Low Income in Retirement

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MrWasabi65
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Joined: Fri Dec 31, 2021 1:42 pm

Low Income in Retirement

Post by MrWasabi65 »

I retired in 2021. My new income for 2022 and beyond will be around $15K year until I begin taking Social Security, at which point it will bump up to around $40K, altogether. I'm not sure when I will begin taking Social Security.

Until then, I will cover my expenses via the $15K pension and withdrawals from assets. My health insurance is provided by the previous employer. I am not yet 65, have a few years to go until Medicare.

I've not been a "low income household" since the 1980s.

What kind of tax credits or similar benefits might I qualify for now that I am in a way lower tax bracket?

Thank you.
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ResearchMed
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Re: Low Income in Retirement

Post by ResearchMed »

MrWasabi65 wrote: Fri May 13, 2022 5:03 pm I retired in 2021. My new income for 2022 and beyond will be around $15K year until I begin taking Social Security, at which point it will bump up to around $40K, altogether. I'm not sure when I will begin taking Social Security.

Until then, I will cover my expenses via the $15K pension and withdrawals from assets. My health insurance is provided by the previous employer. I am not yet 65, have a few years to go until Medicare.

I've not been a "low income household" since the 1980s.

What kind of tax credits or similar benefits might I qualify for now that I am in a way lower tax bracket?

Thank you.
Are those "assets" that you'll be drawing from in regular taxable accounts (or Roth accounts), or are they in tax-deferred accounts such as TIRAs?

RM
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livesoft
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Re: Low Income in Retirement

Post by livesoft »

One can probably make no-tax Roth conversions. Use tax-prep software to figure out what is the maximum Roth conversion that you would be happy doing.
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GerryL
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Re: Low Income in Retirement

Post by GerryL »

Check out the new internet subsidy announced recently by the feds. See https://www.theguardian.com/us-news/202 ... low-income
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Watty
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Re: Low Income in Retirement

Post by Watty »

See this website for to see what it says about when you should start Social Security.

https://opensocialsecurity.com/
livesoft wrote: Fri May 13, 2022 5:07 pm One can probably make no-tax Roth conversions. Use tax-prep software to figure out what is the maximum Roth conversion that you would be happy doing.
Another big one is that the federal long term capital gains tax bracket is 0% for the about the first $41k to $83k in taxable income depending on your marital status. A tradeoff with this is that if you do a lot of Roth conversions then that will limit your ability to take long term capital gains in the 0% federal tax bracket. In some cases it may make sense to sell and then rebuy an investment so that you will be able to get the 0% federal long term capital gains now and then have a higher cost basis in the future when you eventually want to sell the investment.

When deciding if you should do Roth conversions or not keep in mind that the federal 12,22, and 24 percent tax brackets are schedule to revert to the old 15, 25, and 28 percent tax brackets in 2026 if there are no tax law changes.

You also need to understand the complex way that your Social Security will be taxed since if you are in an income range were every additional dollar of taxable income caused more of your Social Security to be taxed then you could end up in a higher than expected effective tax bracket.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

If you are married then you also need to consider that one of you will likely survive the other and then be in the higher single tax brackets so you also need to look at your numbers that way.
Topic Author
MrWasabi65
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Re: Low Income in Retirement

Post by MrWasabi65 »

The assets are in both types of IRAs - TIRA and Roth and just regular money market savings, a regular brokerage account, I Bonds and an HSA. I haven't tapped into most of them yet - still living out of my money market and the aforementioned pension and trying to come up with a strategy.

Thank you.
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arcticpineapplecorp.
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Re: Low Income in Retirement

Post by arcticpineapplecorp. »

how much are you taking out to supplement the $15k? I.E. are your expenses $30k a year and you're taking $15k from other accounts?

if so, what accounts are you drawing from (tax deferred or Roth)?

We would need to know not just the total annual income but the taxable amount of income (if you're drawing from pretax it might be taxable and if pulling from Roth it would not).

