Arthur Godfrey said "I'm proud to pay my taxes, but I could be just as proud paying less". The best thing I did was to learn the tax code as it pertains to my situation.
Julie, that's really solid research and planning with respect to money and taxation matters. Your suggestions are valid for people not only in retirement but during working life. If everyone were so financial literate we'd all be financially "free". Thank you once again for another great video!
Hello Julie, thank you for explaining about the tax table. But I also realized this didn't include state income tax. I just checked Massachusetts and it is a flat 5%. There is a reason we refer to our state as Taxachusetts. Retirement definitely involves a lot more things to think about than I thought. Thanks for another great video.
We've been working diligently to keep our taxable income in the 12 percent bracket. I had a major shift in my part-time income this year because I shifted to a job paying double the past salary. So withdrawing from 401k funds is tricky to figure out. I had to project income in my fluctuating new job. My husband also works part-time so there is a lot of communication, planning, and math involved for filing jointly. I think we've figured it out for this year and my hope is next year will be more stable so we can plan for more withdrawals from 401k and other accounts, to keep us in the 12 percent bracket.
Very good to have a plan as you have with hard numbers, we’re the same age 😃, I have ROTH money but the bulk of my retirement accounts are pretax so will be looking to do ROTH conversions the next 4 years starting 2025 so I can “look poor” when I qualify for Medicare at 65. I also moved to a 0 state tax state a big savings as I worked in New York a ridiculous high state tax state so there is big savings there. I bought a ranch and have a small hay business which allows me to deduct all my associated expenses which reduces my tax burden a lot.
You’re a pretty smart cookie, you figured it out. I figured this “poor on paper” thing out myself sometime last year when I was reading up on ACA, and since then have been strategizing saving more in the Roth portion of my 401k so that we can pull from that if I retire at 62. We can pay all of our basic expenses with my husband’s social security, but I need to have my after tax savings beefed up for the extras and unexpected expenses and not have to touch our pre-tax savings until I’m Medicare eligible. I won’t file for social security until 67 even if I retire at 62 which will help us remain poor on paper. When I’m 65, my husband will be 73 and subject to RMD’s, so we will get a bump in income at that time. I will have to study the numbers a bit closer to see if we can do some Roth conversions, and for what amount between 62 and 65 without affecting my ACA premiums much, but will have to first wait to see what happens with those subsidies, given the new administration. .
I remember a few summers ago, after a tough divorce, when I needed a boost for my struggling business. I researched and found a licensed advisor who diligently helped grow my reserves despite inflation. Consequently, my reserves increased from $275k to around $750k.
That was a really good video. Tax time will be here before you know it and it’s always a mystery on how much you might get back or not get back. Thank you for your information.
I am lowering my visible income in 2025 by putting money in a pre-tax 457 and using other income to pay off debt. I am tax focused at this point in my retirement. My hope is to get to the 0% tax bracket by 2027.
Nothing shady about planning to have less taxable income. The ultra wealthy look for as many ways to avoid paying taxes as possible, so why shouldn't people with average means?
I've got mixed feelings. Any ACA subsidies offered are paid for by others (our government doesn't generate revenue, just spends our tax money). Some in the FIRE community have a large investment portfolio, yet still qualify for subsidies. My tax burden helps pay the bills for people with much more money than me. Legal it seems, but not exactly fair from my point of view.
Very well said, you did an excellent job. I did the same thing, keeping my taxable income within 12%. Anything left over I do a Roth conversion before hitting the 22% tax bracket.
Thanks for another great video and a perfect ending quote! I was curious - won't your Roth conversions over the next couple of years adversely impact your ability to qualify for ACA subsidies? My experience with the ACA in Florida is that even small changes in your AGI can significantly increase your deductibles and out of pocket maxes as well as your premium.
Great topic and informative. Key is building up the taxable brokerage account before retiring. So many ways to keep the income low with this account. We pull just over the standard deduction 30k from Trad IRA and the rest from brokerage account and pay very little tax and qualify for ACA
Be careful about doing Roth conversions when you're getting subsidies under ACA. I called and asked about this, and was told they count as income (I'm in Pennsylvania), and would reduce/eliminate ACA subsidies.
