Please note that the deduction cell in the spreadsheet is editable, and it is NOT tied to your single/married status for a few reasons: 1. The standard deduction changes every year, so by making this an editable box, you can use this spreadsheet this year, next year, and as long as Social Security taxation works the way it does. 2. The deduction changes based on how old you are, so for those above 65, you can put in your deduction while those under 65 can use theirs. 3. Many people do not take the standard deduction and itemize their deduction instead. Since this field is fully editable, that means the spreadsheet will work for these folks as well. Hope this helps :) Isn't an error. It is intentional.
You two are the best level-headed combination on TH-cam for helping us with retirement planning. I was forever confused about how ss benefit is taxed. The table gave me so much clarity
Great Video. I have heard so much about the Tax Torpedo. No one has suggested a way to avoid it. The spreadsheet is a wonderful tool so I can play with numbers. Thank You.
This is such a complex subject. I have a wealth advisor and an accountant but I really need to understand this to make the final decisions. I feel more comfortable after watching your videos. Thank you so much.
I listened to this about three times. You have provided a wealth of information here and I disagree with other comments and I love the back and forth. Don't change a thing about how you present! I downloaded this tool and the other things as well. Thank you for helping us navigate this nightmare...:(
Finally a well thought out tool to limit or organize one's tax torpedo tax contribution levels . Thank you both! Who knows what the future will bring but, today we feast.
Another planning tip is that if your Modified Adjusted Gross Income for a couple is above approximately ninety-seven thousand dollars, you will always be in the eighty-five percent of your benefit is taxable. Thanks, Erik, for your outstanding content and excellence in teaching important financial ideas.
I love it! You guys are me 40 years ago, trying to ace every dollar for my clients. Now, nearly all of them are getting their SS dinged for the extra bucks, some outrageously high, some not so much. The whole concept of brackets stands on its head with these numbers, and so thank you for making us spend some time digging in to what we all should have known during the planning phases. btw, I still love doing the planning.
Another excellent Video! I retired at 61 and will now be turning 65 in a few weeks. Your Medicare videos have been invaluable to me in selecting the best path given my personal situation. I have been holding off on starting SS until minimally full retirement age of 66+10 months, but have been trying to justify that wait in my mind. This video helped me expand that thought process considerably and once I get fully familiar with your spreadsheet I'm sure I'll be able to make a truly informed decision! Thanks so much to you and Zacc for pulling this together. As I dive deep into the spreadsheet I will be sure to reach out if there are questions I can't resolve. Thanks again and best regards!!
@@Theretirementnerds Yes thanks for the Medicare videos. I'm only 63, but because of you I was able to find affordable insurance that specifically covers my cataracts. I never would have thought to make sure the insurance I chose included what I needed. Goofy me thought they all included everything LoL 😂 Thanks! ❤️
Thank you for the spreadsheet!! I have been trying to decide how much to leave in our regular IRAs after ROTH conversions to have the lowest marginal tax rate on future withdrawals. Lots of assumptions, but using the current projected 2026 tax brackets and our projected SS income, I can clearly see we can have $24K of income on top of SS and still have a marginal tax rate of 18.5%. This is the piece of the puzzle I have looking for! It at least gets me in the right ball park (I was really close but it would have been much easier had I had this tool a week ago.) Thank you for this very informative video!
i watch this, go do some scenarios and do more research, get more questions -- i keep coming back and rewatching with new info and it all makes more sense. thank you so much for making this video and spreadsheet, it is helping me so much!
Great video. You mentioned about pushing thru the tax torpedo. Doing the Roth conversions BEFORE taking Social Security avoids the tax torpedo. Drain the traditional IRA amounts before taking Social Security - by either spending it or by Roth conversions.
I've been looking at converting a larger pile of IRA money to a ROTH.. but at my age (63) I find that if I go too far now, I get hit with IRMMA as well, so another spreadsheet calculation to deal with. Paying no taxes after a certain age is sure intriguing though. I appreciate your videos. They do make me think.
Paying IRMAA now might mean not getting bumped up into a higher tier of IRMAA later? Also possibly advantage to converting some to Roth before starting Medicare and/or starting Social Security?
I've listened to a couple of your videos and at 45 years old and unfortunately new to IRA / Roth IRA / investments, these moments listening to the informative descriptions of planning for retirement and/or simply understanding what to expect when we get there, all have been great to absorb. I wish I started earlier in life to be better prepared. Thanks for your time to inform us of your combined knowledge of the subjects at hand... will definitely be making some serious decisions soon.
This is a great video. Good job! One reason someone might consider partial Roth conversions is to avoid that a future RMD push income over a threshold that allows lower rent. Some places in my area will double or triple the rent for income over the threshold.
Thank you both for such a clear and concise explanation of an overly complicated topic. I especially loved when you "flip the numbers on their head", that REALLY made it clear and helped me finally understand it all. Well done gentlemen!
These videos are fantastic! And I concur non alarmist is a great way to describe both of you. I love the non sales approach. My husband and I could use the help and discussion. Will be reaching out for advice and management. Retired, 62 and loving life and hope to for many more years to come!
Best discussion of the Tax Torpedo and especially the different scenarios of when and how a Roth conversion makes sense. I seem to be in the position where converting "it all" "quickly" is the best option. I'd love to hear your thoughts on leaving a portion behind for Donor Advised / Directed contributions. I don't - and probably never will - have that million dollar portfolio we all dream of. But with a small pension and more in traditional than Roth, these discussions and tools are very helpful.
