Help me figure out my retirement income

[mrpaseo]

I have decided to drop my retirement packet (Active Duty Army).

With just over 20 Years (About an extra month or two) I would like to determine my post retirement income. I have a calculator on my iPhone that tells me that I will make $2030 in retirement (Before taxes). My wife makes $29,500 per year (Before taxes).

So here is what I am looking at if I do not get a new job:

Wife income:$29,000
My ret income: $24,360

Total: $53,860

Standard deduction: $11,600

Taxable Income: $42,260

I believe that places me in the 25% tax bracket (This is where I am lost).
That's $10,565 in taxes... that seems high, what am I doing wrong?

Income - Taxes: $31,695

Monthly post taxes income: $2,641

Please help.
Thanks,
Ray

PS. I wish there were text messaging notifications on this site

[kork13]

you'd actually be in the 15% bracket (I assume MFJ), for a total tax of $5489. So your monthly should be around $3065.

Also, "25% bracket" doesn't mean you pay 25% of your taxable income. The brackets are progressive. Say you earned $75k taxable and MFJ... you pay 10% of your first $17k ($1700), then 15% of your income between $17k and $69k (total of $9500), then 25% of your excess above $69k (grand total of $11,000). If it was a straight 25%, it would be $18,750.

[Petunia 100]

Also, you haven't subtracted your personal exemptions. That's another 7k+ subtracted from your income.

[Like2Plan]

Ray,
The taxes are the trickiest part of figuring retirement income (in my opinion ) especially when you have more than one income.

Another datapoint you could use is the IRS tax calculator.
Link to IRS tax calculator

In addition to all your other data, you can enter $0 for amount withheld this year and $0 for tax withheld from your last salary payment and it will tell you what the total taxes would be for the year. (It also gives you a catch up amount which wouldn't be relevant. )

[DebbieL]

Don't you guys have online paycheque calculators that you can input all your data, and they show exactly what your deductions will be in the US? Here in Canada we can go to the Revenue Canada site and look it all up on calculators.

[jpg7n16]

Originally Posted by mrpaseo

So here is what I am looking at if I do not get a new job:

Wife income:$29,000
My ret income: $24,360

Total: $53,860

Standard deduction: $11,600

Taxable Income: $42,260

I believe that places me in the 25% tax bracket (This is where I am lost).
That's $10,565 in taxes... that seems high, what am I doing wrong?

Income - Taxes: $31,695

I wanted to leave your math because this is the typical mistake people make when calculating taxes. Your tax bracket is NOT applied to your entire income. Brackets are marginal.

You also left off some other tax considerations

Gross income: $53,860
Stand deduction: 11,600 (add another $1150 per person who is over 65)
Personal exemptions: 3700 + 3700 = 7400 (you get 1 for you and 1 for your wife)
Taxable income: 53,860 - 11,600 - 7,400 = $34,860

According to here: Tax Brackets 2011 | taxbrackets2011.com you are in the 15% bracket. Now what THAT means:

$0 - 17,000 taxed at 10% = $1700
17,000 - 34,860 taxed at 15% = 17,860 * 15% = $2,679

Total tax due: $4,379


Dont be afraid of moving to a higher bracket, because only the dollars in that bracket are taxed at that rate.

[disneysteve]

Originally Posted by jpg7n16

Dont be afraid of moving to a higher bracket, because only the dollars in that bracket are taxed at that rate.

So many people make this mistake. When I was a medical resident, a lot of my classmates said they didn't want to take moonlighting jobs because it would have put them into a higher tax bracket. It made no sense at all. Instead, I was grabbing up all the jobs I could which were paying $45-50/hour and that was 20 years ago. My late father, an accountant, always said it is far better to earn the money and pay the taxes than to not earn the money.

[DebbieL]

Exactly Disneysteve! I agrees with you (and your father). I'm also an accountant (or soon to be "officially" - but I've worked as an accountant for years now).

[terces]

Remember you might also qualify for VA compensation depending on your disability rating with getting out of the military. That was a nice bonus we didn't anticipate. And its tax fee

[mrpaseo]

Thank you all very much for your time and education.

Ray

[Slug]

Nice work JPG and DS. Good thread.