What If

We are all used to telling our employer how many exemptions we have so they can make the proper tax deductions during the year. For most of us the first time we look at our potential taxes is in January of the following year when we get our W-2s in the mail.

We can do basically the same thing during retirement, but now that we have seen what our Personal Tax Hump looks like and realize that we can save thousands of dollars each year if we avoid those extreme marginal tax rates, we should all consider doing the opposite! Start doing your tax calculation this January, not next January, and keep asking yourself What If every time you decide to create extra taxable income!

Use the following links to examine the details of each of these
What If situation that you could be facing during your retirement.

• You prepared properly for year end unexpected income.
  • 22.2% You received a taxable bonus or short term gains.
  • 10.2% You received some long term capital gains.
• You did not prepare for year end gains and some of your income was LTCGs
  • 49.95% You received a taxable bonus or short term gains.
  • 37.95% You received some long term capital gains.
• You did not prepare for year end gains and none of your income was LTCGs
  • 40.7% You received a taxable bonus or short term gains.
  • 33.7% You received some long term capital gains.
• Break Even Detailed examples after Federal, State, and Local taxes.
• QCD Detailed example of a Qualified Charitable Distribution.

What If you need another cash withdraw within your Sweet Spot?
I’m not a tax accountant, so use everything on this page at your own risk!

An additional $1,000 withdraw from your IRA or other taxable source will fall within the 12% Federal tax bracket if it occurs within your Personal Sweet Spot. But, that withdraw will also increase the Basis for the taxation of your Social Security benefits, at the 85% level that will increase your taxable SSB by an additional $850. You will then pay 12% of the total $1,850 taxable income increase, $222, which is a Marginal Tax Rate of 22.2% of the original $1,000 withdraw!