Great video. Nobody else talks about scenario 3. I had determined for myself that totally eliminating tax deferred money before age 75 when I have to take RMDs was the best plan for me because I was going to be in the SS tax torpedo every year otherwise. It is not only the most tax efficient, it also has many other benefits. It reduces the impact of the so called widow tax. It avoids any IRMAA charges. It makes it easy to spend your wealth without worrying about taxes. I might keep a little tax deferred money around for long term care and qualified charitable distributions.
You are truly the nerdiest of all the SS nerds, and I love it! I thought I would start having to pay taxes, and maybe quite a lot, next year with the COLA. I realized that I may never actually have to pay taxes again, even if I take some money from my 401k. Thanks!
Gentlemen, thank you thank you thank you. Your conversations discussing the different scenarios has helped me understand what I should do for my situation. Blessings
Thank you so much! Finally a tool that allows working retirees, like myself, to calculate social security taxable amount before exceeding 85% or individual desired percentage.👍
Thank you so much for giving us access to this calculator. I was going to start SS at 62 and mix it with my 401K for income. I think now, I might need to live on the 401k first and let my SS "age" for a few years.
@@irinajen6379 if you need medical, and have no 401k, medicare/medicaid will kick in some. If you have 401k, they will make you spend every dime before they will kick in.
It would be really helpful if you would include more examples of people filing as Single. There is a significant percentage of people who retire while filing single. Also, what about if you retire mid year? Does that make a difference?
Tax cpa. we do Roth conversions to fill up the lower tax bracket. For example, if a taxpayer is in the 10% bracket now but when they start taking their RMD, they will be in the 22% tax bracket, a Roth conversion can use up the tax bracket at a lower rate than they will eventually pay. That’s a simplification.
One potential FA incentive is moving from 401k to IRAs based on managing IRA and charging AUM. So, often times to optimize risks/returns of a mixed-source 401k, separating sources by rolling over to IRAs is necessary. So, it can be both beneficial for both the FA and the client.
Thank you for going over different scenarios & reviewing how making changes to the income structure can either save you or impact your taxation. This video is extremely useful 🎉
Another good reason to do Roth conversions is the impact of RMDs when a spouse dies. The survivor's brackets are cut in half, and taxes increase dramatically. The survivor may end up filing as single for many years.
Mahalo for the great information and the spreadsheet! Congrats on remission...amazing how we become untouchable for life insurance. Great motivator to take charge and take care of the family.
Great content, as usual! And thanks Zaac for realizing that having/keeping money is different for different people - and honoring what having that money means to them!
I think people are unaware of the impact collecting SS has on their tax situation and Roth conversions. I retired at 63 (in 2023) with a $70k yearly pension. By not collecting SS I am able to convert a little under $100K to Roth each year. Total income ,with conversion, keeps me under the second IRMAA threshold and partially in the 24% bracket (my IRA is a little over $1.4M). If I was taking SS now my conversions would be much smaller and my RMDs at 75 would be much larger. Yes its a gamble that I'll live long enough but if I don't my heirs will have a more tax free inheritance.
I was going to triple thumbs-up but youtube won't let me - very well done! You guys lay out the information clearly and objectively. I listen to some other channels which I am sure you are aware of where I reckon half the people watching are convinced they will lose everything if they keep more than 500 dollars in a tax-deferred account ;-). Thanks so much and I will be referring some friends to your channel.
Found you guys this weekend and love your videos. I too love my spreadsheets and trying to figure out the best strategy but so much to consider. The spreadsheet is awesome!!! I would make one suggestion. Make one unprotected cell where we can write notes.
I’m subscribing! The other experts do not explain used definitions. You do! Please, more info for single case scenarios and widows(ers). I’m happy for the couples, but in a single case you have the same expenses, less income, less deductions. One more thing: taxing SS is a double taxation. If you were self employed, you paid all FICA!
Thank you. Excellent explanation of the SS Tax Torpedo. Appreciate that you created - and shared - a public/consumer-facing spreadsheet to illustrate various scenarios. (Hope you plan to update it annually, especially once TCJA sunsets!) Well done and quite helpful. 👍🏻
I really appreciate you guys sharing your knowledge and experience to help others. And for making the spreadsheet available for download. I like the storybook approach you take in your videos and find added value listening to the entire story. Too many other changes get to the bottom line and don’t provide situational context like you do. I created a similar spreadsheet but like your better because it will be easier for my wife to understand. I feel better equipped to prepare for each phase but would like to know your thoughts on ROTH 401k accounts. I have historically contributed to 401k but stop contributing in favor of ROTH 401k under the advice of a Financial Planner but now question the strategy and need for a ROTH 401k.
Thank you so much! So glad to hear it was helpful. We have 2 videos on the Roth vs Traditional conversation that may help. All depends on tax rates and philosophy around buckets in retirement. Video 1:(watch first) th-cam.com/video/VHHNYdpVwrU/w-d-xo.html Video 2: th-cam.com/video/-U_su7Ak7QE/w-d-xo.html
I entered retirement with $2m in an IRA. I’ll be doing Roth conversions for 20 years. It’s not a simple problem controlling RMDs and wealth transfer to heirs.
Why isn't this simple? You can definitely have options to do a lot of things with $2M. Also, if passing it to heirs is your main goal, why don't you take RMDs if still not fully converted by 73 and "converting it" into a gift for your heirs that year and help them establish their own Nest Egg including grandkids.