Are you single or MFJ?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
secondcor521
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Re: Low Income in Retirement

Post by secondcor521 »

Topic Author
MrWasabi65
Posts: 89
Joined: Fri Dec 31, 2021 1:42 pm

Re: Low Income in Retirement

Post by MrWasabi65 »

Wow really appreciate the helpful information. More data below:

how much are you taking out to supplement the $15k? I.E. are your expenses $30k a year and you're taking $15k from other accounts?

- So far my expenses are running about $3K month - or $36K year. May go lower if I travel outside the US for an extended period later this year and next. I've been living on an $1,100 month pension payment and a couple thousand a month that I've drawn from my money market.

if so, what accounts are you drawing from (tax deferred or Roth)? So far, only my money market. That's why I am here, trying to figure out how and when to tap the others.

We would need to know not just the total annual income but the taxable amount of income (if you're drawing from pretax it might be taxable and if pulling from Roth it would not). so far only what I have stated - I have more room to spend more if I want to.

Are you single or MFJ? I am a single filer
Thanks for these questions
MikeG62
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Location: New Jersey

Re: Low Income in Retirement

Post by MikeG62 »

MrWasabi65 wrote: Fri May 13, 2022 5:03 pm I retired in 2021. My new income for 2022 and beyond will be around $15K year until I begin taking Social Security, at which point it will bump up to around $40K, altogether. I'm not sure when I will begin taking Social Security.

Until then, I will cover my expenses via the $15K pension and withdrawals from assets. My health insurance is provided by the previous employer. I am not yet 65, have a few years to go until Medicare.

I've not been a "low income household" since the 1980s.

What kind of tax credits or similar benefits might I qualify for now that I am in a way lower tax bracket?

Thank you.
At a minimum you should be thinking about long-term capital gains tax harvesting while you are in the 0% tax bracket for LTCG's.

Depending on what marginal tax rate you may be in once receiving SS and taking RMD's from your tax deferred accounts, you may want to accelerate some of that income while you are in a 12% tax bracket (if your marginal rate will likely be higher in the future). Could do this through Roth conversions.
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Penguin
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Re: Low Income in Retirement

Post by Penguin »

You may be eligible for food stamps (SNAP).
Jon
02nz
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Re: Low Income in Retirement

Post by 02nz »

Putting your information into this format will help get you better and more specific answers.

I think you're very likely to benefit from Roth conversions during low-income years, but how much to do a year depends on a lot on size of your tax-deferred accounts.
Ron Ronnerson
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Re: Low Income in Retirement

Post by Ron Ronnerson »

I would check to see if your utility providers offer discounts based on income.
niagara_guy
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Re: Low Income in Retirement

Post by niagara_guy »

I don't know about tax credits. If you have pretax retirement money you might considering converting some to Roth (I will model my 2022 taxes in the fall using 2021 tax software, close enough and then convert some to Roth). Ditto for selling appreciated assets if you are in a low tax bracket, particularly if they are long term gains since the tax brackets are lower.
epoche
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Re: Low Income in Retirement

Post by epoche »

Many low-income benefits are based at the state level; many also have asset thresholds. You can get an overview for your situation at:
https://benefitscheckup.org/

You are in a nice situation having your health benefits paid for; many low-income benefits are regarding health care and therefore won't apply for you.

You should estimate your expected RMDs and determine what tax bracket/capital gains rate you can expect to be in once you are drawing Social Security + RMD + pension. You can then decide whether to prioritize taking capital gains while at the 0% CG rate, or converting from TIRA to Roth while at a low ordinary income rate.

