Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next
Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19371  
Subject: Re: Too many taxes after retirement? Date: 1/16/2000 9:30 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
for mvsopen:

My income taxes will instantly triple or quadruple when I have to start IRA withdrawals, ten years from now at age 70. I have written a retirement planning spread sheet for myself, that includes my taxable and sheltered accounts, my pension, my Social Security, income tax calculations, the basis in my taxable account, projected inflation and investment returns, portion of gain paid currently and hence taxed, and other things. From all this, and using Excel's built-in mathematical optimization software, I determined that it is indeed better for me to pay (some) now and the rest later by making small optional withdrawals from the IRA each year in my sixties. (Excel has no problem with such ten-dimensional optimization problems and found a different withdrawal for each year.) It's not a huge benefit to me, but worthwhile.

My conclusions are that you will do both -- pay now and pay later -- and that you need to do the calculations to determine the most advantageous policy for you in balancing your taxable and sheltered accounts. This is yet another recommendation that you write yourself a spreadsheet for personal retirement planning. Then, vary your assumptions. I specifically recommend Excel so that you'll have access to its mathematical optimization capability, Solver, which seems to me to be far more usable than the competition. I use Solver, for example, to find the budget that will minimize the variance in the purchasing power of my retirement account over a 35-year planning period.

You mention a 50% tax bracket, which hints that you have added a state income tax to the federal nominal maximum tax bracket of 39.6%. I'm eliminating state income taxes from my plans by moving from California (maximum income tax rate 9.3%, but deductible) to Nevada (no state income tax, none, zero, zip). It's called "voting with my feet".

Regards,

Chips
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement