "unusual" IMO. Yeah, if you didn't have your military pension, you'd be getting a 2500 refund...but you'd also be bringing home a LOT less money. Adding a 2nd stream of income that matches your first stream is a good problem to have...this is just a little hiccup in some budgeting...overall it's a nice problem to have though!
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TheOtherMe
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Post by TheOtherMe on Feb 12, 2018 20:10:21 GMT -5
Don't know how old you are or what state you live in. You may find you don't pay taxes on some of the pension.
Good luck. It's not a bad problem to have, except for the $4000. I would feel much better if I had 3 income streams.
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countrygirl2
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Post by countrygirl2 on Feb 13, 2018 7:46:28 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back.
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princessleia
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Post by princessleia on Feb 13, 2018 8:59:37 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back. At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level.
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midjd
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Post by midjd on Feb 13, 2018 9:32:25 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back. At last somebody is pointing it all out... I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. As opposed to what? Not saving? Or saving somewhere else?
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countrygirl2
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Post by countrygirl2 on Feb 13, 2018 9:37:25 GMT -5
Saving somewhere else, I kept telling my husband, lets pay the taxes and take the hit then while we had the money that the way he won't invest it would cost us dearly and understand that our savings were at least $100k less then it looked like because of it. He would not listen, sooooo. You need to look at what if scenarios and see. He has finally started listening about the burn rate of money but it took some arguments and hard talking to get it across. He is really hard headed.
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Deleted
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Post by Deleted on Feb 13, 2018 9:41:10 GMT -5
At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. The theory is that you avoid taxation on these amounts in your high-income years (e,g, putting it away while you have income from employment) and then when you take it out, you won't have wage income so will be taxed at a lower level. It's not perfect, of course. Even long-term gains and dividends are taxed as ordinary income when they come out of an IRA or 401(k). Tax laws change and some of us are still in exalted tax brackets when we retire, thanks to after-tax savings and maybe a pension or two. Even when you're forced to take withdrawals starting at age 70, you can transfer any or all of them straight to a charity. Voila- no taxable income effect at all. Doesn't even enter into your AGI, which is the basis for determining IRMAA Medicare surcharges, the taxability of SS and a few of the itemized deductions. I'm hoping that's still an option when I'm 70.
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bookkeeper
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Post by bookkeeper on Feb 13, 2018 9:42:39 GMT -5
Hey all I been busy. Here's some updates. We paid about $16K in taxes (I'll pull the exact numbers later)
I checked my withholdings this morning and they were set at (my wife's are similar):
for my retired pay- "married number of exemptions 1" for my regular job-"married but at higher single rate, number of exemptions 2" (not sure why that one was at 2 exemptions)
This AM I set taxes to just take out extra flat amount to about even it out. I just never had this problem before, I always got a refund in the past and LIKED getting a refund in the past (despite Phil's and other's opinions on this). I guess we will just invest less this year to make up for the new tax payments. I still just have a hard time understanding how when I thought we had everything set up to take the right (or close to it) taxes that I have so high a bill. I don't get that having 3 smaller salaries combined could result in so high a tax bill..... I could understand a $1K bill or something......but $4K?? I am afraid to check my state taxes now......
and when I put all our stuff in H&R Block (minus my retirement pay), it shows a $2,500 refund. So I am not understanding how they let me pay so low an amount in my retired pay. I am just frustrated because this is my first time paying taxes in like forever, and to pay such an amount.....
Try to relax and concentrate instead on your effective tax rate. Your federal income tax due divided by the gross income you earned for 2017. If your rate is 10% to 15% you are doing OK. I think that the effective tax rate is a better measure of how we are doing at tax time. Using the percentage helps me estimate my tax bill during the year. Last year I sent in an extra payment, this year I did not because we had already withheld plenty. Just a different way to look at the same situation.
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princessleia
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Post by princessleia on Feb 13, 2018 9:45:03 GMT -5
At last somebody is pointing it all out... I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. As opposed to what? Not saving? Or saving somewhere else? Yes, save somewhere else. Different rules from 401K. Can't put all your eggs in 1 basket.
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midjd
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Post by midjd on Feb 13, 2018 9:50:38 GMT -5
Just to use my own numbers as an example, contributing to two traditional IRAs saved me about $3K in federal taxes this year.
If I invest that savings: According to my Phil Script, a lump sum investment of $3,000.00 bearing an annual return of 11% could grow to $128,454.25 in 36 years! (that's when I'll be 70).
Even if that gain is taxed at 80% or more, which seems unlikely, I'm still waaaay ahead of where I'd have been if I'd paid the $3K in taxes today. And as Athena pointed out, there are ways to get around the full taxation of RMDs.
I'm all for diversifying the tax treatment of savings, which is why DH and I both have Roths and a taxable account... but since time is on my side, I'd rather have that money to invest now.
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Deleted
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Post by Deleted on Feb 13, 2018 9:53:16 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back. At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. I'm trying to imagine a universe where I'm complaining about too much income in retirement. Yeah...can't do it.
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hoops902
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Post by hoops902 on Feb 13, 2018 10:05:35 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back. At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. Well most people plan to have a lower income in retirement (meaning lower potential tax bracket) than they do while working. So the question isn't whether you're raising your retirement income...it's a comparison of the taxes you would pay now vs the taxes you would pay in the future.
People will always complain at the time of actually paying the taxes, that doesn't mean deferring the taxes is a bad idea. Yes, it raises your taxes at the point of retirement...but it does so at the benefit of paying a total overall lower tax bill than you would have when you were saving (if you're doing it with any sort of planning).