Part of your Social Security is likely to be taxable in any case; once you are also taking RMDs even more of it may be taxable and at a higher rate.
Penguin
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Re: Low Income in Retirement

Post by Penguin »

At age 65 you may qualify for tax credit for elderly.
https://www.irs.gov/publications/p524
Jon
dboeger1
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Re: Low Income in Retirement

Post by dboeger1 »

This isn't exactly what you asked, and you probably already know this, but there are lots of free and cheap things that are so much easier to enjoy when retired. Libraries are a perfect example. A more local example is that we have a fairly big park nearby that's popular for picnics and whatnot, and we were surprised to discover by chance one day that there is an open-air stage there with occasional live music. I'm not sure if the bands were hired for events like wedding parties or whatever, but because it was on an open-air stage in the middle of the park, it was no big deal for other groups to listen and enjoy for free. Also, I went to a bar once that has live music including open-mic nights for local musicians, and the place was kind of a dump. I suspect they were operating on a really tight budget and might not have been open to hiring additional help, but as a retiree, you might be able to offer to clean tables in exchange for getting to enjoy the performances at a place like that. I know you were asking more about direct financial support for low-income retirees, but leveraging local resources to cut your spending to the bone is likely every bit as powerful when it comes to stretching your retirement dollars.
Topic Author
MrWasabi65
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Re: Low Income in Retirement

Post by MrWasabi65 »

You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
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arcticpineapplecorp.
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Re: Low Income in Retirement

Post by arcticpineapplecorp. »

MrWasabi65 wrote: Sun May 15, 2022 3:06 pm You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
it may differ by state but in states that don't apply asset tests except in certain circumstances, the rule is:

if you're 60 or older and your income is under 200% fpig ($25,760/year) then there is no asset test for SNAP.

If your income is above 250% fpig then there is an asset test.

you may qualify for low income heating energy assistance type programs (subsidy for heat/electric).

please post according to the link in my signature below to get a strategy from where to draw assets from.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
BreadandButter
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Re: Low Income in Retirement

Post by BreadandButter »

If you are a homeowner you may qualify for a property tax reduction.
MJS
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Re: Low Income in Retirement

Post by MJS »

If your taxable Traditional IRA (plus any 401's) are over $400,000, then long-term tax strategizing may save you a great deal over the next 30-40 years -- though it could mean higher taxes for 5-6 years in order to get the long term savings. Play with https://www.schwab.com/ira/understand-i ... lators/rmd
to see how much unreduced Traditional IRA's plus 401's will add to your pension & social security.
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Penguin
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Re: Low Income in Retirement

Post by Penguin »

arcticpineapplecorp. wrote: Sun May 15, 2022 8:51 pm
MrWasabi65 wrote: Sun May 15, 2022 3:06 pm You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
it may differ by state but in states that don't apply asset tests except in certain circumstances, the rule is:

if you're 60 or older and your income is under 200% fpig ($25,760/year) then there is no asset test for SNAP.

If your income is above 250% fpig then there is an asset test.

you may qualify for low income heating energy assistance type programs (subsidy for heat/electric).

please post according to the link in my signature below to get a strategy from where to draw assets from.
The USDA site lists resource limits.
What resources can I have (and still get SNAP benefits)?
Resources

Households may have $2,500 in countable resources (such as cash or money in a bank account) or $3,750 in countable resources if at least one member of the household is age 60 or older, or is disabled.

However, certain resources are NOT counted when determining eligibility for SNAP:

A home and lot;
Resources of people who receive Supplemental Security Income (SSI);
Resources of people who receive Temporary Assistance for Needy Families (TANF; also known as welfare); and
Most retirement and pension plans (withdrawals from these accounts may count as either income or resources depending on how often they occur).
Vehicles

Vehicles count as a resource for SNAP purposes. States determine how vehicles may count toward household resources.

Licensed vehicles are NOT counted if they are:

Used for income-producing purposes (e.g., taxi, truck or delivery vehicle);
Annually producing income consistent with their fair market value;
Needed for long distance travel for work (other than daily commute);
Used as the home;
Needed to transport a physically disabled household member;
Needed to carry most of the household's fuel or water; or
If the sale of the vehicle would result in less than $1,500.
For non-excluded licensed vehicles, the fair market value over $4,650 counts as a resource.

