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01-20-2020, 08:43 AM
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#1
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Senior Member
Monaco Owners Club
Join Date: Jun 2014
Posts: 14,601
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Taxes when retired.
I've posted on other subjects regarding retirement but now I am trying to determine my tax burden when I start collecting SS.
I am fortunate in that I will get SS, a pension, RMD's from my IRA's, and interest income.
I am 61 and will be deciding whether I will start drawing from SS and pension this year. I know that you gain ~8% a year when you delay SS, and about 5% on my pension. It will be a balancing act to try and predict when there may be changes to benefits and/or the associated taxes.
I have been reading what the taxes may be on my SS benefits.
I have read numerous articles and papers on the potential taxes. I did find the AARP does have a tax calculator.
https://www.aarp.org/money/taxes/104...alculator.html
My question is how accurate is something like this for planning purposes.
I will actually be doing my taxes soon and will probably take the time to use the software to do some modeling to see how accurate the AARP calculator is but I wanted to get other opinions.
I am contemplating closing out the smallest of my IRA's this year to use the money to build a large RV storage garage and workshop. At present I have no other income other then interest on savings accounts. The calculator implies by taxes will be ~8.35% on a total of $90K income. Seems pretty low. Any thoughts?
__________________
Jim J
2002 Monaco Windsor 38 PKD Cummins ISC 350 8.3L
2005 Jeep Grand Cherokee w/5.7 Hemi
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01-20-2020, 08:47 AM
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#2
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Senior Member
Join Date: Dec 2019
Posts: 126
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Just subscribing, have same questions, probably going to meet with tax attorney or similar for feedback
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01-20-2020, 09:00 AM
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#3
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Moderator Emeritus
Join Date: Jan 2000
Location: West Palm Beach, FL. USA
Posts: 27,704
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If you have a separate pension, chances are that at least some of your SS benefit will be federally taxable (a max of 85% of it). There is a worksheet in the federal tax forms for SS tax calculation and any tax software or estimator ought to be able to mimic that calculation easily, but you need the info on the value of the other compensation you will received, i.e. the pension. The AARP article is simple but to the point.
https://www.aarp.org/retirement/soci...w-is-ss-taxed/
And another helpful article:
https://smartasset.com/retirement/is...income-taxable
Some states may tax SS benefit as well, so read the AARP article and check your states tax info if necessary.
Federal tax worksheet:
https://www.irs.gov/pub/irs-pdf/p915.pdf#page=16
__________________
Gary Brinck
Former owner of 2004 American Tradition and several other RVs
Home is West Palm Beach, FL
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01-20-2020, 09:05 AM
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#4
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Senior Member
Join Date: Jul 2018
Posts: 3,165
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you retire now and you will receive about 25% less for the rest of your life than if you wait till 60 something at full retirement. You really want to do that??
__________________
2011 Keystone Sprinter 323 BHS. Port Charlotte Fl/Hinsdale MA. Retired Master Electrician. All Motor homes are RV's. All RV's are not Motor homes.
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01-20-2020, 09:21 AM
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#5
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Senior Member
Join Date: Apr 2010
Location: Western NY
Posts: 3,809
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The question of when to draw SS is always a tricky one. When we have clients ask us that question it is always difficult to answer without knowing one major piece of information. When will they die? Family history could help predict when that date may be, but it is always a crap shoot as to the ideal time to draw Social Security.
I have had people wait until full retirement age or even to age 70 for their maximum social security and then they pass soon after getting their first check. On the other hand I have clients who are now in their 80's who rue the day they decided to take SS early at 62 and have taken that lifetime reduction in SS.
It's a tough call so I wish you luck in your decision.
__________________
2018.5 Entegra Aspire 44R-Sold, 2019 Chevy Blazer-Sold. 2022 Genesis GV-80.
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01-20-2020, 09:28 AM
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#6
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Senior Member
Join Date: Dec 2010
Location: Oswego IL
Posts: 2,393
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With my wife's and my income we figure about a 15% tax bracket for federal taxes. We pay no state income tax on our retirement income for IL.
When I worked there use to be several actuary tables for how long you would live after retirement. One table showed and this is the table I used for retirement planning. If you retired at age 55 statically you would live to age 95 and the life expectancy went down according to the age when you retired. Until if you retired at age 65 statically you would pass away by age 66.
I also calculated if I took SS at 62 vs taking it at 661/2 when my full benefits would be available! I am money ahead and live a more comfortable life by taking my reduce SS benefits at age 62 than waiting until 661/2.