I'm an advocate of having some diversity in the taxation of retirement money, but not because it "raises retirement income"...it's because you have no idea what the brackets will be in the future.
If people are maxing their retirement contributions...they're most likely making a good chunk of money, which means they're deferring a significant tax bill on those contributions to a time when their tax rate will likely be lower (and if it ends up being higher because their RMD amount is greater than their working income...that's a pretty good problem to have).
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princessleia
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Post by princessleia on Feb 13, 2018 10:19:09 GMT -5
At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. I'm trying to imagine a universe where I'm complaining about too much income in retirement. Yeah...can't do it. I know....all I am saying is you can't put ALL YOUR RETIREMENT into 401K or a IRA where you are bound by a minimum withdrawal every year and get taxed at an unnecessary higher rate. By all means, spread it out to a different combinations - Roth and other investment vehicles.
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Deleted
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Post by Deleted on Feb 13, 2018 10:24:39 GMT -5
I just ran an RMD calculator. If by some miracle I have 1.5 million in my IRA at 70.5 the RMD is less than 55K/year...not a huge chunk of change, especially 21 years from now. I won't be receiving any pension money and SS will be minimal (maybe 10-12K/year), so I don't think I'm going to be just flush with income and taxes due to putting all I can into my 401K now.
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Deleted
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Post by Deleted on Feb 13, 2018 10:31:20 GMT -5
I guess if you're thinking of leaving as much as you can for an inheritance it makes sense to minimize taxes in retirement. But, the way I look at it, at the time I start needing to do RMDs, I'm down to probably the last 20 years of my life and I won the retirement game! I'm making more money than I need. If I have to pay taxes, whatever.
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tallguy
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Post by tallguy on Feb 13, 2018 12:11:38 GMT -5
I'm trying to imagine a universe where I'm complaining about too much income in retirement. Yeah...can't do it. I know....all I am saying is you can't put ALL YOUR RETIREMENT into 401K or a IRA where you are bound by a minimum withdrawal every year and get taxed at an unnecessary higher rate. By all means, spread it out to a different combinations - Roth and other investment vehicles. Of course you don't put ALL of your retirement savings into a 401k or IRA, but there is no reason not to put as much as you can into one. You should have a mix of all three types of savings: Taxable, tax-deferred, and tax-free. Doing that allows you the most flexibility over withdrawals and taxes in retirement. I am doing partial Roth conversions each year and will start doing withdrawals when I hit 59.5. A good part of those are and will be at 0 and 10% and nothing will be over 12%. I can manage my tax liability through the timing of withdrawals from each type of savings. Retirement planning does not begin in retirement, but years before.
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CCL
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Post by CCL on Feb 13, 2018 13:50:40 GMT -5
At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. The theory is that you avoid taxation on these amounts in your high-income years (e,g, putting it away while you have income from employment) and then when you take it out, you won't have wage income so will be taxed at a lower level. It's not perfect, of course. Even long-term gains and dividends are taxed as ordinary income when they come out of an IRA or 401(k). Tax laws change and some of us are still in exalted tax brackets when we retire, thanks to after-tax savings and maybe a pension or two. Even when you're forced to take withdrawals starting at age 70, you can transfer any or all of them straight to a charity. Voila- no taxable income effect at all. Doesn't even enter into your AGI, which is the basis for determining IRMAA Medicare surcharges, the taxability of SS and a few of the itemized deductions. I'm hoping that's still an option when I'm 70. Yeah, but then your money goes to the charity. That might work for you, but it wouldn't be helpful for me.
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beergut
Senior Member
Joined: Jan 11, 2011 13:58:39 GMT -5
Posts: 2,184
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Post by beergut on Feb 19, 2018 7:55:00 GMT -5
At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. The theory is that you avoid taxation on these amounts in your high-income years (e,g, putting it away while you have income from employment) and then when you take it out, you won't have wage income so will be taxed at a lower level. It's not perfect, of course. Even long-term gains and dividends are taxed as ordinary income when they come out of an IRA or 401(k). Tax laws change and some of us are still in exalted tax brackets when we retire, thanks to after-tax savings and maybe a pension or two. Even when you're forced to take withdrawals starting at age 70, you can transfer any or all of them straight to a charity. Voila- no taxable income effect at all. Doesn't even enter into your AGI, which is the basis for determining IRMAA Medicare surcharges, the taxability of SS and a few of the itemized deductions. I'm hoping that's still an option when I'm 70. Wait, so your plan is to sacrifice and save and invest only to give it away all so you can avoid paying taxes? If that is your plan, why not just contribute it to charity today?
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beergut
Senior Member
Joined: Jan 11, 2011 13:58:39 GMT -5
Posts: 2,184
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Post by beergut on Feb 19, 2018 7:56:10 GMT -5
I already paid in $10k on estimated taxes, since we sold some property this year I think we are in a world of hurt again. We seem to pay and pay and pay anymore. I'm betting we have to take money out of savings to pay. Our income on rentals is still low as hubs is sinking all the money back in STILL, I think he is finally starting to listen that our burn rate of money is way to high to be sustainable and is slowing down. Be careful on what you put in 401ks and stuff that raises your retirement income and raises your taxes too. I still can't get a fix on it, working on stuff now, should have an idea by end of week of income. Our problem is this property was depreciated for so many years we have a ton to add back. At last somebody is pointing it all out...I can never understand folks who max out their retirement contributions year in year out raising their retirement income and being taxed at a new higher level. "I saved too much for retirement." - said no one, ever
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