Just discovered your videos Ted. Thank you. I especially like that you display the actual 1040 and schedules (the other video i viewed). I makes it so much easier to understand with real documents and numbers versus others that try to explain things on a white-board. Thanks so much!
Great video Ted! About 2 years ago, I started learning more about taxes and am very grateful to have done so. I had watched another video (can't recall the name of it) that provided information similar to what you showed. However, your video, as another person stated, was very clear and easy to understand. Thank you for taking time to create these videos and providing me and others a "free" education. Regarding taxes, I am amazed how many people (including myself at one time) don't pay attention to taxes and tax strategies. What I hear most people say regarding taxes is "I don't like to pay them", lol. However, these same people are typically the same people that don't know much, if anything, about taxes. For example, I remember my parents always "hoping" to get a tax refund, which at the time, I thought yeah who wouldn't. However, now I realize that if a person understand taxes, you don't have to "hope" for a refund. You can strategize and plan to either get a small refund or plan to pay a small amount when one file's their taxes. Education is so important and unfortunately many don't see or desire to educate themselves about taxes and very likely end up paying thousands or even hundreds of thousands more in taxes than necessary. Based on my projections, my knowledge now of taxes and tax strategies will likely reduce my overall taxes by a few hundred thousand dollars over the next few decades of my life (I am only 48 years old). As one person stated, "A lack of knowledge (in this case about taxes) can be very expensive. " :)
Thanks for the great video, Ted. I love your clear examples of traps in the tax code! And thanks for the SS tax spreadsheet you have available to download in another video. I need to create my own planning spreadsheet. For normal years, you need to know tax threshold like this video's example of getting just under social security being taxed. Other years, I want to know the extra tax burden for out of the ordinary spending, like replacing a car, a roof, a special trip, etc. The taxes are inevitable for most with such a low bar, but it's good to know their impact on your spending.
Great stuff, I like the visual component, makes it easy to follow. I wonder if Warren could convert it to a new Roth IRA or is it too late. Also, even if SS were taxed, it still may make sense to convert more IRA money over to the Roth. I imagine it depends on various assumptions and the optimization math on that would be even more complicated.
It would have been nice to see you follow thru with a suggestion on how this hypothetical couple would actually withdraw the money. Examples help to round out the “academic” problem of how to take distributions. I do like that you showed the 1040 tax form.
Rather than doing a conversion into Susie's Roth IRA, wouldn't it make more sense to open a Roth IRA for Warren to start his 5-year clock? It just provides a little extra flexibility.
Based on these 2 choices for a tax strategy, which would you lean towards as your first choice. A significant LTCG at zero tax rate or a Roth conversion staying within the 12% bracket?
Very good. Then if you try and figure the Medicare, state income taxes, etc. it can become very complicated. It took me about 5 years to optimize all this. It would be great if there was software that just did this.
Since Warren & Susie are 65 shouldn't you 1040-SR (for seniors), which would increase their standard deduction? Doesn't change your message but I recently learned of the SR form and thought it worth sharing. Thanks
Yes, depending on the size of their pre-tax accounts. That said, the concept in this video also applies to people that have no pre-tax IRAs/401k but they may have unrealized capital gains, tax deferred appreciation in non-qualified annuities or deferred interest from savings bonds. Might have to do a separate video on this! 😀
Thank you for sharing real world examples. Using the actual 1040 in the illustrations is very helpful! Some questions if you don't mind. In both of your example you show taking taking distributions to maximize use up to the standard deduction of $32,000, basically to have zero taxable income. Zero taxable income of courses equals 0 taxes. However, you mentioned nothing of taking advantage to maximize the Long Term Capital Gains tax - 0% up to $94,050 for MFJ. I'm sure I'm missing something. I understand the Taxable Income side of it.. just not sure how the LTCG tax applies. I was thinking taking IRA distributions up to $94,050 and pay 0 taxes. Hope that makes sense.
Long term capital gains, as well as tax exempt income like municipal bonds are added into the equation to determine how your social security benefits are taxed. You still get to use your long term capital gains tax rate in the final equation of your taxes, but the gains negatively affect how much of your social security is taxed.
I always find your videos very informative and easy to understand. I have a question as it relates to Warren and Susie making a withdrawal from their pre-tax IRA. What if they paid the taxes on the withdrawal during the quarter in which they made the withdrawal or even at the same time they made the withdrawal. Then, at tax time they realize they could have made the withdrawal tax free as in one of your examples? Is there some way they can get that money back and/or what other options can they utilize? Roger
Glad the videos have been helpful. 🙂 Very straight forward answer. If Warren and Susie withheld because they didn't realize their distribution would be tax free, they would get a refund when they ultimately filed their tax return.
It was truly an emotional time for me when I got sudden $6m, I registered with a fiduciary ASAP, who helps me manage my portfolio. I diversified about $2.3m into a 6 funds portfolio, which is doing tremendous. now I have steady dividend income weekly depending on trade and its all Tax free. She is the best thing that happened to me as an investor. I honestly don't Let that little% bother me. 🌹✅
I am looking for how to venture into Dividend investing on a long term basis, I really seek to create an alternate source of income. how did you find a good Fiduciary?
Did quick research on her, She has pretty decent credentials, left a well organized mail after going through her webpages & reviews. I found this very helpful, Thank you!
👉Check this out for more information on how Social Security benefits are taxed: ua-cam.com/video/cbiAtETn_TA/v-deo.htmlsi=jhjMSc8uXffCf4lx
Just discovered your videos Ted. Thank you. I especially like that you display the actual 1040 and schedules (the other video i viewed). I makes it so much easier to understand with real documents and numbers versus others that try to explain things on a white-board. Thanks so much!