What a whirlwind!!! Wealth of information. Trying to wrap my brain around all of this. I’m 57, think that when I turn 591/2 I will start my Roth conversion. I don’t plan on taking social security until 67. I have 800k and make 70k a year so I will be able to move 25k a year in my tax bracket. I have ZERO cash account and this would help once I start taking social security to offset income
My pension seems to be a tax bomb, due to the value. I have no option but to pay the full 85% on my social security. It also affects my ACA subsidies. Also if I want to sell my house in California, I will have so much in capital gains, that I see a scenario where if I sell at age 63, I would trigger losing all ACA subsidies for a year, as well as pushing me to the highest IRMAA brackets for a year when I turn 65. There are so many hidden tax torpedoes. The trick is knowing the information on how to avoid it if possible.
Beware of the Windfall Provision! My Social Secutiry statements listed $800 at age 62, but in reality I received less than $250 at age 62 due to the Windfall Provision.
One issue I have always had with paying the tax now (roth) vs paying the tax later (ira), is that by paying now, I am paying with a much more valuable dollar compared to a weaker dollar in the future...
Thank you for sharing your understanding of an overly complicated subject in ways we can understand better * What's the chance you or Zacc might do an online walk through of the tax torpedo worsheets for folks who's expertise lies in other areas outside taxes and SS? We so want to understand this well to feel a little more in control during senior years.
I just retired in January 2024 . In 2008 when there were lots of losses in the market and I had to leave my job for family reasons I converted a lot of losing positions to Roth so I have twice the amount in Roth as regular Ira ! I am currently still working to get a new car before I actually retire - would love your imput
Hi Edward, happy to help where we can. My email is erik@90daysfromretirement.com if you'd like to shoot me an email with what state you're in and I can connect you with a partner of mine that can help.
It’s great. Unfortunately it showed me that I’m 85% no matter what, without adding IRA withdrawals. Probably going to do some more Roth conversions in the next few years but definitely need to keep studying. I’m only 58 and already retired so it’s not like my income is going down. @@Theretirementnerds
Interesting, I hadn't looked at this this way. I had heard of the tax torpedo but in reference to when one spouse dies, the other goes to filing as an individual and still having most of the income when they were filing as a couple. More applicable to high income earners.
for federal employees, financial advisors want you to take money out of your TSP and put into an IRA so can do the conversions - they want to get to manage that TSP money!
For many there is no way to avoid the tax and since the earnings limit is not adjusted for inflation it will be worse in the future. Since half of your SS goes into the calculation, if 2 SS checks equal $70k, even a small pension or investment income will put you over the $44k limit. You make a good point about getting at least 15% tax free. In my state there is also no state tax, so my total tax on SS will be 20%. IRA withdrawals will be taxed at 30% (a 50% higher rate).
Tax Accelerator is a more intuitive reference than Tax Torpedo, imo. Thnx for the explanation, I now see I probably could’ve done better in my 60s. 😳 Now RMD is here to stay 😉
This made so much sense. Thank you for explaining it so well. To make it perfectly clear if you have a pension of over $50,000 you are going to pay your full 85% on Social Security. Correct?
Hi Carla, so glad it was helpful, and thank you for watching! Highly recommend downloading the spreadsheet if you haven't already. It depends on how much Social Security income you have. If you have $50k in pension and $80k in SS as a couple... No. It's not 85%. So it all boils down to a few factors, not just income from things like a pension or 401k. Hope that helps!
I'm getting about 24K Social Security at age 60 as survivor benefit due to the death of my spouse. I also get health insurance with ACA using 28K annual income adding 4K in interest income. I have plenty of headroom to do some Roth conversion but i run into the issue that ACA at 28K gives me free health insurance, if adding just a bit more annual income it starts to make health insurance under ACA to be 200 to even 500 dollars per month for the ACA insurance.
I graduated the CFP college but decided against the certification and CFP business. You'll never get all the credit for good outcomes, and you'll get blamed when things crash. Stick to taxes. You'll be on overload three months of the year and on vacation for nine.
Hi Can you have a video About “Avoid the Social Security Tax Torpedo” for filling Joint, but one collected social security benefits , other still working full time. Thanks Your video is absolutely helpful .❤
So I pay no taxes on my wealth after 75 if I fully convert to Roth, which is great. But I’m 75! What the hell do I need all that now tax free money for anyways…better diapers, or nicer electric scooter?
Really appreciate the great information and discussion you provide here, not to mention the invaluable tool and walkthrough. Came across your channel this week, and definitely subscribing. Regarding your discussion around incentives for recommending Roth vs Traditional and Roth conversion, would fiduciary responsibilities play into it at all? There have been a lot of talk, at least in my small circle of millennial professionals, of ensuring your FA is also a fiduciary. I would also think that the incentive may be stronger depending on where the FA is in his/her client base. If he/she is still building that base or looking to expand, building goodwill and a reputation for making good recommendations regardless of whether it garners income would go a long way. I'll tell you that that's why I've stuck with my current FA.
Thank you for watching! So glad you found us! We have a video coming out soon that goes over the fiduciary discussion. I think people are trying to earn business and one way is to make your existing relationship appear like they are hiding something from you that is costing you money.
What about dodging the tax torpedo by converting all of your traditional IRA/traditional 401k to Roth between the ages of 60 and 70 before you start taking social security at 70? (assuming you retire at 60) In this case you would be funding both your daily expenses and the taxes on the conversions via long term capital gains from a taxable brokerage account combined with some Roth withdrawals if needed. In this scenario you would already have ~85% of your retirement assets in Roth to begin with due to favoring a Roth IRA and Roth 401k for the entirety of your working life. There would be no pension or other income.