Taxes are one of the reasons I dont pay my house off. my retirement is almost all in pretax accounts. I owe $77,000. If I took that out it would put me into the %20 for most of that money. my mortgage interest is %2.375 so I would be paying %20.0 to save %2.375. the math doesn't add up
Instead of a HYSA, you may want to consider 4 week treasury bills. They are currently paying 4.6 % and there is no state tax on the yield. Good luck with your approach and channel. You are giving good advice for people that want to start enjoying life more.
Thanks - that's a good option! That's right about what my HYSA is making too. I live in Washington state, so I don't have state tax, but this could help others! ☺
Tax avoidance is legal and fully within the law. Tax evasion is illegal and immoral. As long as we work within the framework of the law. we are not doing something wrong. Perhaps the laws are slanted to a particular group (e.g. punishing apartment renters and enhancing home buyers) but if it is something that ought to be changed, it is up to the lawmakers to change it. There is a reason that some kinds of bonds are tax free - it is to encourage investment in that direction for something that is especially important. So minimizing our tax legally is not something reprehensible. It is something sensible. Personally, I don't mind paying taxes. I want good services and to help those that need it. But if I can easily reduce my taxes when my income becomes reduced I think it is a sensible idea that keeps me from becoming even more of a burden on the state.
Similar to you, I’ll take enough from my pretax accounts to keep me in the 12% bracket. Any long term capital gains or dividends would be at the 15% level, so I’m hoping I won’t have to pay over 15% on anything.
You're channel is the best. You present real world scenarios and I really appreciate that. I'm 52 and this is super relevant as I plan out my retirement. Thanks!
You have plenty of time to spread out those Roth conversions before the RMD’s come into the equation. With your UA-cam income your withdrawal strategy is going to be quite favorable I bet. The longer you wait, the more that 401k/Roth grows. I am hoping to let mine grow a bit before actually having to dip in and start draining those sources of income. Let that 4% estimated withdrawal rate I would use just compound for a bit. An extra cushion if you will?
I am a single filer and in 2026, when I start taking RMD's my taxable income will be at least $175K. I keep getting barraged by seminars on how to pay little or no taxes. I've been doing some ROTH conversions however, I'll still have a sizable 401K account. Are there any legal ways to reduce my taxes other than donating the money?
As always, I have to say that if you have about 1 million in your current nest egg, then you can entertain the conversation of retiring prior to 62.... If you are teetering around the 500000-dollar mark, then you are doing it with "fingers crossed"... And yes, of course there are scenarios that allow to you survive at 57 with 500000 in the bank. I have trouble convincing myself at the age of 57, five years from drawing SS that I would surrender 5 years of my highest earnings of my lifetime just to claim I am retired and happy with just 500000 and looking at what possibilities that I may have to consider in the future to fund likely shortfalls in money that is needed to live in retirement. If healthy and working those last 5 years arriving at 62 will all but guarantee 1 million while knowing that you will NEVER have to work. The lady that hosts this channel is doing a nice job of showing her journey and roadmap in saving, but I think as teacher she was enjoying entire summers off throughout her career, she had long summers of down time to unplug and decompress
Everyone has a different perspective! Thanks for sharing yours. I had less than 2 months off in the summer and my summers were spent taking trainings, writing lesson plans, and setting up my classroom. We also didn't get paid for most of that! But yes, I'm just sharing my journey. Everyone must choose their own path! ☺
Everything I've read says it is. From what I understand, Medicare sets income limits. If your income is above the limit, you'll pay an additional amount called the IRMAA.
Great video, as always 😊👍….many people here watching you are following your advice about the tax strategy you mentioned. However, a question for you : let’s say for either fun or God forbid medical reasons or other reasons like home repairs etc etc ….you need to take out more money out of traditional irs or 401k etc. which that year it’ll show you as higher income, and therefore you get hit hard with taxes And your bracket changes which like you said could affect other benefits ACA or Other… We would like to see a program about if you ever had to do that and obviously at times you will have to do that because you can’t just hide behind your net worth. You may have to spend some of it and why not. Any strategies to minimize taxes then?