Licensed vehicles are also subject to an equity test, which is the fair market value less any amount owed on the vehicle. The following vehicles are excluded from the equity test:

One vehicle per adult household member; and
Any other vehicle used by a household member under 18 to drive to work, school, job training, or to look for work.
For vehicles with both a fair market value over $4,650 and an equity value, the greater of the two amounts is counted as a resource.

You can find this here

https://www.fns.usda.gov/snap/eligibili ... cial-rules
Jon
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arcticpineapplecorp.
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Re: Low Income in Retirement

Post by arcticpineapplecorp. »

Penguin wrote: Mon May 16, 2022 7:03 am
arcticpineapplecorp. wrote: Sun May 15, 2022 8:51 pm
MrWasabi65 wrote: Sun May 15, 2022 3:06 pm You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
it may differ by state but in states that don't apply asset tests except in certain circumstances, the rule is:

if you're 60 or older and your income is under 200% fpig ($25,760/year) then there is no asset test for SNAP.

If your income is above 250% fpig then there is an asset test.

you may qualify for low income heating energy assistance type programs (subsidy for heat/electric).

please post according to the link in my signature below to get a strategy from where to draw assets from.
The USDA site lists resource limits.
What resources can I have (and still get SNAP benefits)?
Resources

Households may have $2,500 in countable resources (such as cash or money in a bank account) or $3,750 in countable resources if at least one member of the household is age 60 or older, or is disabled.

However, certain resources are NOT counted when determining eligibility for SNAP:

A home and lot;
Resources of people who receive Supplemental Security Income (SSI);
Resources of people who receive Temporary Assistance for Needy Families (TANF; also known as welfare); and
Most retirement and pension plans (withdrawals from these accounts may count as either income or resources depending on how often they occur).
Vehicles

Vehicles count as a resource for SNAP purposes. States determine how vehicles may count toward household resources.

Licensed vehicles are NOT counted if they are:

Used for income-producing purposes (e.g., taxi, truck or delivery vehicle);
Annually producing income consistent with their fair market value;
Needed for long distance travel for work (other than daily commute);
Used as the home;
Needed to transport a physically disabled household member;
Needed to carry most of the household's fuel or water; or
If the sale of the vehicle would result in less than $1,500.
For non-excluded licensed vehicles, the fair market value over $4,650 counts as a resource.

Licensed vehicles are also subject to an equity test, which is the fair market value less any amount owed on the vehicle. The following vehicles are excluded from the equity test:

One vehicle per adult household member; and
Any other vehicle used by a household member under 18 to drive to work, school, job training, or to look for work.
For vehicles with both a fair market value over $4,650 and an equity value, the greater of the two amounts is counted as a resource.

You can find this here

https://www.fns.usda.gov/snap/eligibili ... cial-rules
good points. it's not just resources or no resources. it's IF resources are going to be counted...which ones? there's countable and excluded resources. mostly the excluded resources are one car and one resident property.

but based on the particulars I saw from the OP, it looks to me like right now (based on age and his income) resources would be excluded. once he starts getting SS in addition to the pension, he likley won't be eligible because of his income.

but if he's considering drawing assets down, that also might make him ineligible as well depending upon the amount.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
michaeljc70
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Re: Low Income in Retirement

Post by michaeljc70 »

Probably none. My grandmother made only $10k a year (SS) and didn't have to file taxes or pay taxes, but there were no special federal tax credits.

Everything else will vary by state. She owned a home but had no other savings. She got a minimal amount of SNAP (like $60/mo). She had a property tax freeze for 27 years (can start at age 65 here) so her property taxes were 10% of what they normally would be. There were some programs for heating/cooling, but they were subject to the state's budget and were hit or miss. One year she got a whole slew of things done to improve the efficiency of her house like insulation, new furnace, etc. at no cost to her. Since you aren't even 65 yet, you likely aren't eligible for most of those types of programs. Some asset based programs will exclude your primary home.

