Comments on: Why You’re Likely To Be In A Higher Tax Bracket When You Retire

By: PapaGeek

PapaGeek — Fri, 10 Feb 2012 16:00:40 +0000

Engineer has stated the biggest tax problem for seniors, one that is rarely mentioned in the articles and forums. Let me give an example for a single individual who’s SS check is $30,000 per year:
IRA/Pension $00,000 to $10,000 tax rate 0%
IRA/Pension $11,000 to $16,000 tax rate 15%, 10% plus 50% of SS
IRA/Pension $16,000 to $21,000 tax rate 22.5%, 15% plus 50%
IRA/Pension $22,000 to $30,000 tax rate 27.75%, 15% plus 85%
IRA/Pension $31,000 to $41,000 tax rate 46.25%, 25% plus 85%
IRA/Pension $42,000 and up tax rate 25%, 25% plus 0%, you’ve hit the max
At a total income of only $52,000 your tax rate is now higher than what you probably saved, 25%, when you put your money in your 401K.
From $61,000 to $71,000 you pay a higher tax rate than millionaires. The highest tax rate is only 35%, you are paying 46.25%.

By: jIM

jIM — Tue, 26 Feb 2008 14:58:12 +0000

I think taxes went down more for the deductions than it did because of the tax cuts.

I say this because wife and I both work and paid about 7% effective tax rate last year on a gross income of 100k+.

Next year with same income and two kids (having twins in June) show the 3k tax refund we received this year going up to 9k next year. Our effective tax bill is significantly lowered because of the tax credit.

The fact you lowered income (one spouse left workforce) would also indicate that taxes paid would get lower.

By: Teri Newton

Teri Newton — Sat, 16 Jun 2007 03:06:51 +0000

I should clarify a lot of reasons why ROTHs aren’t always #1, or why not to put all your eggs in one basket. I will work on a future article to explain on the subject – good idea.

By: Engineer

Engineer — Thu, 14 Jun 2007 00:55:52 +0000

There’s one other factor that could make your tax rate higher in retirement. Tax deferred distributions can result in $.50 and as much as $.85 of Social Security income for each $1 of taxable distribution. So a 15% bracket is effectively increased to either 22.5% or 27.75%. And a 25% bracket is effectively increased to either 37.5% or 46.25%.

By: Diane

Diane — Tue, 12 Jun 2007 20:41:12 +0000

Our required minimum distributions starting in four years is going to throw us into a higher tax bracket from then on. We are thinking of converting some of our 401 funds into a Roth but the amount we can convert at a lower tax rate will not make that much difference in our income once the RMD begins. We should have been converting funds to the Roth for the past few years but didn’t pay any attention to the problem.
And, I agree with Alex, would like to know why you think we should avoid a Roth.

By: Amy F.

Amy F. — Mon, 11 Jun 2007 22:49:32 +0000

Yes, I think that would make a great future post.

By: Alex

Alex — Mon, 11 Jun 2007 20:04:12 +0000

Thanks for the interesting article Teri.
You say: “I actually have a lot of reasons why I would avoid a ROTH.”

Would you be able to outline what your knocks are on Roth IRAs?

By: Analyzing Wealth

Analyzing Wealth — Mon, 11 Jun 2007 18:53:34 +0000

Some links of interest…

I’ve been doing some reading this morning and thought I’d highlight some posts that I enjoyed…