3 Simple Ways to Minimize Taxes in Retirement

[@TheLeadfootgirl]

Thank you for showing examples and calculations for a single person instead of a couple. Most finance chabnels only focus on couples examples only so really appreciate this.

[@dutchcrunch91]

Love these kind of multi scenario “what if” videos. It really shows how tweaking a few small things can make such a big difference.

[@davidtvedte1337]

EXCELENT!!! I am 66 and likely delaying Social Security to 70 for various reasons. I have fully converted my small IRA to ROTH and did it TAX FREE. I still have a small amount in an Inherited IRA to take out but can also do the TAX FREE. In the meantime, I do plan to do as much tax gain harvesting over the next few years but only it it will also be TAX FREE. I will be looking closely once I start Social Security and will take out of the ROTH IRA if my provisional income starts growing out of my comfort range.

[@StressLessFinancial]

Your strategic approach to managing taxes and retirement funds is impressive! It sounds like you’ve put a lot of thought into optimizing your financial situation. What factors are you considering most closely when deciding between Roth withdrawals and Social Security to manage your provisional income?

[@cablaze1]

Scenario 1 is shocking, I didn't expect the result to be so dramatic. Nice example.👊

[@ASouthernBoyCanSurvive]

Scenario 1 is not realistic at all.. imagine someone who was a high earner who has max SS and has no other investment income? Not realistic.

[@ChristinemSA]

This is one of the most impactful videos I've seen in a while. I love the comparisons between the different types of withdrawals. The software you use is excellent.

[@DrMaryVision]

Excellent video. I have been trying to educate myself regarding the various tax repercussions in retirement. This was clear, succinct, thorough, and a perfect tempo. Thanks. 😅

[@juanvillanueva1120]

New challenge unlocked: Be as smart and awesome at explaining complicated tax concepts as James Canole🙌🙌🙌 you are simply awesome my friend!!!

[@curtcoltharp3719]

These clips are highly informative and illustrate things that I’m specifically interested in. Last one I watched dealt with ACA subsidy v AGI and how gain harvesting can reduce the subsidy. I’ve tried to ask this question of other professionals and got confusing answers. I do know that drawing down investments in retirement is complicated and I need to generally know how it works so that I can ask intelligent questions. I’m also thinking that a retired person needs to have a god trial 1040 completed in early December in order to know how to draw down on investments before year end.

[@markb8515]

Thanks James for another great video! The examples you gave were very simple to understand.

[@woodsparker7902]

This was yet another high quality presentation. Keep them coming!

[@richdewitt760]

GREAT explanations James, easy to follow and understand! Thank you. Rich

[@sagig72]

Fantasic video. Fantastic channel !!

[@djsnowpdx]

Really great video, James!

[@Jupiterplus]

Tax gain harvesting! Hmm! Interesting!!👍

[@davidcook7847]

Love to get that software James. What is it and is it available for purchase?

[@CManinLa]

Ditto James. Another great video that explains the way taxes are determined. I have the same question as David. Where can we get the software to run various scenarios? Is this software & the ability to run scenarios included when the Retirement Planning Academy is purchased for $297?

[@IsraelHenryKalb]

Ditto!

[@gratefuldad4603]

I need this!

[@BillMaass]

No, the first example is not wrong. Yes, provisional income always includes 50% of social security. But, provisional income is not taxable income. Taxable Social Security ranges from 0% to 85% of total social security. The taxable amount is heavily dependent upon the amount of other income you have. Very little other income will result in very little, if any, taxable social security. High amounts of other income will force 85%, or close to that, of your social security to be taxable.

[@StressLessFinancial]

Great clarification on how provisional income impacts the taxation of Social Security! It’s crucial to understand the nuances of how different income sources affect taxability. Have you come across any strategies or tools that have helped you manage or optimize this aspect of your retirement planning?

[@mutantryeff]

I'm hearing a lot of complications for those that retire from civil service in California (using CalPERS) and then moving out of State. If they come back to do something as simple as use a doctor in California, they get hit with a tax bill as if they lived in the State. I had heard of other situations that seem predatory by FTB for those that have left the State but get their income from CalPERS (and maybe other income streams).

[@Fabian-rg1wc]

Great presentation. how to get that template that you are using?

[@Chris_Heather_livingbestlife]

I am trying to decide in early retirement if I should do roth conversions or tax gain harvesting

[@BadPhD777]

I am trying to figure out how the SS example ends up going from $116,952 of SS to $18,305 AGI. What else are you subtracting out besides the MFJ Std deduction?

[@woodsparker7902]

See SS worksheet from Publication 915 IRS.GOV. Since a $44,000 floor (split between $32,000 and $12,000) is used to determine the amount that is ultimately included in AGI, you end up with $6,000 on line 15 and $12,305 on line 16. When combined, the amount to include in AGI is $18,305. This is then wiped out completely by the standard deduction. See page 15: www.irs.gov/pub/irs-pdf/p915.pdf

[@stevenmeulink2177]

Taxable SS = 0.5*(116952/2-32000) + 0.35*(116952/2-44000) = 18305 which is less than the standard deduction resulting in zero federal tax.

[@BillMaass]

Total SS gets multiplied by 50% to arrive at provisional income. Provisional income then gets plugged into the formula computing taxable SS. For a married couple, that calculation is 0% on the first 32k plus 50% of the next 12k plus 85% of the amount over 44k (32k+12k). So, yes, using $116,952 of SS with $0 of other income yields only $18,305 of taxable SS and that is then erased by the MFJ Std deduction. Go check out the SS income worksheet in the IRS instructions for Form 1040 or Google a taxable SS online calculator to verify.