One thing you are probably eligible for, but may be of no use, is the Saver's Tax Credit. That is a credit for putting money in an eligible retirement account when you have a low income.
CaptainT
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Re: Low Income in Retirement

Post by CaptainT »

Perhaps a part time of full time job in a second career
Penguin
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Re: Low Income in Retirement

Post by Penguin »

arcticpineapplecorp. wrote: Mon May 16, 2022 7:23 am
Penguin wrote: Mon May 16, 2022 7:03 am
arcticpineapplecorp. wrote: Sun May 15, 2022 8:51 pm
MrWasabi65 wrote: Sun May 15, 2022 3:06 pm You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
it may differ by state but in states that don't apply asset tests except in certain circumstances, the rule is:

if you're 60 or older and your income is under 200% fpig ($25,760/year) then there is no asset test for SNAP.

If your income is above 250% fpig then there is an asset test.

you may qualify for low income heating energy assistance type programs (subsidy for heat/electric).

please post according to the link in my signature below to get a strategy from where to draw assets from.
The USDA site lists resource limits.
What resources can I have (and still get SNAP benefits)?
Resources

Households may have $2,500 in countable resources (such as cash or money in a bank account) or $3,750 in countable resources if at least one member of the household is age 60 or older, or is disabled.

However, certain resources are NOT counted when determining eligibility for SNAP:

A home and lot;
Resources of people who receive Supplemental Security Income (SSI);
Resources of people who receive Temporary Assistance for Needy Families (TANF; also known as welfare); and
Most retirement and pension plans (withdrawals from these accounts may count as either income or resources depending on how often they occur).
Vehicles

Vehicles count as a resource for SNAP purposes. States determine how vehicles may count toward household resources.

Licensed vehicles are NOT counted if they are:

Used for income-producing purposes (e.g., taxi, truck or delivery vehicle);
Annually producing income consistent with their fair market value;
Needed for long distance travel for work (other than daily commute);
Used as the home;
Needed to transport a physically disabled household member;
Needed to carry most of the household's fuel or water; or
If the sale of the vehicle would result in less than $1,500.
For non-excluded licensed vehicles, the fair market value over $4,650 counts as a resource.

Licensed vehicles are also subject to an equity test, which is the fair market value less any amount owed on the vehicle. The following vehicles are excluded from the equity test:

One vehicle per adult household member; and
Any other vehicle used by a household member under 18 to drive to work, school, job training, or to look for work.
For vehicles with both a fair market value over $4,650 and an equity value, the greater of the two amounts is counted as a resource.

You can find this here

https://www.fns.usda.gov/snap/eligibili ... cial-rules
good points. it's not just resources or no resources. it's IF resources are going to be counted...which ones? there's countable and excluded resources. mostly the excluded resources are one car and one resident property.

but based on the particulars I saw from the OP, it looks to me like right now (based on age and his income) resources would be excluded. once he starts getting SS in addition to the pension, he likley won't be eligible because of his income.

but if he's considering drawing assets down, that also might make him ineligible as well depending upon the amount.
Apparently 40 states allow much higher or unlimited resources to qualify for SNAP.
https://www.governing.com/archive/snap- ... -data.html
Jon
User avatar
arcticpineapplecorp.
Posts: 10322
Joined: Tue Mar 06, 2012 9:22 pm

Re: Low Income in Retirement

Post by arcticpineapplecorp. »

Penguin wrote: Mon May 16, 2022 8:49 am
arcticpineapplecorp. wrote: Mon May 16, 2022 7:23 am
Penguin wrote: Mon May 16, 2022 7:03 am
arcticpineapplecorp. wrote: Sun May 15, 2022 8:51 pm
MrWasabi65 wrote: Sun May 15, 2022 3:06 pm You may be eligible for food stamps (SNAP).

This never crossed my mind. I assume there may be differences from state to state, but do you know, generally speaking, how they account for assets, not just income?