Great video Ted! About 2 years ago, I started learning more about taxes and am very grateful to have done so. I had watched another video (can't recall the name of it) that provided information similar to what you showed. However, your video, as another person stated, was very clear and easy to understand. Thank you for taking time to create these videos and providing me and others a "free" education. Regarding taxes, I am amazed how many people (including myself at one time) don't pay attention to taxes and tax strategies. What I hear most people say regarding taxes is "I don't like to pay them", lol. However, these same people are typically the same people that don't know much, if anything, about taxes. For example, I remember my parents always "hoping" to get a tax refund, which at the time, I thought yeah who wouldn't. However, now I realize that if a person understand taxes, you don't have to "hope" for a refund. You can strategize and plan to either get a small refund or plan to pay a small amount when one file's their taxes. Education is so important and unfortunately many don't see or desire to educate themselves about taxes and very likely end up paying thousands or even hundreds of thousands more in taxes than necessary. Based on my projections, my knowledge now of taxes and tax strategies will likely reduce my overall taxes by a few hundred thousand dollars over the next few decades of my life (I am only 48 years old). As one person stated, "A lack of knowledge (in this case about taxes) can be very expensive. " :)
This is the best video to explain tax planning, great job!
Thanks for the great video, Ted. I love your clear examples of traps in the tax code! And thanks for the SS tax spreadsheet you have available to download in another video.
I need to create my own planning spreadsheet. For normal years, you need to know tax threshold like this video's example of getting just under social security being taxed. Other years, I want to know the extra tax burden for out of the ordinary spending, like replacing a car, a roof, a special trip, etc.
The taxes are inevitable for most with such a low bar, but it's good to know their impact on your spending.
What a great video! Thank you 🙏
Great stuff, I like the visual component, makes it easy to follow. I wonder if Warren could convert it to a new Roth IRA or is it too late. Also, even if SS were taxed, it still may make sense to convert more IRA money over to the Roth. I imagine it depends on various assumptions and the optimization math on that would be even more complicated.
You're thinking strategically! It definitely could make sense to take some additional income in the first two tax brackets which are 10-12%.
Great video and easy to follow.
It would have been nice to see you follow thru with a suggestion on how this hypothetical couple would actually withdraw the money. Examples help to round out the “academic” problem of how to take distributions. I do like that you showed the 1040 tax form.
Thank you! VERY informative.
What about the taxes removed and paid to the IRS from my 401k account? Since I have no tax burden, do I get that back in the form of a tax refund?
Rather than doing a conversion into Susie's Roth IRA, wouldn't it make more sense to open a Roth IRA for Warren to start his 5-year clock? It just provides a little extra flexibility.
This is awesome information. Thank you. Is there a timeline the standard deduction had to be drawn off the Ira or the taxable retirement account?
Based on these 2 choices for a tax strategy, which would you lean towards as your first choice. A significant LTCG at zero tax rate or a Roth conversion staying within the 12% bracket?
Very good. Then if you try and figure the Medicare, state income taxes, etc. it can become very complicated. It took me about 5 years to optimize all this. It would be great if there was software that just did this.
Since Warren & Susie are 65 shouldn't you 1040-SR (for seniors), which would increase their standard deduction? Doesn't change your message but I recently learned of the SR form and thought it worth sharing. Thanks
At some point they have to take RMD’s and will probably have taxable income
Yes, depending on the size of their pre-tax accounts. That said, the concept in this video also applies to people that have no pre-tax IRAs/401k but they may have unrealized capital gains, tax deferred appreciation in non-qualified annuities or deferred interest from savings bonds. Might have to do a separate video on this! 😀
Thank you for sharing real world examples. Using the actual 1040 in the illustrations is very helpful!
Some questions if you don't mind. In both of your example you show taking taking distributions to maximize use up to the standard deduction of $32,000, basically to have zero taxable income. Zero taxable income of courses equals 0 taxes.
However, you mentioned nothing of taking advantage to maximize the Long Term Capital Gains tax - 0% up to $94,050 for MFJ.
I'm sure I'm missing something. I understand the Taxable Income side of it.. just not sure how the LTCG tax applies. I was thinking taking IRA distributions up to $94,050 and pay 0 taxes.
Hope that makes sense.
Long term capital gains, as well as tax exempt income like municipal bonds are added into the equation to determine how your social security benefits are taxed.
You still get to use your long term capital gains tax rate in the final equation of your taxes, but the gains negatively affect how much of your social security is taxed.
All the money that comes out of a regular IRA is taxed as ordinary income, whether or not it was generated by long term capital gains.
I always find your videos very informative and easy to understand. I have a question as it relates to Warren and Susie making a withdrawal from their pre-tax IRA. What if they paid the taxes on the withdrawal during the quarter in which they made the withdrawal or even at the same time they made the withdrawal. Then, at tax time they realize they could have made the withdrawal tax free as in one of your examples? Is there some way they can get that money back and/or what other options can they utilize?
Roger
Glad the videos have been helpful. 🙂 Very straight forward answer. If Warren and Susie withheld because they didn't realize their distribution would be tax free, they would get a refund when they ultimately filed their tax return.
It was truly an emotional time for me when I got sudden $6m, I registered with a fiduciary ASAP, who helps me manage my portfolio. I diversified about $2.3m into a 6 funds portfolio, which is doing tremendous. now I have steady dividend income weekly depending on trade and its all Tax free. She is the best thing that happened to me as an investor. I honestly don't Let that little% bother me. 🌹✅
I am looking for how to venture into Dividend investing on a long term basis, I really seek to create an alternate source of income. how did you find a good Fiduciary?
Did quick research on her, She has pretty decent credentials, left a well organized mail after going through her webpages & reviews. I found this very helpful, Thank you!
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