2022 Tax Rates For Retirees

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But before we get there. I wanted to share this Bible verse with you. As you know I love to do this is what tickles me is it's Ephesians 210, then you might know it reads, for we are God's handiwork, created in Christ Jesus to do good works, which God prepared in advance for us to do and so when you think about that verse preparing in advance. Good works, you know you can't help but think that God is literally thought of these things ahead of time that he wants you to do for your family retirement and finish well, and he you know is just holding you over the basket want to make it� So what he did was he allowed you to listen to the show today so that you could be prepared in advance, but also as a Christian card. I let me just say this a minute okay when I think about this idea of taxes.

It reminds me of that old Midas muffler commercial. You know the repair shop where the guy says well you can pay me now or you can pay me later. And you knew that that you wanted to pay it now and later it would get more expensive and so I think you're going to be excited about preparing advance as we talk about these tax rates right yeah these come out in November. Usually these runtime is the tax brackets and tax rates for 2022.

The brackets the only thing to change the rates remain the same. The brackets grew a little bit and then the standard deduction increased a little.

Generally speaking, for those of you that are not in retirement or you're anticipating it or your freshman retirement. You can pay less taxes in retirement you're going to keep more your paycheck in retirement than you did when your work starting with the fact you don't pay Social Security taxes which so security and Medicare adds up to almost 8% of every paycheck to look hundred 45 grand so not to pay that now I am from a planning standpoint you know when you think about that I'm insignificant.

It's real significant, then you're not can be contributing to your 401(k) or your IRA anymore so if you are putting 10% or 15% or something into their that's more your paycheck when really a tax that was paying herself some of tax and you're not making that contribution but you still going to pay federal taxes and you gonna pay state income taxes unless you live in a state where there are no taxes like Florida with our taxes, but they're not income taxes in Florida or Texas or Nevada or somewhere like that.

And so since 2018 were in the loss brackets I've ever seen in my working career of doing this, which stretches back to the 70s. You know like I'm looking in 2022. That the top of the 12% tax bracket is 83,550 of income that doesn't include all of your Social Security. It might include this very little your Social Security rights are just catching from an enemy on premise is if you're making less than $83,000 after standard deduction right after standard deductions guy you really are making 100 right so after that your only pain.

12 like 12% weight of those days. It is what a lot of people think is taxes is not returned about 12% in the first 20,000 years paying 10% so that amount may bother you, but compared to what taxes were like 34 years ago substantially larger percentages and then still climbing means that the top of the 22% bracket is hundred 78,000 which after the standard deduction.

That means you have a combined income of over $200,000 and the amount from 83,200 78,000 your pan, 22% and you're still to spend 12% on the amount from 28 so you get into effective tax credits. I don't really want to confuse people. People look at this stuff for a reason is not all that interesting material reason that people don't plan in advance. That much is your whole working life, you've basically had no control over this stuff. So why would you look at the menu just you don't have control right over now over how much money you make this year raise or something. But you pretty much know how much money Ren�e and then you know how much tax your baby Jesus trusted their withholding the proper amount and then every April. Yeah, go to the CPA in the good news and bad days. So it's just a history lesson planning their calculating what is elsewhere up with the government when you're in retirement. You can have a lot more control over when you receive your money and when you pay taxes on. Then you did while you were working.

Especially if you have an IRA account actually to the extent I miss having been your disciple for some time now.

As you get into your late 50s early 60s you now begin the process of that right yeah I mean you're just planning okay at some point, I'm not can have paycheck within right at that point or somewhere around them and have Social Security and then I don't know much tax on the pay on that, but I have news for you is your tax on that is can be calculated by the other money you are, most of which is going to come from withdrawals from your eye area account which you control year by year by year so people make errors on both sides of the steel where they have a year where they don't take out anything and they probably should've taken some out and pay taxes on because they left money on the table with these low tax rates or people do the opposite. They don't take anything out.

They don't take anything out until he got an emergency or a big need for money and they pull out a whole huge amount one year and it drives them way up in the tax bracket.

So my thinking is use these numbers and I got them for 2022 but I can very easily project with her to be in 2023, 20, 24, 2025 and it's already baked into the law in 2026 that the tax rates are going go back to what they were before the 2017 tax cuts and jobs act so there's a there's a planned increase in tax rates.

It's already baked in the law that Congress is to do nothing the president does nothing. These things are going to go up so these lowest tax rates dare call him that are have a timeframe they got. That's the pay me now or pay me later nonenergy 12%.

Now on that money, not IRA into the situation or you can go back to 25 to 30% sure and for single people. The top of the 12% bracket is 41,000 the top of the 22% bracket is 89,000 the top of the 24% bracket is hundred and 70,000 so still there's some room if you're living off of 40, 50, $60,000 a year and you gotta pretty good size IRA. There's some room to make a withdrawal or do a Roth conversion actually voluntarily pay taxes at these low rates to save on taxes later.

Okay so when I can't take that to the end and the show but I'm just trying to show how this information mainly for me and just pointing out little bits of it is helpful for you is that in retirement, providing you have a 401(k) or an IRA or your spouse does of some significance you have some choice year by year by year of when you recognize taxable income.

So you have some control over your tax return and your cash flows in your taxpayer and then it begs the question, which a lot of people ask my own CPS is why in the world would you pay more taxes this year than after. Why would you do that is very flippantly arrived today on Solomon's my ranch that I'm not in touch that with a 10 foot form you're already telling me where you stand on this issue.

This is like an invitation to a debate but still his point of view, Sam tell you exactly why because the tax rates are lower. I'm leaving money on the table.

If I don't, and I'm thinking when I get later in retirement.

All of a sudden, I need some of this money all at once and then my tax rates are going to be huge or unsuccessful, and just deferring it and having a big balance. I pass away, and then deal.