__________________
Jim & Jill
Sold: 2010 318SAB Cougar:New: 2016 Cedar Creek 34RL. 2008 Dodge 6.7LCummins the original 6.7L engine, w/68RFE Auto
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01-20-2020, 09:28 AM
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#7
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Senior Member
Join Date: Apr 2016
Posts: 942
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When my wife was told in 1998 the she was looking to be in a wheelchair full time, we started living then. Both of our families have issues where one partner was disabled, and travel difficult, before age 70. I am planning to draw SS at 65, family history says 78 is the norm. Probably less for me.
The way the USA is going today, I don't much care to live a whole lot longer. And I'm surprised I'm not dead yet.
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2020 Ram 3500 Tradesman HO Diesel Aisen CC LWB Dually
2008 Cherokee WolfPack 295WP
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01-20-2020, 09:32 AM
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#8
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Senior Member
Join Date: Jan 2018
Posts: 1,513
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Quote:
Originally Posted by cavie
you retire now and you will receive about 25% less for the rest of your life than if you wait till 60 something at full retirement. You really want to do that??
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For people with other assets like the OP, absolutely.
Investments will generally outperform the 8% SS increase. Spend the SS, preserve your capital.
Preserving the assets that you control means they can be included in your estate planning. You can’t leave your SS benefit to your heirs.
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Newmar Ventana 4037, 2023.
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01-20-2020, 09:43 AM
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#9
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Senior Member
Entegra Owners Club Spartan Chassis
Join Date: Feb 2010
Posts: 4,246
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Quote:
Originally Posted by wnytaxman
It's a tough call so I wish you luck in your decision.
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An additional challenge in making long term financial decisions based on current tax rules is that those rules change. As an example, the Secure Act of 2019 just changed the rules regarding Required Minimum Distribution.
One highly regarded personal financial adviser regularly suggests that Personal Finance decisions are more "Personal" than "Finance".
What works well for one forum member may not work so well for you. Your circumstances are uniquely different from theirs.
It might be worthwhile to consult with a professional adviser.
Take care,
Stu
__________________
"I would rather have questions that can't be answered than answers that can't be questioned."
2018 Anthem 42DEQ
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01-20-2020, 09:48 AM
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#10
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Senior Member
Join Date: Aug 2016
Location: Twin Cities
Posts: 741
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I had a client in my office a few years ago who was fretting about being squeezed out at her place of employment. She was 69 and had substantial assets. When I asked her "why the heck don't you just retire and start your SS?", she replied that her SS would be higher if she waited until she turned 70 (true). She was dead 4 months later.
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01-20-2020, 10:14 AM
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#11
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Member
Join Date: Nov 2019
Posts: 69
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Factors to consider:
* Can you figure out an acceptable plan faster than a pro? (Probably not.)
* Can you come up with a plan that saves more money than a pro could? (Possibly.)
* Is it worth spending what little precious time you have left trying to out-think and out-save a pro? (YMMV; my answer is no.)
Go talk to a pro. They do this for a living.
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01-20-2020, 11:06 AM
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#12
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Senior Member
Join Date: Mar 2001
Location: Upstate South Carolina
Posts: 171
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Quote:
Originally Posted by Finance
For people with other assets like the OP, absolutely.
Investments will generally outperform the 8% SS increase. Spend the SS, preserve your capital.
Preserving the assets that you control means they can be included in your estate planning. You can’t leave your SS benefit to your heirs.
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I agree with this. Why spend down your own personal savings when one can take SS now and keep your personal assets growing untouched and untaxed.
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01-20-2020, 11:26 AM
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#13
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Member
Join Date: Sep 2012
Location: Massachusetts
Posts: 53
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I took my social security at 62 instead of 66 1/2. I did the math and if I waited until 66 1/2 it would take 11 years to break even. I would be 77 1/2. Would the extra money be nice? Sure but not having to work those extra years is worth so much more. Will I be alive or in good health to enjoy myself? Only you can decide. My accountant said take it now. The only downfall is I have to buy health insurance privately now until medicare kicks in.
__________________
2013 Montana 5th wheel
2020 Ford F350 long bed 4x4 7.3 gas
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01-20-2020, 11:41 AM
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#14
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Senior Member
Join Date: Oct 2011
Posts: 1,062
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With the average life expectancy of 78.69 years for a Male in the U.S., I'll take mine at 62 and enjoy it.
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