Dave, right on as always. I had a real sugar high for years piling up that tax deferred savings. Now I am 73 and hit with high(ish) RMD and IRMMA. Ouch. Listen to Dave folks. Avoid the sugar and brush some taxes away.
@davidfolts5893 Жыл бұрын
The Money Math Maven is back again with another outstanding KZfaq video; thanks, Safeguard Wealth Management!🔥🔥🔥
@TheFirstRealChewy Жыл бұрын
I started estimating taxes in retirement by taking the simpliest and most extreme approach possible. That is to assume all sources of income are taxed at the regular income tax rate. If I'm comfortable with that, then any strategies to save taxes just add to it.😊
@nobeliefisok9174 Жыл бұрын
I will pay partb Medicare and IRMAA payments from my HSA since partB+partB irmaa + partd irmaa are qualified medical expenses. This complicates the tax calculation slightly, but with an interesting enough spreadsheet not difficult. This may also make a good topic for a video, incorporating HSA payments for Medicare and IRMAA increasing the available cash of 401k conversions to Roth IRA. And also how if you have a high deductible healthcare plan you can contribute to your HSA even when retired, thus also moving some cash from 401k to HSA. HSA are excellent tools in the tax-kit.
@larryrobx6 ай бұрын
So, I'm allowed to pay my IRMAA penalties as well as my Medicare premiums using my before-tax HSA $'s, Mr. No Belief? The IRS classifies any tax penalties it assesses as non-deductible expenses, so I had always just assumed any assessed Medicare penalties would similarly be ineligible for such preferential tax treatment. Do you have an IRS link or citation I can use to ratify this understanding, if/when challenged by the tax authorities? Much appreciated. Thanks.
@garrysinger9704 Жыл бұрын
Is there some kind of software template or model that can be used to forecast your taxes? It needs to include 1040 formulas for each year.
@ld5714 Жыл бұрын
Thanks for another excellent video Eric! Larry Bakersfield, Ca
@rick_vv7754 Жыл бұрын
For tax planning involving ROTH conversions in current year, how do you estimate IRMAA brackets for 2 years in the future in order to stay below a certain threshold? I believe the thresholds change annually with inflation.
@nobeliefisok9174 Жыл бұрын
Its not too bad to estimate. And you really should not try to cut it close. Assuming there is some inflation present, using today's IRMAA lookback bracket will often be fairly close, and safe to use. But if you want to push it further, since brackets came out in 2007 the median is 2.3% and the mean is 2.5%. Which is suspiciously the same as social security COLA since the mid 1980's. (ignoring ridiculous inflation years of the late 70s, early 80s) You can also guess by using 1/2 the current and prior year's inflation as your adjustment upwards, but that didn't work twice. Costly error IMO.
@rayhiggins7938 Жыл бұрын
If I don't have ordinary income tax and start my social security between age 67-70 and look to have 80K in income will the tax torpedo still be there and how can I avoid it. I am currently converting Traditional IRA to Roth IRA each year while remaining under IRMAA.
@cchat3491 Жыл бұрын
Mutual Fund end of year distributions are a killer when trying to avoid tax cliffs like IRMAA. How can these unknowns be managed?
@Antandthegrasshopper Жыл бұрын
That is the reason I invest in ETFs and not mutual funds.
@alphamale2363 Жыл бұрын
Don't own mutual funds. Use index funds.
@captsorghum Жыл бұрын
Index ETFs are the most predictable. But if you are already in mutual funds with large unrealized gains, getting out of them without generating a big tax event may be difficult.
@larryjones9773 Жыл бұрын
Yes, they are a killer. Once I know my year end distributions, I calculate my final Roth conversion amount (to avoid IRMAA), and complete my conversion by December 31. p.s. Don't plan a year end vacation and make sure you have plenty of adding machine paper rolls.
