Calculator: Taxes owed in retirement

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NS_Bane
Posts: 117
Joined: Sat Mar 17, 2018 12:27 pm

Calculator: Taxes owed in retirement

Post by NS_Bane »

There are quite a lot of retirement calculators in the BH Wiki. I'm looking for something in particular: I want to model the federal and state taxes I will owe on my different streams of retirement income, including my brokerage account.

I already have an excel for this, but I just realized that my excel assumes I'm paying cap gains taxes on 100% of the annual withdrawal (~4%) from my brokerage account, when I should only be paying it on the portion that is gains. I realize this could be really complicated because someone could be very strategic about which shares they sell to minimize taxes, so I'm just asking for the best of what's out there.

Thanks!
jebmke
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Re: Calculator: Taxes owed in retirement

Post by jebmke »

I doubt that any calculators would do any better than a recent copy of tax software. The major effort is in defining taxable income which I doubt any calculators can do. Even the tax software doesn't do much in that regard. You have to know the tax characteristics of each of your withdrawals (e.g. basis for stock sales, amount of RMD, QCDs if any etc ...).
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dbr
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Re: Calculator: Taxes owed in retirement

Post by dbr »

I have done some future tax estimating using spreadsheets. Probably the "best" answer out there is to do more work on your spreadsheet to allow for cost basis to be entered and capital gain to be estimated a little better. You could also run some estimates on how much it would matter anyway,
livesoft
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Re: Calculator: Taxes owed in retirement

Post by livesoft »

Consider just making some multiple fake tax returns with tax-prep software. That's what I have done.
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carolinaman
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Re: Calculator: Taxes owed in retirement

Post by carolinaman »

dbr wrote: Fri Jul 30, 2021 12:00 pm I have done some future tax estimating using spreadsheets. Probably the "best" answer out there is to do more work on your spreadsheet to allow for cost basis to be entered and capital gain to be estimated a little better. You could also run some estimates on how much it would matter anyway,
+1. Good suggestion. You need to know or estimate CG regardless of whether your spreadsheet or an online calculator does the calculation. With a spreadsheet you should be able to easily adjust CGs to see how that impacts the tax.
MiddleOfTheRoad
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Re: Calculator: Taxes owed in retirement

Post by MiddleOfTheRoad »

Taxcaster app for iphone (not sure if avail on android)

Free and made by turbotax. Super easy to use and give you break down.
iamblessed
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Re: Calculator: Taxes owed in retirement

Post by iamblessed »

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FiveK
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Re: Calculator: Taxes owed in retirement

Post by FiveK »

NS_Bane wrote: Fri Jul 30, 2021 11:53 am I already have an excel for this, but I just realized that my excel assumes I'm paying cap gains taxes on 100% of the annual withdrawal (~4%) from my brokerage account, when I should only be paying it on the portion that is gains. I realize this could be really complicated because someone could be very strategic about which shares they sell to minimize taxes, so I'm just asking for the best of what's out there.
If your spreadsheet already handles everything relevant to your situation (income, credits, phaseouts, etc.), then you probably have enough spreadsheet know-how to populate a range with your investment lots, including the basis for each. Pick a selling price and which lots to sell, and the resulting long and/or short term gains can feed your tax calculations.

The personal finance toolbox and Excel1040 are two freely available spreadsheets if you want to compare with yours. The latter has nicer formatting and the former allows you to see all the formulas.
JonnyBeRetired
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Joined: Tue Jan 15, 2019 10:49 am

Re: Calculator: Taxes owed in retirement

Post by JonnyBeRetired »

I have found these two sites to be helpful - the first is a calculator and the second is a list of tax treatments:

https://smartasset.com/retirement/retirement-taxes

https://www.retirementliving.com/taxes-by-state
MathWizard
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Re: Calculator: Taxes owed in retirement

Post by MathWizard »

No calculator can know what portion is capital gains without you telling it the basis.

I suggest just modifying your excel spreadsheet to include the basis, and then
you can calculate a ratio R which is (balance - basis)/balance.
Then if you withdraw an amount A, then the CG is just A*R .

This assumes that you are just getting the average capital gains.
nix4me
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Joined: Sat Oct 13, 2018 9:32 am

Re: Calculator: Taxes owed in retirement

Post by nix4me »

This is the best retirement tax calculator i have found. It's very good!

https://www.aarp.org/money/taxes/1040_t ... lator.html
dbr
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Re: Calculator: Taxes owed in retirement

Post by dbr »

The problem is not to just calculate the tax but to set up a data set of personal tax items by year from retirement to death. In principle a spreadsheet can handle a problem like that with entries for all the inputs and formulas to compute the taxes year by year. Obviously there is a lot of estimating of future income and also assumptions about tax laws. My spreadsheet does, for example, index the inflation (estimated inflation being a required input) linked bracket points and phase outs, but tax rate changes still remain an unknown and so do circumstances that might develop. It is pretty rough work.
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Wiggums
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Re: Calculator: Taxes owed in retirement

Post by Wiggums »

livesoft wrote: Fri Jul 30, 2021 12:13 pm Consider just making some multiple fake tax returns with tax-prep software. That's what I have done.
This is what we do.
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VanGar+Goyle
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Re: Calculator: Taxes owed in retirement

Post by VanGar+Goyle »

MathWizard wrote: Fri Jul 30, 2021 3:08 pm No calculator can know what portion is capital gains without you telling it the basis.

I suggest just modifying your excel spreadsheet to include the basis, and then ...

This assumes that you are just getting the average capital gains.
What you want is a combination of tax software to calculate taxes, and a brokerage to know about cost basis, current price,
to detect tax loss harvesting. Net dividends and mutual fund distributions are unknowable until December,
even if you know RMDs, annuity payouts, wages, and other income in January, and if tax laws do not change during the year.

As an exercise for the reader, when you next calculate your net worth, calculate your max income, and taxes,
if you captured all your capital gains and distributed all your tax-deferred accounts.
Well, you pay a little bit, we're a little bit tough. | You pay very much, very much tough. | You pay a too much, we're too much a tough. | How much you pay? ... Well, then we're plenty tough. - Marx
carolinaman
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Location: North Carolina

Re: Calculator: Taxes owed in retirement

Post by carolinaman »

Wiggums wrote: Fri Jul 30, 2021 7:00 pm
livesoft wrote: Fri Jul 30, 2021 12:13 pm Consider just making some multiple fake tax returns with tax-prep software. That's what I have done.
This is what we do.
I did this last year when I was planning a large tira to Roth conversion using TurboTax. When I did my regular taxes, TT thought a CL carryover was applicable to my taxes. I could not get rid of it and had to get help from TT to erase it from my tax record. If I do this again, I will use another tax software so as not to confuse my real tax return.
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