CashFlo wrote: ↑
Mon Jun 29, 2020 7:40 am
Watty wrote: ↑
Sun Jun 28, 2020 9:54 am
Before you get too excited about a Roth something to keep in mind is that an over 65 couple can have over $100K in taxable income and still be in the 12% federal tax bracket.
I'd like to see an example, with some numbers, on how that works.
Here is a federal tax estimator web site.
On the first screen select Married, jointly, and enter 1950(70 years old) as the year of birth for both spouses,
Click the continue button then enter 100000 as the income for one spouse, then select a different box to cause the numbers to be recalculated.
That will then show you the taxes and if you scroll down to the bottom of the screen you will see the details of which tax bracket you would be in and how much you would pay in taxes in each tax bracket.
$19050 x 10%......$1905.00
$54350 x 12%.......$6522.00
$0 x 22%.............$ 0.00
Calculated Tax based on your information using 2018 Tax Brackets is $8427.00 .Your maximum tax bracket is 12%.
The convoluted way that Social Security is taxed complicates this and you can enter similar numbers with Social Security then add $100 to your income to see how much that increases your taxes and your effective tax bracket.
https://www.bogleheads.org/wiki/Taxatio ... y_benefits
If you go through a similar process for an over 65 couple that has $40K in Social Security and $20K in taxable income then you will see that they would pay no federal income tax. I live in a medium to low cost of living area with a paid off house that is enough to pay for an above average middle class lifestyle here.
Compared to many of the posters here I am pretty middle class and that is roughly my retirement spending target along with a bit of money in Roths and taxable accounts for occasional large expenses. My state does not tax Social Security and has a retirement income exclusion so I will also not have to pay any state income taxes.
If my numbers work out just right then some years I may be able to not pay any state or federal income taxes once we are both getting Social Security.
If you are married it would also be good to look at your possible taxes as if one of your survives the other and files taxes as single.