@livingontheedge8680 Жыл бұрын
A person earning $120k on a W-2 brings home/lives on far less than that amount, closer to around $85-90k. If they withdraw $120k during retirement, they are giving themselves a massive raise, moving up in tax bracket and penalizing themselves by SS tax liability. Studies indicate that living expenses go down about 25% upon retiring, so they would actually only need about $67K to live, which would make their account withdralws much less and affect SS much less, perhaps even not all.
@nobeliefisok9174 Жыл бұрын
It totally depends on expenditure rates while working and cost of new things in retirement you did not used to do. For instance in my particular case I spend about $55k/yr while working. But I do not have more than $5k a year in travel costs, and I expect to travel much more in retirement costing as much as $20k/yr. I also do not have high working costs, transportation+food is approximately $200 a month, $2400 a year. During retirement I probably will spend at least a few thousand a year on hobbies I currently do not have. And that may end up being $10k or more a year.
@TheFirstRealChewy Жыл бұрын
I believe the 80% of current income assumption is based on not having to invest 15% for retirement, not having to contribute to social security, and reduced expenses due to not having to commute for work. That said, I don't base my retirement expenses on my current income.
@Jl-62011 ай бұрын
Expenses don’t always go down. For example, health insurance pre-Medicare is a high cost, even on ACA, compared to employer-subsidized. Also consider RMDs, which you will be taxed on even if you don’t need the money.
@livingontheedge868011 ай бұрын
@@Jl-620 That is entirely dependant on your level of income and expenses. For us, we can qualify for $0 ACA premiums if we choose to, however, with our projected expenses and retirement plan, the current rates/premium will be $284.00 for both of us. We intend to burn down tax deffered accounts first to mitigate RMD's/taxes in the future.The remainder is in Roth, brokerage and cash, our tax liability will be very low. All of us are different regarding savings, expenses, allocation, retirement plan and insurance needs.
@larryjones9773 Жыл бұрын
Technically, we're all supposed to calculate our Alternative Minimum Tax (AMT) and pay it if it is greater than our 'regular' federal tax calculation. I had never calculated AMT, but I decided to calculate it for my remaining retirement years. To my shock, I'll owe AMT for nine years. This is due to a lot of capital gains at the 0% federal tax rate & high itemized deductions. I plan to do three cashout refinance mortgages in retirement. This money will provide me capital gains at a 0% tax rate, along with a high mortgage interest deduction. But, I'll be hit with AMT (unless I can figure out a way to strategize around it).
@nobeliefisok9174 Жыл бұрын
High itemized deductions should not be an issue for most, unless they are giving massive amounts to charity. But I will concede if you already have a decent amount of itemized deductions then enough capitol gains would push it over the edge. Just for my curiosity, what are you getting high itemized deductions from? Medical should not be it, I would expect interest on primary home to not be high in retirement. And you would not be operating a business, have depreciation, nor home office expenses since those are "not retired".
@larryjones9773 Жыл бұрын
@@nobeliefisok9174 Mortgage interest on California home. Pulling all my equity out of my home every 7 to 10 years will lead to high mortgage payments, but the benefit is high mortgage interest deductions. I'll do a reverse mortgage at age 95, if alive. I see storing money in a home as a bad idea. I'd prefer to maximize my stock holdings. My asset allocation is (and will always be) 100% stock & 0% fixed income.
@rickhernandez9084 Жыл бұрын
Hello
@markrand652 Жыл бұрын
Please explain how you’re getting to the 40.7% marginal number. Thanks
@Whiskey_BS Жыл бұрын
Yes, please clarify. SS income would add to pension income or to the left on your income vs tax rate graph. So why isn’t the marginal rate on SS just 22%?
@saplouie Жыл бұрын
At the 22% tax bracket, $1000 of additional income is taxed $220. That $1000 of income causes 85% of $1000 of SS benefits to be taxable. So $850 of SS @ 22% is an additional $187 in taxes. $220 + $187 = $407 taxes on the $1000 additional income, so 40.7% Hope that makes sense.
