It really helps when you have the examples on the screen (for us visual folks). Please try to always add that. It's so helpful!

You really need a whiteboard to use for breaking down the numbers and examples.

avoiding the 'tax torpedo' becomes impossible when you reach a certain level of income.

Bro yoy really need to use illustrations with numbers. blessings

Whitleyca is correct. $15,550 is the taxable SS in example 2. James is not the first CFP to get this wrong. Go to the IRS worksheet to follow the math and then double check with an online taxable SS calculator.

Hey James - question for clarity. In example 2: $35k IRA + $24k SS = $47k PI. So far, so good, but you then stated 85% of SS is taxable. I have understood 'SS taxability' to be a progressive, sliding scale: $47k PI -25k 0% SS taxable = $0 taxable -9k 50% SS taxable = $4,500 taxable -13k 85% SS taxable = $11,050 taxable Taxable SS = $15,550 / $24k = ~65% FIT = $35k+$15,550 = $50,550 - std deduct = taxable at ordinary rates If you might, please highlight my error for better understanding? Thanks for your content.

Really would help a lot to have these examples written out.

The bottom line is that for most with other substantial income than their SS, they will essentially pay 0.85 of their marginal rate on their SS. The only way to avoid this is by having almost all money post tax, or not having any income. For couples with a standard deduction it means that the max rate on your Social Security is 0.85 times 12%(10.2%). That is up to about $120k of income!. So most of the moderate income couples will have effective tax rates of less than 10%. If Trump gets re-elected, I expect no change in these rates. Even if we end up at 15% rates it will only be an extra $4-5k of taxes. Not a retirement killer. As to Roth money, contribute when at low rates, and convert only in the teen brackets, unless you have quit large pre tax portfolios. (Say over $1.5 million) converting in the 22% brackets or above will likely be a wash otherwise.

Completely lost me when you started talking about the tax torpedo. I'll have to research it to try and figure it out

For the situation with the tax torpedo, what is the proper strategy? Withdrawal more money from the IRA to lower the effect of the torpedo and convert the extra to Roth ?

This would make a lot more sense if you used a whiteboard or a PowerPoint presentation. Just listening to you throw numbers around is like listening to the grown-ups in a Peanuts special.

Isn't the tax torpedo marginal impact always going to be +50% or +35% of SS of where you'd otherwise be before that extra dollar? IOW, you don't leap from 0% inclusion to 85% for just one dollar, there's a step in between. And as others have pointed out, at some level of income this is just unavoidable. With moderate to high SS amounts, you get to or close to the 85% threshold even without any other income.

Thanks James for another very informative video that was very helpful!

Oops, calculation error in the video as other commenters have said For a person filing single with PI > 34 000, the amount of SS that is added to AGI is the lessor of 85% of the benefit or 4500 + (PI-34000)*.85 Or the calculation can be described as: 50% of the amount over 25k PLUS 35% of the amount over 34k = If(PI>32000,0.5*(PI-32000)) + If(PI>44000,0.35*(PI-44000))

Do you deduct the standard deduction before figuring out the provisional income?

Given that the SSA provisional income brackets are not adjusted for inflation, but SSA payments have COLAs, how soon before there are many folks paying tax on their SSA despite having no other income?

Thanks for the info. When you say you need to be careful with the SS tax torpedo, do you mean trying to avoid it (which may not be possible) or are you suggesting to increase the provisional income to surpass the level when all 85% of your SS is already taxed and therefore any additional dollar goes back to being taxed at your regular marginal rate?

Due to the amount of forced income we have in retirement, we are unable to avoid the tax torpedo.

James: Your last video shows a JP Morgan historical performance chart. Based on that chart an 80% stock / 20% cash (T-Bills and/or money market) would have a $100,000 greater return than the 60/40 portfolio. My gut feeling is that it’s even less risky. Could you please do a video comparing these 2 portfolios: 80/20 & 60/40. Thanks

We will pay our taxes in retirement from tax-deferred retirement accounts, by running an income tax scenario using personal income tax software to cover income taxes due on provisional income.

Social security is taxed in Minnesota if your income is high enough

Explaining the reality of needs of eco systems and time and space and other stories of foot dragging and monetization or leverage… it’s important stuff of pull through and time and management of realities… One of which are deadlines of sorts.

I need pictures

James, thank you for another excellent video. I really enjoy and appreciate your content. Question about Social Security. I plan to retire in about a year at age 60. I don't plan to draw Social Security until age 70. I know the years of zero income from retirement to age 70 will decrease my social security benefit but how do I determine how much the monthly benefit will decrease? Thanks again for all you do!

LIS and well beyond layers and reality. Rethinking Plato’s cave, desserts, and stark laws and certificates of need and… community… Health, climate and tools #GPOHIEMSOSTS #LoveEVICTShate #projectsamdtrust