[@JayCleveland]

This has to be an error.

[@stevenmurphy6576]

Look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@gregsimons4815]

Scenario 1 - I can't figure how $116k in ss income is reduced to $18k AGI? Even considering provisional income calculation ... 85% taxable of $116k is not $18k. What am I missing?

[@jacobkowski7705]

I have the same question 😂

[@BillMaass]

Provisional income calculation uses 50% of SS. That gives you $58k to plug into the calculation of taxable SS. Married joint first 32k @ 0% plus 12k @ 50% plus remainder 14k @ 85%. Review the IRS worksheet for taxable SS and then Google on online calculator to verify the result.

[@stevenmurphy6576]

Great question - look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@johnbrennick8738]

is tax gain harvesting assuming non-IRA investments?

[@BiggMo]

What about… …won’t those repurchased stocks now be taxed at short term gains? …how does this mix withdrawal affect future RMD’s? Please do a follow-up video with examples of how this plays with long term tax mitigation

[@headlibrarian1996]

Wait to rebuy to avoid wash sale rules.

[@paulstein916]

It’s hard to do long term planning with so many roadblocks. RMD’s, IRMAA, NIT and possible expiring tax cuts after 2025. Retirees who have social security distributions and IRA RMD’s don’t have much flexibility on taxes.

[@mckeefamily5522]

Very clear!

[@JayCleveland]

I think your software has a bug because your social security taxable amount is in the first scenario is really wrong.

[@BillMaass]

No, it is correct. James had it wrong on a previous video.

[@stevenmurphy6576]

Software is correct. It does certainly seem like an odd calculation! look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@johngill2853]

Great job 👍 Delaying Social Security to 70 is absolutely the right thing in my situation (assuming nothing changes)

[@michaelnance5236]

Why is the "Total Income" $18,305 with just SS as it's source?

[@khanbus]

Question: what if you take the dividends from the brokerage account, will that make a difference in the tax amount ?

[@Sylvan_dB]

You pay taxes when you receive dividends in a taxable account, not when you take them out. If they are qualified dividends, you pay at the same rate as long-term capital gains.

[@jimknarr]

My spouse is 6 yrs younger than me. If I begin SS benefit at age 70, my understanding is that spousal benefit stops increasing at age 67. Do I have that right? If so, age 67 is when spouse will get max benefit.

[@jacobkowski7705]

How can a couple making $110K from social security pay no tax???? Doesn’t make sense!!! Their 85% of SS income should be taxable!!!

[@BillMaass]

Amazing how many miss this but even James got it wrong a couple videos ago. The example was $0 of other income. That is critical. Now, let’s say they have $120k of SS. Provisional income uses 50% of that or $60k. Plug 60k into the taxable SS formula. First 32k @ 0%, next 12k @ 50%, remaining 16k @ 85%. That amounts to only $19,600 of taxable SS. Entirely erased by their standard deduction. By the way, they wouldn’t even be required to file a Form 1040 per IRS instructions. Again, the key part is they have no other income. That is unlikely for a couple that had a work history that earned max SS benefits. One way to do that is to have performed Roth conversions prior to claiming SS.

[@stevenmurphy6576]

Look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@Kelly_HornsUp]

Let's remember that this couple likely paid over a million in taxes to the government. Why should retirees even pay taxes on money they have already given the government.

[@brucegaylord2430]

Pay attention you DF

[@ynAMe6Aj]

This is a very complicated optimization problem. Can you do a video on how you find real near optimum strategies for the long term in real world complex scenario s? What tools help you with the problem?

[@lindawilliamson1661]

I am not following this. Provisional income includes 50% of social security benefits, right? In your "no other income" example, after subtracting the standard deduction for a couple, that would still leave about $30k in taxable income. How are you getting zero taxes owed on that?

[@woodsparker7902]

See page 15 SS worksheet www.irs.gov/pub/irs-pdf/p915.pdf from Publication 915 IRS.GOV. Since a $44,000 floor (split between $32,000 and $12,000) is used to determine the amount that is ultimately included in AGI, you end up with $6,000 on line 15 and $12,305 on line 16. When combined, the amount to include in AGI is $18,305. This is then wiped out completely by the standard deduction. Thus, zero tax in this scenario.

[@BillMaass]

James is correct. This corrects a previous video that simply discussed SS taxation without doing the math. For a married couple, you plug provisional income into a formula. Let’s just say SS grew to $120k so provisional income is 60k. The first 32k is multiplied by 0%. The next 12k is multiplied by 50%. The excess over 44k (44k=32k+12k), or 16k in this example is multiplied by 85%. So, your 60k plugged into the formula yields only 0+6,000+13,600= 19,600 of taxable SS which is then wiped out by the standard deduction.

[@jacobkowski7705]

I have the same question. It’s weird

[@stevenmurphy6576]

Look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@chrisvild1263]

Is there a AI version of this as a calculator to optimize everything ?

[@BarbHurley-s6m]

Excellent!

[@keithmachado-pp6fv]

Good video.

[@jpny4750]

The first example seems to be seriously wrong. According to every source I’ve seen provisional income always includes 50% of social security.

[@stevenmurphy6576]

Look up IRS publication 915 to find a worksheet that shows how to calculate how much SSA benefits are taxable. It's beyond just the provisional income.

[@rdbeaz]

Move out of blue state.