It would be interesting to know what the median account balance of 401k’s in 2024 of those age 60 to age 70. 🤔 If it is as low as I would be lead to believe. I cannot imagine the median account holder paying much tax on the withdrawal from the median deferred account along with social security?
Much of this advice and educational content is very useful. However, side-eye anyone who tells you they know "tax rates are definitely going up". I have been hearing this for more than 30 years. Rates are actually significantly less. My point is to set yourself up so you retain options and flexibility, not one specific situation. Also, remember, no one actually knows if the tax implications of Roth IRAs will remain the same indefinitely.
Since I'm in that higher AGI and lower Social Security, I know I will be at the high end of taxes. What I am now curious about (relating to reducing taxable v roth accounts and conversions) is the impact on capital gains taxes. You may be in the 85% taxable social security but still in the 0 tax for capital gains since the income limits are so vastly different. It may still be worth converting taxable accounts to roth if capital gains are in the conversation.
So prior to age when RMDs kick in you may be able to do "tax free" Roth conversion if you have the "head room" in the table. This is extremely good news as otherwise I will take a huge tax hit when withdrawing for a new car or expensive home repairs.
Hi there, this is intentional. It is a field where you can type your deduction in. That makes this sheet usable every year and accounts for those who itemize deductions and don't have a standard deduction number. The single/joint field will adjust the threshold equations. Hope that helps!
This is fascinating. If you have a million earning dividends, not selling, or munis which you discussed, how can you avoid a tax torpedo? It can’t. From a simple Roth conversion and taking that in steps makes sense, but what exactly can you do to avoid including income in the calculation for most people who’ve saved in non qualified? So if you sell your primary home you will pay your social security back too? What I get out of this is you can either pay back your social security, which is now welfare, or live. For this scenario, you should not take social security at all because your hurting yourself in several ways. Also never do an ira when younger and fully fund roth. My kids are starting out and they’ll get Roth IRA money for Christmas.
Hello, I sent you two emails one in the morning and one in the late afternoon for this calculator and no answer yet.... would appreciate it. Loved your presentation.
Hi Rozalia, did you fill out the form and it isn't showing in your email? Send me a message to Erik@90daysfromretirement.com and I'll send over the file.
Please note that the deduction cell in the spreadsheet is editable, and it is NOT tied to your single/married status for a few reasons:
1. The standard deduction changes every year, so by making this an editable box, you can use this spreadsheet this year, next year, and as long as Social Security taxation works the way it does.
2. The deduction changes based on how old you are, so for those above 65, you can put in your deduction while those under 65 can use theirs.
3. Many people do not take the standard deduction and itemize their deduction instead. Since this field is fully editable, that means the spreadsheet will work for these folks as well.
Hope this helps :)
Isn't an error. It is intentional.
Theretirementnerds
You two are the best level-headed combination on TH-cam for helping us with retirement planning. I was forever confused about how ss benefit is taxed. The table gave me so much clarity
Thank you so much for tuning in! So glad to hear it is helpful!
Nothing but positive things to say about this presentation! Thank you both!
Thank you so much!
Great Video. I have heard so much about the Tax Torpedo. No one has suggested a way to avoid it. The spreadsheet is a wonderful tool so I can play with numbers. Thank You.
You're welcome! Thank you for spending some time with us!
Great show. You two make a perfect team, both very down to earth and explain things well, in simple ways.
You are too kind! Thank you so much! Zacc is so sharp and great at what he does.
This is such a complex subject. I have a wealth advisor and an accountant but I really need to understand this to make the final decisions. I feel more comfortable after watching your videos. Thank you so much.
So glad they are helpful! Thank you for spending time with us!
I listened to this about three times. You have provided a wealth of information here and I disagree with other comments and I love the back and forth. Don't change a thing about how you present! I downloaded this tool and the other things as well. Thank you for helping us navigate this nightmare...:(
So glad to hear it was helpful! Thank you for spending time with us! :)
Finally a well thought out tool to limit or organize one's tax torpedo tax contribution levels . Thank you both! Who knows what the future will bring but, today we feast.
Thank you for spending time with us! Hope it's helpful!
Another planning tip is that if your Modified Adjusted Gross Income for a couple is above approximately ninety-seven thousand dollars, you will always be in the eighty-five percent of your benefit is taxable. Thanks, Erik, for your outstanding content and excellence in teaching important financial ideas.
Thank you for adding that David!
@@Theretirementnerds My pleasure, indeed.😀
I love it! You guys are me 40 years ago, trying to ace every dollar for my clients. Now, nearly all of them are getting their SS dinged for the extra bucks, some outrageously high, some not so much.
The whole concept of brackets stands on its head with these numbers, and so thank you for making us spend some time digging in to what we all should have known during the planning phases. btw, I still love doing the planning.
Thank you so much for spending time with us!
Another excellent Video! I retired at 61 and will now be turning 65 in a few weeks. Your Medicare videos have been invaluable to me in selecting the best path given my personal situation. I have been holding off on starting SS until minimally full retirement age of 66+10 months, but have been trying to justify that wait in my mind. This video helped me expand that thought process considerably and once I get fully familiar with your spreadsheet I'm sure I'll be able to make a truly informed decision! Thanks so much to you and Zacc for pulling this together. As I dive deep into the spreadsheet I will be sure to reach out if there are questions I can't resolve. Thanks again and best regards!!
