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Fun With (Retirement) Numbers

February 8th, 2023 at 10:31 pm

I received the overnight package from Guardian Life for my single payment income annuity, signed everywhere I needed to and fed'exed it back this afternoon.

If all goes smoothly, my first annuity payment will come in March. I will have them deduct federal and state income taxes so no big tax bill at year-end. I will have to tweak my asset allocation afterwards at Vanguard to make sure I'm at about the same place as I am now, but not a biggie since this is all IRA money and can be moved around with no tax consequences.

Here's a projection of my future income situation:

From ages 63 (now) to 65:
Annual income will come from 4 sources:
Annuity: $ 13,700 (net of taxes this will be more like $1,000/mth)
Investment income (dividends, interest, cap gains) $5,500. I will change my current reinvestment of these and redirect these into my checking account as soon as I get the annuity all squared away.
My new p/t job (still not set in stone but will know in a few weeks): $18,000
This is my hoped-for income from 2 stories a month. If she doesn't like the other writer's work, she will ask me to do 4 stories a month, which I really don't want to do, so I'm hoping she likes us both and will keep us both on, which she explained is a possibility.
Dad's Xmas gift: $5,000
Total income: $ 42,200

From ages 65-69:
Annual income will come from 3 sources only since I plan to retire completely at age 65.
Annuity: $ 13,700
Investment income: $5,500
Dad's Xmas gift: $5,000
Total: $24,200
Obviously not enough to live on so will start taking withdrawals of about $17,800 annually from a combination of traditional IRA/taxable mutual funds and Roth monies.

Municipal property tax credit: $2,900 (Right now I pay $6,600/yr, so that's a 44% reduction)
State property tax credit: ??
My town offers property tax credits based on a sliding income scale for low-and moderate-income seniors age 65+. You have to reapply every year, but I think it's well worth the effort.

From age 69+2 mths - 73 (69+2 mths is the best age for me to begin SS)
Annual Income:
Annuity $13,700
Inv income: Let's say $3,000 due to withdrawals the previous 4 years
Social Security: $ 39,108 ($3,259 a mth) (It will be a bit higher when they factor in 2 more years of work by me that's higher than a string of really low earning years when I was in college and in my 20s), if all goes well, but just using this number for now.)
Total: $ 55,808

Municipal property tax credit: $1,500.
State property tax credit: ???

From age 73 - for the rest of my life
Annual income:
Annuity: $13,700
Inv income: $2,500?
Social Security: $39,108
RMDs: Around $34,000??
Total: $89,308?
(Actually, Dido calculated my total income at $100k so need to go back and study her numbers. There are so many moving parts.)

I guess at this point...age 73...I will no longer qualify for a municipal property tax credit, which phases out after an income of $70,000.

Nice income! Of course, I have no debt.

But taxes will rise, too, at age 73 with RMDs. I hope to continue strategically withdrawing each year from traditional IRA or taxable mutual fund money (fully taxable) up to the 2nd lowest tax bracket  (well, right now that's just 12% for earners up to $41,775 but that will surely change), and then "topping off" as needed using Roth (tax-free) money.

After what seems like a lifetime of planning (at least 30 years!), everything is beginning to fall in place. It's kind of exciting.


14 Responses to “Fun With (Retirement) Numbers”

  1. Rachael777 Says:

    I just popped in and it is so fun to see some of the long time posters (like you!) sharing your success. Congrats.. looks like you made it . SOOO happy for you and excited to hear more.

  2. Petunia 100 Says:

    You've done a great job setting yourself up for a comfortable retirement. Enjoy! Smile

  3. terri77 Says:

    You’ve definitely planned this well. You have a lot of diversity in income with multiple income streams. Congratulations!

  4. Dido Says:

    Actually, based on what you told me that your investment income was, as long as you set your portfolio to stop reinvesting dividends and capital gains, you won't be reducing your principal until sometime after RMDs start, unless you have a larger than usual draw for some reason. In the short term, your portfolio should continue to grow. Once you have RMDs and those exceed the amount of income generated by your portfolio, then the drawdown will begin.

  5. LivingAlmostLarge Says:

    I'm going to throw something wild but why work part time now? Do you want to? Why not start RMDs now? Why head into higher brackets then? Why not level out and start drawing out and not working if you don't want to.

    If you want to then I'd still draw down my IRA and potentially make your RMDs smaller. I think too many people wait to draw their RMDs rather than pulling early and leaving it in taxable investments and then paying more tax than needed. You are heading fast into IRMAA. This will make your budget more expensive.