Mostly I am curious.
it may differ by state but in states that don't apply asset tests except in certain circumstances, the rule is:

if you're 60 or older and your income is under 200% fpig ($25,760/year) then there is no asset test for SNAP.

If your income is above 250% fpig then there is an asset test.

you may qualify for low income heating energy assistance type programs (subsidy for heat/electric).

please post according to the link in my signature below to get a strategy from where to draw assets from.
The USDA site lists resource limits.
What resources can I have (and still get SNAP benefits)?
Resources

Households may have $2,500 in countable resources (such as cash or money in a bank account) or $3,750 in countable resources if at least one member of the household is age 60 or older, or is disabled.

However, certain resources are NOT counted when determining eligibility for SNAP:

A home and lot;
Resources of people who receive Supplemental Security Income (SSI);
Resources of people who receive Temporary Assistance for Needy Families (TANF; also known as welfare); and
Most retirement and pension plans (withdrawals from these accounts may count as either income or resources depending on how often they occur).
Vehicles

Vehicles count as a resource for SNAP purposes. States determine how vehicles may count toward household resources.

Licensed vehicles are NOT counted if they are:

Used for income-producing purposes (e.g., taxi, truck or delivery vehicle);
Annually producing income consistent with their fair market value;
Needed for long distance travel for work (other than daily commute);
Used as the home;
Needed to transport a physically disabled household member;
Needed to carry most of the household's fuel or water; or
If the sale of the vehicle would result in less than $1,500.
For non-excluded licensed vehicles, the fair market value over $4,650 counts as a resource.

Licensed vehicles are also subject to an equity test, which is the fair market value less any amount owed on the vehicle. The following vehicles are excluded from the equity test:

One vehicle per adult household member; and
Any other vehicle used by a household member under 18 to drive to work, school, job training, or to look for work.
For vehicles with both a fair market value over $4,650 and an equity value, the greater of the two amounts is counted as a resource.

You can find this here

https://www.fns.usda.gov/snap/eligibili ... cial-rules
good points. it's not just resources or no resources. it's IF resources are going to be counted...which ones? there's countable and excluded resources. mostly the excluded resources are one car and one resident property.

but based on the particulars I saw from the OP, it looks to me like right now (based on age and his income) resources would be excluded. once he starts getting SS in addition to the pension, he likley won't be eligible because of his income.

but if he's considering drawing assets down, that also might make him ineligible as well depending upon the amount.
Apparently 40 states allow much higher or unlimited resources to qualify for SNAP.
https://www.governing.com/archive/snap- ... -data.html
yes, but again, the resource exclusion is whether or not a client is categorically eligible (it's on the chart you provided from governing.com) and you have to know what categorical eligibility means so you know whether you resources are excluded or not.

much more here:
https://www.federalregister.gov/documen ... ogram-snap
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
ncbill
Posts: 1392
Joined: Sun Jul 06, 2008 4:03 pm
Location: Western NC

Re: Low Income in Retirement

Post by ncbill »

MrWasabi65 wrote: Fri May 13, 2022 5:03 pm I retired in 2021. My new income for 2022 and beyond will be around $15K year until I begin taking Social Security, at which point it will bump up to around $40K, altogether. I'm not sure when I will begin taking Social Security.

Until then, I will cover my expenses via the $15K pension and withdrawals from assets. My health insurance is provided by the previous employer. I am not yet 65, have a few years to go until Medicare.

I've not been a "low income household" since the 1980s.

What kind of tax credits or similar benefits might I qualify for now that I am in a way lower tax bracket?

Thank you.
Any state property tax relief?

Here those 65+ with total household income (from all sources) under ~$32k (increases each year) can have their property taxes cut in half:

https://www.co.davidson.nc.us/717/Homes ... -Exemption
hiduplex
Posts: 61
Joined: Sat Jan 19, 2019 11:04 am
Location: IA

Re: Low Income in Retirement

Post by hiduplex »

About a year ago I did a post about low income maybe some of this could help here too.
Good Luck!

viewtopic.php?t=349305
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