Thank you so much for spending time with us! So glad to know these are helpful. We're happy to help in any way we can
@@Theretirementnerds
Yes thanks for the Medicare videos. I'm only 63, but because of you I was able to find affordable insurance that specifically covers my cataracts. I never would have thought to make sure the insurance I chose included what I needed. Goofy me thought they all included everything LoL 😂
Thanks! ❤️
This is one of the best explanations of SS taxes and Roth conversions I’ve seen on TH-cam! Outstanding job guys!
Thank you so much!!
Thank you for the spreadsheet!! I have been trying to decide how much to leave in our regular IRAs after ROTH conversions to have the lowest marginal tax rate on future withdrawals. Lots of assumptions, but using the current projected 2026 tax brackets and our projected SS income, I can clearly see we can have $24K of income on top of SS and still have a marginal tax rate of 18.5%. This is the piece of the puzzle I have looking for! It at least gets me in the right ball park (I was really close but it would have been much easier had I had this tool a week ago.) Thank you for this very informative video!
So glad it was helpful! Thank you for spending some time with us!
i watch this, go do some scenarios and do more research, get more questions -- i keep coming back and rewatching with new info and it all makes more sense. thank you so much for making this video and spreadsheet, it is helping me so much!
So glad to hear it is helpful! Thank you!
Great video. You mentioned about pushing thru the tax torpedo. Doing the Roth conversions BEFORE taking Social Security avoids the tax torpedo. Drain the traditional IRA amounts before taking Social Security - by either spending it or by Roth conversions.
Thank you for watching and sharing this comment!
I've been looking at converting a larger pile of IRA money to a ROTH.. but at my age (63) I find that if I go too far now, I get hit with IRMMA as well, so another spreadsheet calculation to deal with. Paying no taxes after a certain age is sure intriguing though. I appreciate your videos. They do make me think.
Paying IRMAA now might mean not getting bumped up into a higher tier of IRMAA later? Also possibly advantage to converting some to Roth before starting Medicare and/or starting Social Security?
I've listened to a couple of your videos and at 45 years old and unfortunately new to IRA / Roth IRA / investments, these moments listening to the informative descriptions of planning for retirement and/or simply understanding what to expect when we get there, all have been great to absorb. I wish I started earlier in life to be better prepared. Thanks for your time to inform us of your combined knowledge of the subjects at hand... will definitely be making some serious decisions soon.
So glad you found us! Thank you for taking the time to listen and learn. Zacc is amazing!
This is a great video. Good job! One reason someone might consider partial Roth conversions is to avoid that a future RMD push income over a threshold that allows lower rent. Some places in my area will double or triple the rent for income over the threshold.
Thank you both for such a clear and concise explanation of an overly complicated topic. I especially loved when you "flip the numbers on their head", that REALLY made it clear and helped me finally understand it all. Well done gentlemen!
Appreciate you spending time with us!
These videos are fantastic! And I concur non alarmist is a great way to describe both of you. I love the non sales approach. My husband and I could use the help and discussion. Will be reaching out for advice and management. Retired, 62 and loving life and hope to for many more years to come!
Thank you so much! Happy to help however we can, and we agree... we hope many more years of loving life! :)
Best discussion of the Tax Torpedo and especially the different scenarios of when and how a Roth conversion makes sense.
I seem to be in the position where converting "it all" "quickly" is the best option. I'd love to hear your thoughts on leaving a portion behind for Donor Advised / Directed contributions. I don't - and probably never will - have that million dollar portfolio we all dream of. But with a small pension and more in traditional than Roth, these discussions and tools are very helpful.
Great video. Nobody else talks about scenario 3. I had determined for myself that totally eliminating tax deferred money before age 75 when I have to take RMDs was the best plan for me because I was going to be in the SS tax torpedo every year otherwise. It is not only the most tax efficient, it also has many other benefits. It reduces the impact of the so called widow tax. It avoids any IRMAA charges. It makes it easy to spend your wealth without worrying about taxes. I might keep a little tax deferred money around for long term care and qualified charitable distributions.
Thank you so much for watching! So glad it was a useful video :)
You are truly the nerdiest of all the SS nerds, and I love it! I thought I would start having to pay taxes, and maybe quite a lot, next year with the COLA. I realized that I may never actually have to pay taxes again, even if I take some money from my 401k. Thanks!
So glad you enjoy! 🙂 appreciate you!
Gentlemen, thank you thank you thank you. Your conversations discussing the different scenarios has helped me understand what I should do for my situation. Blessings
Appreciate you taking the time to watch! So glad it is helpful!
Thank you so much! Finally a tool that allows working retirees, like myself, to calculate social security taxable amount before exceeding 85% or individual desired percentage.👍
So glad it is helpful! Thank you for watching!
Zach you're the best. You make a perfect team.
Thank you so much!!
Thank you so much for giving us access to this calculator. I was going to start SS at 62 and mix it with my 401K for income. I think now, I might need to live on the 401k first and let my SS "age" for a few years.
So glad to hear it is helpful! Happy to help however we can.
@@allikat1352 How about medical bills in the later age? How to cover those if all 491K is gone?
@@irinajen6379 if you need medical, and have no 401k, medicare/medicaid will kick in some. If you have 401k, they will make you spend every dime before they will kick in.
Really great content. Love the detail! Thanks for taking time to explain.
Thank you so much for taking the time to watch! :)
Great video. Thank you for this insight , Appreciate the spreadsheet-Amazing !
Thank you so much! Appreciate you watching!!
Awesome....What a fantastic planning tool! Thank you.