    Just putting it out there. Or is it to get that RMD you need to keep investing and saving now? I'm a big fan of touching principal. I see nothing wrong with planning to live to 100 (highly unlikely for most people) which is 37 more years for you. More realistic? 90. And you live on $40k now for 40 years with buffer is $1.6M not counting social security.

    But here's an easier way $39k + $13k = $52k/year Social security and Annuity. Then add in your RMDs you are living on more than you are now. I think you are solid to pull the trigger and retire.

  6. PatientSaver Says:

    LivingAlmostLarge, thank you for your thoughtful comments. And thanks to everyone else, too.

    I think you're right, that there's no reason not to start RMDs now instead of at age 65, or another year-and-a-half. Old habits die hard, for one thing. When they talk about how hard it is having to change behavior after a lifetime of saving, saving, saving, well, that's definitely a problem for me.

    Starting to draw down on my nest egg right up thru age 73 is definitely part of my plan to reduce the size of my overall portfolio so that future RMDs...and thus, taxes... will be less. I guess I'm just being overly cautious?

    As far as why bother working if i don't want to, well, you're right there, too. I had been coming around to that conclusion right around the time I got my current job offer, though, and it just seemed like the path of least resistance to just accept the job.

    And, I feel like I have so many big expenses, most related to home improvements I'm still trying to get done, that it would be nice to have the extra cash. Yes, guess I'm still in the old mindset thinking of only spending as I earn.

    What is IRMAA?

    If the new employer doesn't like the other writer's work and asks me to do 4 stories monthly, I will tell her no and am prepared to walk away from the job. Becus I only want very p/t. So retiring completely NOW may still come to pass.

  7. PatientSaver Says:

    And, PS to Dido, I do anticipate several large purchases that should result in a more rapid drawdown prior to RMDs, like a new car, for instance. And more home improvements. Smile

  8. Dido Says:

    IRMAA is Income-Related Medicare Adjustment Amounts, and it's essentially adjusting your Medicare premiums based on income.

    Your Medicare premiums are based on your mAGI (modified AGI) two years prior to the current year, so when you start Medicare in 2026, they will be looking back to your 2023 tax return to determine your premiums. The "modified" is essentially tax-exempt income, so if you're one of those millionaires who pays little tax because they stick most of their assets in muni bonds and tax-exempt dividends, it will pick up that income as well.

    For 2023, the Tier I for Medicare Part B premiums ($164.90 a month) tops out at 97k mAGI. There are 6 total tiers currently so that taxpayers with the highest income are paying $560.50 each a month (for mAGI over 500k for a Single person, $750k for a married couple).

    The premium is determine annually, so if you have a year with a big capital gain or very large IRA withdrawal that puts you over the limit for your Tier, you pay the higher premium for a year. There are ways to appeal a higher premium for those people who are retiring from high income jobs (e.g., their wage income is $250k a year and then the next year their mAGI is 75k), but it only works for special situations.

  9. Dido Says:

    Your RMD will depend on how much of your total investments are in your IRA account. I didn't say anything since I have no idea how much you have in your taxable, IRA, and Roth accounts.

    But I do work with lots of clients who start taking draws from their IRAs early to lower the overall tax burden.

    P.S. I'm loving the current captchas when I submit comments--the last one I got was pictures of a panda in water. very cute!

  10. Dido Says:

    Meant to say 2025 for Medicare, typo BTW

  11. PatientSaver Says:

    Thanks for that explanation of IMAA, Dido. Learned something new about Medicare premiums. Smile

  12. Deb Says:

    I’m wondering how you came to figure out it was best to start SS at 69.2 months instead of 70? I am 68 and 5 months now, so I’m extremely interested in your reply. I have read your blog posts for years and think you are so smart! Thanks in advance for any reply.

  13. PatientSaver Says:

    Hi, Deb.

    To answer your question, I used an app that Dido told me about: To use the calculator, you'll need to know what your monthly benefit would be at FRA, or Full Retirement Age. You can find that piece of info at

    I hope that helps!

  14. LivingAlmostLarge Says:

    The other thing to consider is about IRMAA is

    up $91k Single - $170.80
    91k - $114k - $238.10
    $114-142k - $340.20

    People on early retirement got mad when I said anyone paying IRMAA is rich. You are. You fall into top 5-10% of retirees. So good problem to have.

    But along with paying more monthly in SS about $70/month, losing the property taxes exemption will make like more expensive. Everyone i've seen try to appeal the IRMAA loses.

    So I mean it's something to carefully consider. Conversions to Roth while not working in your 60s could help. A lot depends on where you live, etc. You want some money in 401ks to cover medical but there are caveats.

    I think that a level income stream in 60s on is better. Also a consideration is instead of buying a car cash is probably not the best option but paying while drawing from assets better unless you have the cash now.

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