@johnj4094 That's a great question! That's why I try to keep 5 years worth of money in bucket 1. Then if those emergencies come up I don't have to pull from my pre tax accounts. But I'll put that on my list for future videos! 😊
I'm (hopefully) about four years from retirement and your videos are really helpful. Thanks.
@@thenightoffice2541 You're welcome! ☺️
Same here.
Arthur Godfrey said "I'm proud to pay my taxes, but I could be just as proud paying less".
The best thing I did was to learn the tax code as it pertains to my situation.
@@daveschmarder-1950 I love that! Great quote! 😁
Julie, that's really solid research and planning with respect to money and taxation matters. Your suggestions are valid for people not only in retirement but during working life. If everyone were so financial literate we'd all be financially "free". Thank you once again for another great video!
Thank you! You are very welcome! ☺
Good info.
And if someone finds themselves with zero income in retirement they can buy dividend stocks which will create an income for them.
Good video a topic that's not always explained. You did a good job and provided clear data. Thanks
@golt4576 Thank you and you're welcome! 😊
Excellent information! Thank you for taking the time to research and sharing it with us.
You are welcome! 😁
Another excellent video. Your presentation is so clear and understandable. Thank you again.
@@nncadi1 Thank you! You are very welcome! ☺️
Hello Julie, thank you for explaining about the tax table. But I also realized this didn't include state income tax. I just checked Massachusetts and it is a flat 5%. There is a reason we refer to our state as Taxachusetts. Retirement definitely involves a lot more things to think about than I thought. Thanks for another great video.
We've been working diligently to keep our taxable income in the 12 percent bracket. I had a major shift in my part-time income this year because I shifted to a job paying double the past salary. So withdrawing from 401k funds is tricky to figure out. I had to project income in my fluctuating new job. My husband also works part-time so there is a lot of communication, planning, and math involved for filing jointly. I think we've figured it out for this year and my hope is next year will be more stable so we can plan for more withdrawals from 401k and other accounts, to keep us in the 12 percent bracket.
That's great! Sounds like you guys have it figured out. It is a lot of number crunching! 😀
You have really put a lot of planning in place. This is so helpful. Something I need to plan and think about.
@@lisagardner9798 Thanks! I'm glad it was helpful! 😊
Very good to have a plan as you have with hard numbers, we’re the same age 😃, I have ROTH money but the bulk of my retirement accounts are pretax so will be looking to do ROTH conversions the next 4 years starting 2025 so I can “look poor” when I qualify for Medicare at 65. I also moved to a 0 state tax state a big savings as I worked in New York a ridiculous high state tax state so there is big savings there. I bought a ranch and have a small hay business which allows me to deduct all my associated expenses which reduces my tax burden a lot.
@@andrewrivera4029 That's awesome! We also don't have state tax in Washington. Roth conversions are a great idea! 😁
You’re a pretty smart cookie, you figured it out. I figured this “poor on paper” thing out myself sometime last year when I was reading up on ACA, and since then have been strategizing saving more in the Roth portion of my 401k so that we can pull from that if I retire at 62. We can pay all of our basic expenses with my husband’s social security, but I need to have my after tax savings beefed up for the extras and unexpected expenses and not have to touch our pre-tax savings until I’m Medicare eligible. I won’t file for social security until 67 even if I retire at 62 which will help us remain poor on paper. When I’m 65, my husband will be 73 and subject to RMD’s, so we will get a bump in income at that time. I will have to study the numbers a bit closer to see if we can do some Roth conversions, and for what amount between 62 and 65 without affecting my ACA premiums much, but will have to first wait to see what happens with those subsidies, given the new administration.
.
@@JacqueScherrer That's awesome! Good for you and good planning! 😀
I remember a few summers ago, after a tough divorce, when I needed a boost for my struggling business. I researched and found a licensed advisor who diligently helped grow my reserves despite inflation. Consequently, my reserves increased from $275k to around $750k.
