After getting my tax bill this year and discussing it with my CPA it appears that there is no longer any point to maintaining my W-2 job where I am paying social security, medicare, medicaid etc. and having to get pushed into a higher bracket. Weekday fishing on the horizon for next year when I turn 55. I guess there comes a point of diminishing returns for continuing to work. In a way this may be a blessing in disguise as I was on the fence anyway.
I don’t understand. I retired at 62 and lost 30-35 % of my SS monthly benefits. I calculated that loss to breaking even at 85. I’m going to be 81 this year, so is that what you are saying?
Beats the heck out of me what he’s trying to say.Originally Posted by Bassin08
No I was just saying that I spent my entire after tax w-2 income from last year paying the tax bill. It no longer makes sense for me to continue to work and pay withholding when I could just forgo the W-2 income and live off of qualified dividends and distributions.
Wow, you and I are not even close to the same income bracket. I guess I don’t understand the top one-percenters.
Well what is the point of working when your W-2 wages are taxed to the point where it is meaningless? I could be fishing instead of working a job at ordinary income at a higher tax rate. At some point it just isn't worth it. My point was the income I make from my job just isn't worth the time anymore.
I read most of your posts, so I assume your investment income is enough to live on? Mine is SS, pensions and investments and no write-offs.
Congrats NitroZ7!!! With any luck and a lot of praying I'll be able to forgo the w2 job at 56...in 6 years. I'll still need my 1099 side gig for 20 or so hrs a week. But beats the 50 to 60 hrs a week now. Again...CONGRATS
Congrats. Thats what it's all about, making your money work for you.
Thanos was the hero
It's not about understanding one-percenters. It's about understanding our tax system. There are different types of income that get taxed differently. You can work for money and then it's gets taxed at a rate depending on level of income, the more you work, the more you make, the more it's taxed. OR You can have your money work for you. The more money you have, the more money you make, and you get taxed at a much lower rate because of the type of income.
We can work our butts off and get taxed 22-24% at the federal level or we can do nothing, collect dividends from our investments and get taxed 0-15%. And lets not forget we can do tax loss harvesting.
And it can really get good and complicated when talking realestate and margin loans.
Thanos was the hero
Thanks. I may try to get a job once I move close to Clemson to maybe teach business law or something. I love being around younger people and seeing their energy and ambition. I figure between that and fishing I will be able to stay busy.
It seems to me that covering the taxes on your investment gains with W-2 wages is a pretty good system because it allows you to leave more of your money in the market - the alternative is less net income or selling investments to cover taxes.
The tax brackets only hit the income above the threshold with the higher tax rate, and they don't go up dramatically in the upper brackets. Maybe you're jumping into the 32% rate from 24% and that feels like a big deal. That's an additional $600 on every $10k in income, which sucks but isn't the end of the world at that level.
You could always find a job that pays less, I suppose.
Using taxes as an excuse to quit working makes about as much sense as saying, "I bought this truck because I needed a tax write-off." When you make less money as an individual or a business, it's true you pay less tax, but you still make less money.
But if you are simply financially ready to retire, congrats!
I think I have hit my number. I won't need to sell anything in retirement as I can live off a portion of the investment income, most of which will be taxed at 15-20%. After paying the withholding each year, the after tax income from the W-2 is not really as important. The only reason I stayed on is my kids like my insurance but they will be graduating next year so that will then become a non-factor. At some point the W-2 income becomes less important especially when it is taxed at a higher rate and requires me to pay withholding. That is the conclusion I reached after reviewing my taxes this year.
That makes sense to me. Congrats on your soon-to-be retirement!! That's got to be a great feeling. I'm a few years away yet.
Thanks. Hopefully we will all be weekday fishing soon as that has always been my dream.
Nitro, what do you plan to do for Health Insurance?
Hit the exchange and pay out of pocket.
My wife and I retired making more money than if we worked full time. Took two years to figure out the taxes but we were prepared for this. We are glad we invested as we did. Good luck on that decision. Seems logical
2002 Pro Craft 200 Super Pro- 2005 200 Mercury Optimax, Retired
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