It would be really helpful if you would include more examples of people filing as Single. There is a significant percentage of people who retire while filing single.
Also, what about if you retire mid year? Does that make a difference?
Make sure to download the spreadsheet! There's a cell for filing status and you can play with single numbers 🙂
Tax cpa. we do Roth conversions to fill up the lower tax bracket. For example, if a taxpayer is in the 10% bracket now but when they start taking their RMD, they will be in the 22% tax bracket, a Roth conversion can use up the tax bracket at a lower rate than they will eventually pay. That’s a simplification.
One potential FA incentive is moving from 401k to IRAs based on managing IRA and charging AUM. So, often times to optimize risks/returns of a mixed-source 401k, separating sources by rolling over to IRAs is necessary. So, it can be both beneficial for both the FA and the client.
Thank you for going over different scenarios & reviewing how making changes to the income structure can either save you or impact your taxation. This video is extremely useful 🎉
So glad it was helpful! Thank you for watching!
Another good reason to do Roth conversions is the impact of RMDs when a spouse dies. The survivor's brackets are cut in half, and taxes increase dramatically. The survivor may end up filing as single for many years.
Great point, David!
Mahalo for the great information and the spreadsheet! Congrats on remission...amazing how we become untouchable for life insurance. Great motivator to take charge and take care of the family.
Thank you so much for watching!
Thanks for the deep dive - for those with an interest in their own finances it was very well done.
Thank you so much for watching!
I’m so lucky that I won’t have to worry about all of this complexity since I will never be able to retire and have almost no retirement funds.
Great content, as usual! And thanks Zaac for realizing that having/keeping money is different for different people - and honoring what having that money means to them!
Zacc is the best! Thank you for spending time with us!
I think people are unaware of the impact collecting SS has on their tax situation and Roth conversions. I retired at 63 (in 2023) with a $70k yearly pension. By not collecting SS I am able to convert a little under $100K to Roth each year. Total income ,with conversion, keeps me under the second IRMAA threshold and partially in the 24% bracket (my IRA is a little over $1.4M). If I was taking SS now my conversions would be much smaller and my RMDs at 75 would be much larger. Yes its a gamble that I'll live long enough but if I don't my heirs will have a more tax free inheritance.
The most you can contribute is $7,500 I believe. Second you have to be on Medicare at age 65 for any IRMMA to take affect.
IRMMA kicks in at various ages. Mine was age 71, next year its around age 73.
I was going to triple thumbs-up but youtube won't let me - very well done! You guys lay out the information clearly and objectively. I listen to some other channels which I am sure you are aware of where I reckon half the people watching are convinced they will lose everything if they keep more than 500 dollars in a tax-deferred account ;-). Thanks so much and I will be referring some friends to your channel.
Appreciate this so much! Thank you for spending time with us!
The best tax planning video and free spreadsheet for a good clarity.
Thank you so much for watching!!
Found you guys this weekend and love your videos. I too love my spreadsheets and trying to figure out the best strategy but so much to consider. The spreadsheet is awesome!!! I would make one suggestion. Make one unprotected cell where we can write notes.
Great suggestion! I’ll work on it 😊
I’m subscribing! The other experts do not explain used definitions. You do! Please, more info for single case scenarios and widows(ers). I’m happy for the couples, but in a single case you have the same expenses, less income, less deductions. One more thing: taxing SS is a double taxation. If you were self employed, you paid all FICA!
Thank you for watching!
The spreadsheet you can download has been updated from this original video. It now includes single options :)
Thank you. Excellent explanation of the SS Tax Torpedo. Appreciate that you created - and shared - a public/consumer-facing spreadsheet to illustrate various scenarios. (Hope you plan to update it annually, especially once TCJA sunsets!) Well done and quite helpful. 👍🏻
So glad to hear it was helpful! Appreciate you spending time with us!
Thanks for the detailed examples and the spreadsheet
Of course! Thank you for spending some time with us!
I really appreciate you guys sharing your knowledge and experience to help others. And for making the spreadsheet available for download.
I like the storybook approach you take in your videos and find added value listening to the entire story. Too many other changes get to the bottom line and don’t provide situational context like you do.
I created a similar spreadsheet but like your better because it will be easier for my wife to understand.
I feel better equipped to prepare for each phase but would like to know your thoughts on ROTH 401k accounts. I have historically contributed to 401k but stop contributing in favor of ROTH 401k under the advice of a Financial Planner but now question the strategy and need for a ROTH 401k.
Thank you so much! So glad to hear it was helpful.
We have 2 videos on the Roth vs Traditional conversation that may help. All depends on tax rates and philosophy around buckets in retirement.
Video 1:(watch first)
th-cam.com/video/VHHNYdpVwrU/w-d-xo.html
Video 2:
th-cam.com/video/-U_su7Ak7QE/w-d-xo.html
I entered retirement with $2m in an IRA. I’ll be doing Roth conversions for 20 years. It’s not a simple problem controlling RMDs and wealth transfer to heirs.
Why isn't this simple? You can definitely have options to do a lot of things with $2M. Also, if passing it to heirs is your main goal, why don't you take RMDs if still not fully converted by 73 and "converting it" into a gift for your heirs that year and help them establish their own Nest Egg including grandkids.
@@annamartino5681 The number of variables that have unknown values complicates the problem.
@@Toomanydays should've started converting before retirement.
@@hubster4477 After retiring I moved from California to Washington, a no income tax state.
Thank you!! This answers so many questions I have had on how taxes work in retirement. I am downloading the spreadsheet.