That was a really good video. Tax time will be here before you know it and it’s always a mystery on how much you might get back or not get back. Thank you for your information.
Thank you! You're very welcome! 🙂
I am lowering my visible income in 2025 by putting money in a pre-tax 457 and using other income to pay off debt. I am tax focused at this point in my retirement. My hope is to get to the 0% tax bracket by 2027.
@@FIRE_DrNinjaTurtle Nice plan! 😁
Nothing shady about planning to have less taxable income. The ultra wealthy look for as many ways to avoid paying taxes as possible, so why shouldn't people with average means?
@@user-rc4zk1zs7g I completely agree! 👍
I've got mixed feelings. Any ACA subsidies offered are paid for by others (our government doesn't generate revenue, just spends our tax money). Some in the FIRE community have a large investment portfolio, yet still qualify for subsidies. My tax burden helps pay the bills for people with much more money than me. Legal it seems, but not exactly fair from my point of view.
@@MinnesotaCabin6 I get what you're saying. 🙂
@@HappyonMonday Thanks - tried to be careful with the wording so as not to start an argument with anyone. 😁 Great video once again!
@@MinnesotaCabin6 I’ve been paying for those subsidies with my taxes. I have 0 guilt in using them.
Great video, easy to follow
Thank you! ☺
Very well said, you did an excellent job. I did the same thing, keeping my taxable income within 12%. Anything left over I do a Roth conversion before hitting the 22% tax bracket.
Thank you - that's awesome!! 😀
This is the way to do it. Very smart Jay. 👍🏻
Thanks for another great video and a perfect ending quote! I was curious - won't your Roth conversions over the next couple of years adversely impact your ability to qualify for ACA subsidies? My experience with the ACA in Florida is that even small changes in your AGI can significantly increase your deductibles and out of pocket maxes as well as your premium.
Thank you! Yes, I will have to watch my Roth conversions and make sure it doesn't bump me up too much in taxable income! 😁
Great topic and informative. Key is building up the taxable brokerage account before retiring. So many ways to keep the income low with this account. We pull just over the standard deduction 30k from Trad IRA and the rest from brokerage account and pay very little tax and qualify for ACA
Thank you! That's fantastic! 😁
Be careful about doing Roth conversions when you're getting subsidies under ACA. I called and asked about this, and was told they count as income (I'm in Pennsylvania), and would reduce/eliminate ACA subsidies.
Absolutely! It will count as income. Thanks for bringing this up! 😁
Very informative thanks 😊 👍
You are welcome! 😁
Taxes are one of the reasons I dont pay my house off. my retirement is almost all in pretax accounts. I owe $77,000. If I took that out it would put me into the %20 for most of that money. my mortgage interest is %2.375 so I would be paying %20.0 to save %2.375. the math doesn't add up
@@jonathanfoster2263 Yes, there's lots of different scenarios and ways to plan. 😊
@0:40 exactly, put your money only in the registered account and grow your money.
👍Yes!
Great video!!
Thank you! ☺
Yes, this works. Once you get social security and Medicare it does get more complicated. A mortgage also makes it difficult. No debt is best.
I agree it gets more complicated with SS and Medicare. And debt free is best! 😀
Instead of a HYSA, you may want to consider 4 week treasury bills. They are currently paying 4.6 % and there is no state tax on the yield. Good luck with your approach and channel. You are giving good advice for people that want to start enjoying life more.
Thanks - that's a good option! That's right about what my HYSA is making too. I live in Washington state, so I don't have state tax, but this could help others! ☺
Love the ending quote
😄
Tax avoidance is legal and fully within the law. Tax evasion is illegal and immoral. As long as we work within the framework of the law. we are not doing something wrong. Perhaps the laws are slanted to a particular group (e.g. punishing apartment renters and enhancing home buyers) but if it is something that ought to be changed, it is up to the lawmakers to change it. There is a reason that some kinds of bonds are tax free - it is to encourage investment in that direction for something that is especially important. So minimizing our tax legally is not something reprehensible. It is something sensible. Personally, I don't mind paying taxes. I want good services and to help those that need it. But if I can easily reduce my taxes when my income becomes reduced I think it is a sensible idea that keeps me from becoming even more of a burden on the state.
