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Subject:  Income & taxes in retirement Date:  4/10/2007  4:18 PM
Author:  fleg9bo Number:  11240 of 22086

This is our first year with no salaries, and I've just finished figuring out our estimated quarterly taxes.

Our taxable income breaks down this way:

LTCG 76.0%
STCG 5.9%
N-Q DIVS 2.7%

That works out to about 84.4% taxed favorably and about 16% taxed as ordinary income. In spite of the total being into six figures, the effective tax rate is only around 13%, even with a little AMT thrown in.

Total investment income is a lot more than our withdrawl amount, so most of the capital gains get reinvested. One source in particular, our hybrid value account, spits out a lot of gains, but still crushes the index after fees and taxes and an annual 4% withdrawl taken in monthly installments beginning in 1/06, so I don't care.

If the Bush tax cuts expire, the rate on LTCG will go up 5% and the rate on Qual Divs will go up to whatever the ordinary rate is. But then again, if the Dems get to enact all their economic proposals, there won't be any capital gains to pay taxes on.

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