So glad it is helpful! Feel free to reach out if you have any questions!
I think it is next generation management opportunity which is aligns with client's desire to ensure generation management.
What a whirlwind!!! Wealth of information. Trying to wrap my brain around all of this. I’m 57, think that when I turn 591/2 I will start my Roth conversion. I don’t plan on taking social security until 67. I have 800k and make 70k a year so I will be able to move 25k a year in my tax bracket. I have ZERO cash account and this would help once I start taking social security to offset income
Thank you for watching! Lots of decisions to work through. Sounds like you're in a pretty good spot!
Very informative information God bless you guys I'm sharing this with my family and friends thank you God bless you
Thank you so much for watching!
Giving the game away for anyone capable and willing to learn it lol thank your
Thank you for watching!
My pension seems to be a tax bomb, due to the value. I have no option but to pay the full 85% on my social security. It also affects my ACA subsidies. Also if I want to sell my house in California, I will have so much in capital gains, that I see a scenario where if I sell at age 63, I would trigger losing all ACA subsidies for a year, as well as pushing me to the highest IRMAA brackets for a year when I turn 65. There are so many hidden tax torpedoes. The trick is knowing the information on how to avoid it if possible.
Thank you for every bit of information. This has helped me sooooo much!
So glad it was helpful! Appreciate you 🙏
Beware of the Windfall Provision! My Social Secutiry statements listed $800 at age 62, but in reality I received less than $250 at age 62 due to the Windfall Provision.
One issue I have always had with paying the tax now (roth) vs paying the tax later (ira), is that by paying now, I am paying with a much more valuable dollar compared to a weaker dollar in the future...
How the heck is it legal for States to tax your Social Security
Thank you for sharing your understanding of an overly complicated subject in ways we can understand better * What's the chance you or Zacc might do an online walk through of the tax torpedo worsheets for folks who's expertise lies in other areas outside taxes and SS? We so want to understand this well to feel a little more in control during senior years.
My email is erik@90daysfromretirement.com
Send me an email and I can connect you with Zacc's team. They are the experts on that spreadsheet.
Great job and the content is so helpful for the DIY person 👍🏻
Thank you for watching!
I just retired in January 2024 . In 2008 when there were lots of losses in the market and I had to leave my job for family reasons I converted a lot of losing positions to Roth so I have twice the amount in Roth as regular Ira ! I am currently still working to get a new car before I actually retire - would love your imput
Hi Edward, happy to help where we can. My email is erik@90daysfromretirement.com if you'd like to shoot me an email with what state you're in and I can connect you with a partner of mine that can help.
Great information. Going to a while and some time with the spreadsheet to digest it but now I have a better starting point. Thanks
Thank you so much! Hope the spreadsheet is helpful!
It’s great. Unfortunately it showed me that I’m 85% no matter what, without adding IRA withdrawals. Probably going to do some more Roth conversions in the next few years but definitely need to keep studying. I’m only 58 and already retired so it’s not like my income is going down. @@Theretirementnerds
thanks for this useful and ACTIONABLE information!
Our pleasure! Thank you for watching!
New subscriber here I am not done with this video yet and decided you guys are my favorite nerds. Been looking for these type of discussions Thank you
So glad you found us! Thank you for tuning in! We have two episodes with Zacc in production that should be coming out in the next week or two :)
Before watching these videos, I didn't know ss was taxed! Surprising.
Most don't! So you're not alone. Don't hate us as the messengers :)
Interesting, I hadn't looked at this this way. I had heard of the tax torpedo but in reference to when one spouse dies, the other goes to filing as an individual and still having most of the income when they were filing as a couple. More applicable to high income earners.
My favorite color is Midnight Blue. That comment may apply to one of your other videos. Thanks guys.
Haha! Appreciate it! 🔵
Thank you! The spreadsheet is helpful.
Thank you for watching! So glad it is helpful!
Besides the division table there is also a multiplication table that works out the same.
Thanks for this excellent information, important fine points well-explained in plain English. 🙂
Appreciate you tuning in!!
*sigh* If only we could predict the future (tax rates, our health, lifespan, etc).
for federal employees, financial advisors want you to take money out of your TSP and put into an IRA so can do the conversions - they want to get to manage that TSP money!
No matter the retirees financial status Social Security needs to be exempt from taxes, both state and federal.
For many there is no way to avoid the tax and since the earnings limit is not adjusted for inflation it will be worse in the future. Since half of your SS goes into the calculation, if 2 SS checks equal $70k, even a small pension or investment income will put you over the $44k limit. You make a good point about getting at least 15% tax free. In my state there is also no state tax, so my total tax on SS will be 20%. IRA withdrawals will be taxed at 30% (a 50% higher rate).
if S.S. is your only income u don't have to file
Ouch! I wish I'd seen this before I had to take out MRD!
Tax Accelerator is a more intuitive reference than Tax Torpedo, imo. Thnx for the explanation, I now see I probably could’ve done better in my 60s. 😳 Now RMD is here to stay 😉
This made so much sense. Thank you for explaining it so well.
To make it perfectly clear if you have a pension of over $50,000 you are going to pay your full 85% on Social Security. Correct?
Hi Carla, so glad it was helpful, and thank you for watching!
Highly recommend downloading the spreadsheet if you haven't already. It depends on how much Social Security income you have. If you have $50k in pension and $80k in SS as a couple... No. It's not 85%. So it all boils down to a few factors, not just income from things like a pension or 401k.
Hope that helps!