@Whiskey_BS Жыл бұрын
Thanks for the reply. I understand your math but I still think of SS as additional income. For example, if your pre-SS income was just below the 24% tax bracket threshold, wouldn’t your SS income push you into the 24% bracket? So the majority of your SS would be taxed at 24%. This feels like additional income whether it is from SS or some other source. And if I understand your example, none of the income was taxed at a rate above 22%. I guess it comes down to how you think of SS income.
@markrand652 Жыл бұрын
@@Whiskey_BS Agree
@saplouie Жыл бұрын
@@Whiskey_BS I feel the way you do. The main thing to know is SS is taxed in a special way based on your taxable income. If you look at SS as additional income, I think you'll always come out ahead since no more than 85% of SS is taxable. He's trying to say there are ways to make SS non-taxable, by showing less taxable income and can save a lot of money that way.
@bigjohnson7415 Жыл бұрын
Is the IRMA married or single amount? I'm looking at retirement at 63 1/2, trying to figure the best strategy for Medicare at 65. I turn 62 in a couple of weeks. Planning on taking Cobra until Medicare eligibility. Thanks!
@elliottring1573 Жыл бұрын
If married, yeah married is your answer.
@Jl-620 Жыл бұрын
COBRA is usually up to 18 months, in some cases 24. If you are 62, you will need another arrangement between the end of COBRA and when you turn 65.
@bigjohnson7415 Жыл бұрын
@@Jl-620 Read further. I'm planning on 63 1/2.
@bigjohnson7415 Жыл бұрын
@@elliottring1573 Single.
@elliottring1573 Жыл бұрын
@@bigjohnson7415 IRRMA has two charts, one for single filers and another one for married filers.😁
@bobhodge9646 Жыл бұрын
Very confusing video for me, you graft and explanation were hard to follow, thank for the video tho...
@lydialee5444 Жыл бұрын
I agree the graph was so confusing. I wish he explained it in a simple way like what he did on his video how to taxed social security. It’s so hard to follow plus he talk to fast.
@TheFirstRealChewy Жыл бұрын
@@lydialee5444 There are two main things at play. The first is how much of your social security benefits is taxed. The second is which tax bracket that income falls into. Uncle Sam loves his cut so the taxable portion of your social security benefits is added to the end so that it's taxed at your highest marginal bracket.😅 The idea is to assume you have taxable income in retirement. Depending on the amount of income you'll land in one of the marginal, federal tax brackets after applying the standard deduction (10%, 12%, 22%, 24%,...). State taxes is a whole other can of worms since that varies from state to state. So let's focus only on federal taxes. When you add social security benefits to that income a portion of the benefits will be taxed as regular income. How much gets taxed will depend on how much taxable income you already have. There are calculators to help determine how much gets taxed. As your taxable income increases, more of your social security benefits get taxed. This will continue until you either stop increasing your taxable income or 85% of all of your social security benefits is taxed, whichever comes first. The chart is showing the combination of taxes you pay on the taxable income and social security benefits for each additional dollar of taxable income you make. It starts with 0% taxes due to the standard deduction, then jumps to 10% once your income plus the taxable portion of your benefits cross into the 10% bracket. As your income increases, more and more of your benefits get taxed and that total taxable income can push you into other income brackets. Eventually you reach a point where the full, 85% of your benefits is taxed. Any further increase in income no longer has an effect on your benefits. The stacking order is also important. Your income is applied before the taxable portion of your social security benefits is applied. Also keep in mind that long and short term capital gains also affect how much of your social security is taxed. An important takeaway when looking at the graph is how quickly your social security benefits get taxed when you have any sort of taxable income. So if most of your retirement funds is in a tax deferred account and you need to withdraw from that account plus collect social security benefits, Uncle Sam is smiling at you. If you happen to convert it all to Roth before taking social security, Uncle Sam doesn't like that so he hope you have less time to collect it.
@BadPhD777 Жыл бұрын
You completely lost me. Very confusing.
@firstlast3192 Жыл бұрын
How is the $996 penalty derived?
@firstlast3192 Жыл бұрын
$996 = ($70 + $13) * 12 months. Adjustment from the prior threshold.