No. of Recommendations: 3
"The easiest thing to do is put the figures into Turbotax and see what it says."

This is OK "after the fact," that is, once you've made all your decisions and are just trying to figure out the correct amount to pay. However, that method is very unsatisfying for *planning*.
...
I wanted to account for the fact that having income that doesn't count as taxable income (from the Roth) wouldn't drive my social security from untaxed to 85% taxed. In eight or ten years, I can just plug it into a tax software, but that doesn't help me decide if I should do a conversion in three to five years.


Use turbotax for the tax calculations and then plug the amount of tax it tells you into a spreadsheet.
I did this several years ago, wanting to see how the SS tax-bullet hits you.
Set up a clean tax form with only 2 sources of income, ordinary income and SS benefit. Set up for zero withheld so it was easy to see the tax amount..it was "tax owed" right at the top of the TT form.
Varied ordinary income from $20K to $100K with constant above-average (familiy) SS benefit of $35K.
Write down the tax in a column and then compute the additional tax from the previous line (next lower ord income) and then compute the marginal rate in the next column.
Easy to see the marginal rate started at 15% then went to 28% as the SS began to get taxed, then dropped back to 15% when the maximum 85% of SS was taxed. It then stayed at 15% until the next tax bracket (25%).

Then I did it again in another section with same total income, but all ordinary and no SS. This was to emulate deferring SS to see how the tax compared. The marginal rate stayed at 15% until it hit the 25% bracket. But the amount of tax was much higher. Ex: at $65K total income the tax _with_ SS was $1700 whereas the tax _without_ SS (that is, all ordinary income) was $5600.

This would be like taking the same income to live on, but one way was taking some 401K & SS and the other was taking it all from 401K and none from SS---which is what you'd do if you deferred SS.

This showed me that there is a large additional tax cost if you defer taking SS. None of the take SS early/late discussions ever talk about that.

Ah, yes, of course you could use a clever spreadsheet like Bruce's to figure out the tax. But it is REAL EASY for such a spreadsheet & calculations to be wrong, and hard for one to take into account different things like single/joint, standard deductions vs. actual, etc. Turbotax is almost certainly going to get all those complex calculations right.


(It's got a lot of nested IF statements.)

Professional programmers see this type of thing as "bugs that are hard to see".
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