I'm getting about 24K Social Security at age 60 as survivor benefit due to the death of my spouse. I also get health insurance with ACA using 28K annual income adding 4K in interest income. I have plenty of headroom to do some Roth conversion but i run into the issue that ACA at 28K gives me free health insurance, if adding just a bit more annual income it starts to make health insurance under ACA to be 200 to even 500 dollars per month for the ACA insurance.
I graduated the CFP college but decided against the certification and CFP business. You'll never get all the credit for good outcomes, and you'll get blamed when things crash. Stick to taxes. You'll be on overload three months of the year and on vacation for nine.
Synopsis: if you make a crapload of money in retirement, you will pay a little tax on some of your SSI payments. 🤷♂️
Hi
Can you have a video
About “Avoid the Social Security Tax Torpedo” for filling Joint, but one collected social security benefits , other still working full time.
Thanks
Your video is absolutely helpful .❤
So I pay no taxes on my wealth after 75 if I fully convert to Roth, which is great. But I’m 75! What the hell do I need all that now tax free money for anyways…better diapers, or nicer electric scooter?
Largely to pass on to your survivors/heirs.
Nursing care, paying folks to do stuff that you can’t (home repairs, cleaning lady), travels
Awesome information. You guys are the best.
Thank you so much!
this is gold!!! so well explained.
Thank you so much for watching!
Really appreciate the great information and discussion you provide here, not to mention the invaluable tool and walkthrough. Came across your channel this week, and definitely subscribing.
Regarding your discussion around incentives for recommending Roth vs Traditional and Roth conversion, would fiduciary responsibilities play into it at all? There have been a lot of talk, at least in my small circle of millennial professionals, of ensuring your FA is also a fiduciary. I would also think that the incentive may be stronger depending on where the FA is in his/her client base. If he/she is still building that base or looking to expand, building goodwill and a reputation for making good recommendations regardless of whether it garners income would go a long way. I'll tell you that that's why I've stuck with my current FA.
Thank you for watching! So glad you found us!
We have a video coming out soon that goes over the fiduciary discussion. I think people are trying to earn business and one way is to make your existing relationship appear like they are hiding something from you that is costing you money.
Eye opening
What about dodging the tax torpedo by converting all of your traditional IRA/traditional 401k to Roth between the ages of 60 and 70 before you start taking social security at 70? (assuming you retire at 60) In this case you would be funding both your daily expenses and the taxes on the conversions via long term capital gains from a taxable brokerage account combined with some Roth withdrawals if needed. In this scenario you would already have ~85% of your retirement assets in Roth to begin with due to favoring a Roth IRA and Roth 401k for the entirety of your working life. There would be no pension or other income.
It would be interesting to know what the median account balance of 401k’s in 2024 of those age 60 to age 70. 🤔 If it is as low as I would be lead to believe. I cannot imagine the median account holder paying much tax on the withdrawal from the median deferred account along with social security?
the IRS ought to have a FULL trackers and calculator for all this... do they?
What about the fact ' they take 20% of any withdraw from 401K?
Much of this advice and educational content is very useful. However, side-eye anyone who tells you they know "tax rates are definitely going up". I have been hearing this for more than 30 years. Rates are actually significantly less. My point is to set yourself up so you retain options and flexibility, not one specific situation. Also, remember, no one actually knows if the tax implications of Roth IRAs will remain the same indefinitely.
Since I'm in that higher AGI and lower Social Security, I know I will be at the high end of taxes. What I am now curious about (relating to reducing taxable v roth accounts and conversions) is the impact on capital gains taxes. You may be in the 85% taxable social security but still in the 0 tax for capital gains since the income limits are so vastly different.
It may still be worth converting taxable accounts to roth if capital gains are in the conversation.
So prior to age when RMDs kick in you may be able to do "tax free" Roth conversion if you have the "head room" in the table. This is extremely good news as otherwise I will take a huge tax hit when withdrawing for a new car or expensive home repairs.
Downloaded the chart but it does not change when you switch from joint filing status to single! Please fix this!
Hi there, this is intentional. It is a field where you can type your deduction in. That makes this sheet usable every year and accounts for those who itemize deductions and don't have a standard deduction number.
The single/joint field will adjust the threshold equations.
Hope that helps!
This is fascinating. If you have a million earning dividends, not selling, or munis which you discussed, how can you avoid a tax torpedo? It can’t. From a simple Roth conversion and taking that in steps makes sense, but what exactly can you do to avoid including income in the calculation for most people who’ve saved in non qualified? So if you sell your primary home you will pay your social security back too? What I get out of this is you can either pay back your social security, which is now welfare, or live. For this scenario, you should not take social security at all because your hurting yourself in several ways. Also never do an ira when younger and fully fund roth. My kids are starting out and they’ll get Roth IRA money for Christmas.
Love your videos. Truly a life raft in a sea of YT mediocrity. Thank you!
Thank you so much! Is your profile picture from Barry?
you're both awesome! Your passion for simply helping people really shines through -- and that spreadsheet is fantastic!
Appreciate you spending time with us! :)
Thank you for this information.
Thank you for spending time with us!
Hello, I sent you two emails one in the morning and one in the late afternoon for this calculator and no answer yet.... would appreciate it. Loved your presentation.
Hi Rozalia, did you fill out the form and it isn't showing in your email? Send me a message to Erik@90daysfromretirement.com and I'll send over the file.
Sent email, thank you@@Theretirementnerds
Received, thank you much @@Theretirementnerds
Dang, looks like my military pension and Social Security is going to push me into 85% being included pretty easily.