If you pay state income tax, you can make a large estimated payment in December - I mean large, like far in excess of what you will owe.
You get a big deduction for that year, you will get a huge refund, and the next year you will have to declare the refund as Federal income. Make sure you owe a lot of state tax that year. In that year, take the standard deduction.
Then the next year, do it again - you get to deduct what you owed the year before, make a giant estimated payment in December, and repeat!
This has probably already been mentioned in a 706 page thread, but I was surprised to read today that 13 states tax Social Security benefits. I was not aware of that. I have a relative who lives solely on SS benefits; I know that this person could just not spare those dollars.
We are trying to position ourselves to be ready for retirement with our housing. We close on our current home a week from today and will be renting. I had an auction guy come in and take the majority of our “stuff” yesterday. I mean, tons! We sold our baby grand piano already. Auction guy took all the dining room furniture, our king-sized bedroom furniture, sofas, chairs, bar stools, occasional tables, china, stemware, barware, knick-knacks, lamps, books - you name it. We eventually plan a major downsize to our 2-BR, 2-BA condo in Florida (not our current state) for the long term. We are going to “practice” living in a similar sized place for awhile by renting an apartment for the short term. We are storing some things, but it’s precious little.
We wanted to be rid of most of our stuff now to give us the most flexibility going forward. Also, so we can move quickly whenever the time comes. Not having to wait for our house to sell, etc. I don’t expect we’ll get lots of money for our things, even though we had some nice items. But, I figure we have had and used the majority of it for quite some time, and we have already gotten good value out of it. A lot of it is more formal than I want now anyway. And much stuff and space were rarely used. As empty nesters, dh and I spent all our time in four rooms of our house.
MN taxes social security. Our primary residence is in MN and our lake home is in WI. We are trying to research if it makes sense for us to claim lake home as primary residence when H retires and we downsize MN home. There are pros and cons to each place.
We have always been big savers and lived below what we could afford but the closer H gets to retirement (probably 2 years) the more I panic about finances. We have little debt…the lake house is paid for and our MN house has just a very small mortgage. Financial planner thinks H could retire now but I still worry about “what if”. H gets a big profit sharing bonus if he sticks to his retirement schedule and that is what he is waiting for. The not knowing what could happen with our economy is starting to keep me awake at night even though I know we have a very big nest egg.This is new for me and I can’t figure out why this is bothering me so much. H thinks I need to relax but I find myself becoming even more frugal. Sheesh…what is happening to me???
Our state currently has no state income tax on pensions or SS, but there have been proposals to change that, so these income sources may one day also be taxed. We also follow the fed govt for inheritances and gift taxes.
@coloradomom, depending upon your investments, you can invest in fixed income securities that produce better than your mortgage. If you can, no obvious need to pay off the mortgage.
We are really struggling a bit with how/where to live. ShawWife and I are pretty clear that we don’t need our 5 BR house anymore and have been pleasantly surprised at how happy we have been in a two BR houseboat (one to sleep and one for me to use as an office). The downstairs of the houseboat is one elegantly designed yacht-like room with sitting area, kitchen, dining area and living room area all in one large room with a wall of sliding glass doors overlooking Richardson Bay, some houseboats and Mount Tamalpais (same view from the upstairs office). It would be good to have another room for kids to visit.
So we’d sell our house and the studio we built for my wife on an adjoining lot. We are thinking we’ll move in closer to the city (house or condo but only 2-3 BRs). That would enable ShawWife to use a studio we own closer to town, although my preferred neighborhood is not that close to the studio. Then, we’ve sort of inherited a small cottage, that needs to be knocked down and rebuilt. It was put in the name of ShawWife and sibs and one-by-one, they say they don’t want to spend money on it (but two of three still want to be able to use it). I’d delightfully let it go, but ShawWife and the kids love it. That gets us to three small residences, but three nonetheless. Seems a little complex.
In an ideal world, it would be in a place with no income tax at all (let alone on pensions), but instead, we’ve picked high tax jurisdictions for all three. Ah well.
@IxnayBob Ha! He is very reasonable and says we will have the same lifestyle when he retires based on our savings. Meanwhile,unbeknowst to him, I have started even more frugal practices around the house that I used to think were silly while H thinks he can continue to golf everyday at the nice courses where he now entertains customers. Can we afford it? Yes, but it makes me nervous knowing there will not be a reliable steady stream of incoming cash. I just can’t figure out why this has unsettled me and continues to keep me awake. He is currently 61 and really enjoys what he is doing for work. Who knows…maybe he will work longer when the time comes.
@NorthMinnesota , I have long wanted DW to retire. I have run the numbers every possible way, and there is no reasonable (and some unreasonable) way that we won’t be financially okay if she never gets another paycheck.
But, if I’m being honest, on the two occasions where I thought I’d get my way and she’d give up her job, I had a little bit of panic, for a moment, and I recalculated things with even more pessimistic assumptions. It’s just human nature.
I think it is normal to be concerned including the first few years of retirement while you prove to yourself it does work. That same concern has probably been a significant factor in being a prudent saver and investor that has gotten you to the place where you/husband can consider retirement at a fairly young age to began with. Just try not to let it consume you. Run some of the scenario calculators online that project a whole host of different scenarios if it will give you some comfort about your future financial picture. Might help you sleep better at night.
We were very worried and believed we would be significantly poorer in retirement but due to paying off the kids’ educations and our mortgage, we’ve been fine in retirement. It was scared, but has worked out.
Thanks @menloparkmom. The figures are great and I know I should have peace of mind BUT for some strange reason it still bothers me. Must be some deep-seated trauma from my childhood.
Maybe I should send that link to DH. His retirement planning spreadsheet keeps getting more refined… alas it seem always with same answer - “work a few more years”.
