I never thought having too much income would be a problem

I am a 70 year old woman. I am currently working, but beginning next year I will not be. That means i will have to start taking the RMD from my 401k which is worth about $500k. I have a second 401k from a previous employer worth about $300k. Also I started collecting social security this year at $2800/month.

Last year my gross taxable income was under $60k because I put 40% of my salary in my 401k. That of course will stop and ALL my income with be taxable. I'll probably have a gross income of over $90k next year (I get a pension from my old employer).

What tax surprises do I have to look forward to? I think my Medicare premium will go up? Of course my tax bracket will go up. What else should I brace myself for?

thanks

Reply to
Jane
Loading thread data ...

If I had that question I would get a copy of some tax software and run the numbers. Even last years would be okay. There might be free software on line.

Your question is way too complicated for anyone to answer.

Reply to
Troubled

Also can look forward to taxation of a portion of your SS benefit. It is a sliding scale, where up to 85% of the benefit can be taxed at your bracket rate.

I'm currently taxed on about 14% of my benefit, at the 15% bracket, which means the IRS takes back about $1400/year of my SS benefits.

See

formatting link
where there is a worksheet to calculate the hit. YMMV

Reply to
Retired

Extrapolating from your numbers, your SSA benefit becomes taxable. Most probably, the maximum amount of 85% of your benefit will become taxable. Medicare premiums for 2016 are based on your 2014 tax return MAGI (AGI plus tax-exempt interest). 2017 premiums will be based on your 2015 tax return. Currently, the safe harbor is $85,000 of MAGI before your premium flips into the higher rate.

So.... you will probably need to make sure that you have adequate tax withholding for federal and state (if you live in a tax state) income taxes. You can elect to have volunteer federal tax withholding on your SSA benefit.

Reply to
Alan

I use a spreadsheet I found at

formatting link
to project my taxes. It takes a little getting used to, but once you do, I've found it excellent for reasonable projections and also "what-if's." I'm not sure if that spreadsheet also projects the Medicare Part B premium. There's a glitch under current law that could really spike your Part B premium (has to do with most current SS beneficiaries not getting a COLA) but there's not much you can do about that if they don't fix it.

There's probably not much you can do about it but grin and bear it. My mother passed away in 2014 and my father will go from paying almost no federal income tax in 2014 to paying $5K in 2015. Sometimes you just have to render unto Caesar that which is Caesar's.

Reply to
Roger Fitzsimmons

Good news! Your after tax income will also go up.

You are correct, except for 15% of your Social Security benefits it appears that all your income will be taxable. It appears to me that you have a good handle on what to expect.

Good luck.

Reply to
Bill Brown

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.