I agree! Minimizing our taxes legally is all I'm talking about. It can be really helpful. ☺
Similar to you, I’ll take enough from my pretax accounts to keep me in the 12% bracket. Any long term capital gains or dividends would be at the 15% level, so I’m hoping I won’t have to pay over 15% on anything.
Awesome! 😁
I did a backup plan without social security.
Nice! 😀
You're channel is the best. You present real world scenarios and I really appreciate that. I'm 52 and this is super relevant as I plan out my retirement. Thanks!
Thank you and you're very welcome! 🙂
You have plenty of time to spread out those Roth conversions before the RMD’s come into the equation. With your UA-cam income your withdrawal strategy is going to be quite favorable I bet. The longer you wait, the more that 401k/Roth grows. I am hoping to let mine grow a bit before actually having to dip in and start draining those sources of income. Let that 4% estimated withdrawal rate I would use just compound for a bit. An extra cushion if you will?
Absolutely!! I will wait as long as possible! 😁
I am a single filer and in 2026, when I start taking RMD's my taxable income will be at least $175K. I keep getting barraged by seminars on how to pay little or no taxes. I've been doing some ROTH conversions however, I'll still have a sizable 401K account. Are there any legal ways to reduce my taxes other than donating the money?
Here's an article about that. I hope this helps! smartasset.com/financial-advisor/how-to-avoid-taxes-on-rmd
You waited too long to convert. Sorry. You can start a business which will give tax deductions to protect some of the RMD’s.
As always, I have to say that if you have about 1 million in your current nest egg, then you can entertain the conversation of retiring prior to 62.... If you are teetering around the 500000-dollar mark, then you are doing it with "fingers crossed"... And yes, of course there are scenarios that allow to you survive at 57 with 500000 in the bank. I have trouble convincing myself at the age of 57, five years from drawing SS that I would surrender 5 years of my highest earnings of my lifetime just to claim I am retired and happy with just 500000 and looking at what possibilities that I may have to consider in the future to fund likely shortfalls in money that is needed to live in retirement. If healthy and working those last 5 years arriving at 62 will all but guarantee 1 million while knowing that you will NEVER have to work. The lady that hosts this channel is doing a nice job of showing her journey and roadmap in saving, but I think as teacher she was enjoying entire summers off throughout her career, she had long summers of down time to unplug and decompress
Everyone has a different perspective! Thanks for sharing yours. I had less than 2 months off in the summer and my summers were spent taking trainings, writing lesson plans, and setting up my classroom. We also didn't get paid for most of that! But yes, I'm just sharing my journey. Everyone must choose their own path! ☺
Another great video!😊
Thank you 🤗
Part B premiums are not based on income.
Everything I've read says it is. From what I understand, Medicare sets income limits. If your income is above the limit, you'll pay an additional amount called the IRMAA.
@@HappyonMonday From googling, I see that the 2025 IRMAA increase starts after $106,000 of income
Good idea if possible, but what should be do? Not invest?
You should absolutely invest! Just monitor your withdrawals and invest in some after tax account too!🙂
Great video, as always 😊👍….many people here watching you are following your advice about the tax strategy you mentioned.
However, a question for you :
let’s say for either fun or God forbid medical reasons or other reasons like home repairs etc etc ….you need to take out more money out of traditional irs or 401k etc. which that year it’ll show you as higher income, and therefore you get hit hard with taxes And your bracket changes which like you said could affect other benefits ACA or Other…
We would like to see a program about if you ever had to do that and obviously at times you will have to do that because you can’t just hide behind your net worth. You may have to spend some of it and why not. Any strategies to minimize taxes then?
@johnj4094 That's a great question! That's why I try to keep 5 years worth of money in bucket 1. Then if those emergencies come up I don't have to pull from my pre tax accounts. But I'll put that on my list for future videos! 😊