The only way that my kids can get their inheritance is botanical extracts and so none of those outcomes are good so that's exactly why I am going to be methodical about this and I'm one of Casey's tax bracket rates on the wall and then I'm in a creative scheduled year by year by year by year of how much I'm out plan recognized in & Marty done with my schedule. I got all my IRA money is now in just paid the taxes. My accountant has elected but paid the taxes and now I just got a pot of tax-free money is growing in the grossest tax-free and so and I use these charts to new Mayday will sometimes write in my bed so hugely important.

From my perspective right is that is you got what you refer to different buckets of money so I'm sitting in retirement and I'm taking money out of my Roth IRA. That's Artie been taxed doesn't change my income and I pay no income tax in retirement essential. What will yeah and we also don't have. We have a stream of income. That's not driving tax and Social Security right so you get to that formula to answer my plan is to have two pretty significant Social Security checks close to tax-free texturing and then have another stream of income is coming out of the wall or as policy loans on my life insurance just as big or small. As I needed to be to supplement the Social Security always come tax-free. So I only need to plan for net money instead of gross coaching so we come back we got more of 2022 tax rate in for retirees coming very cool so stay tune a process is brought to by Cardinal guy.com Cardinal guy planning for a living retirement versus video is on Cardinal advisors be right back. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hahn's expertise by charitable contributions veterans aid and attendance IRA Social Security care and long-term care. Just go to Cardinal guy.com and contact Tom to schedule a live recording of finishing well your church Christian or civic group contacts on Cardinal guy.com Cardinal guide.com welcome back to finishing well, a certified financial planner Tom Shaw hello my good friend and sometimes known as the road is shallow is 2022 tax rates for retirement.

Retirees and and he's trying to go to send this idea of you can pay me now you can pay me later and so you got a cool story. I think about somebody who essentially when they saw what you're talking about. They went all my goodness this is kind of a no-brainer. This whole idea of Roth conversions is on people's minds now. Perhaps maybe I take a little credit.

I'm driving through my videos and Lee's peak in their interest pretty much our rule of thumb is been with people coming in is, we been taken to the top of the 22% bracket of a married couple when they got a fairly large IRA, which was 178,000 people living off of maybe a grand 90 grantor 100 grand and Dan. You know 70 grand or whatever there there living on that with her taxable income would be and then were converting like 100,000 to get them up to where they're paying 22% taxes on the Roth conversion. Then some of the people would do what, what's the next higher level is not enough because they got so much in their IRA and they can see a timeframe that they want to do more than that. So then we go to the top of the 24% bracket is 340,000 and so we had a few people pushed up against the end times.

The expert in almost office all night. He pointed out as you not pan that all the income you're paying 4% up to the 80 and then your pan and then the 24 hour to stop at different so we we've just had a godsend in us these people through YouTube is. We had lots of people with million plus in their IRAs and some of multiple millions. And these aren't like your typical rich have a whole bunch of money made a high income with a high lifestyle, a man I can think of one particular gentleman whose penis wife. He's like a chemist.

His wife is a nurse and I think that their combined income was a couple hundred thousand dollars for the remit maybe 250 in their best years were she was making 100 years make an hundred and 50. These people have between four and $5 million in their pretax IRA and they have almost nothing and other savings and their approaching retirement and they can pretty much live off of their Social Security so you know we get talking to him and so you know it's like what he wanted about the taxes on this.

He's just he's like distraught over this is just over all sides as he smart enough to figure out the governments can get about half of they can pay me now or you can pay just he's figured all that out then these people are from an Asian country and they they big importance on leaving an inheritance in their in their in the really in their culture and no I'm sensing man I'm asking all the questions and then I start showing them about the burden when kids inherit this this guys only in his mid 60s and his wife a little bit younger and so we got another 30 years to grow. This with him not spending in minimum distributions and so he's going all the way up to the 35% bracket doing Roth conversions his his witch for a couple is 647,850 is the top of the 35% bracket and that man shall pay 35 on some of the conversion. 32 on some of the other conversion 24 and so on so forth.

But his goal is to get this all converted through studying these charts and buying and everything were doing. It's gonna let them convert between four and 500,000 a year and he's going to do that for for five years he still like to have it all over but and he's going to pay a lot of taxes out of that because that's the other probably can't convert dogs he doesn't have any money sitting on the sidelines to pay the taxes so he's going to actually have to pay the taxes out of the amount converted the whole goal here is to get it all over there. Most of her. I explained Q CDs to them their very charitably inclined in there giving money to the church now and to missions and various causes, and so you know I explained that when I carve off some piece of this for 1/2 million dollars and the like our Q CD fund. So when she reaches 70 1/2 will start. Given that away to the church with it and then make the church, the beneficiary of that account so that if it's a direct admit to a secondary beneficiary because the spouse might split it up as his wife has a lot of money in these things to the whole point of pay me now or pay me later and taking taking a little bit of pain of the tax and a little bit of the time and being thoughtful about this prospectively, as opposed to just like open for the best and being bothered about attacks upon going your chance right MMS. I was looking at your board in your video that there are no advisors on the U-2 and I saw some that while that appeals to me like after 65, you get more and more like oh my goodness, the standard deduction goes up, and I wasn't even aware that but I can tell my birthdays pay it all for me people I do, an informal survey on this all the time.

Most people don't know about this big standard deduction came in 2018 is a result of the tax cut jobs. They just don't. And for a married couple. The standard deduction in 2022 is every $25,900 and if you're over 65. Both of you is can be $27,300 so I tell her but it was at me Pierce standards action.

What that means is if your deductions, your tax deductions which were pretty much talking about home interest home taxes, car taxes, property taxes and charitable donations medical embarrassment medicals in there, but it's Confucius.

It is confusing and it's got a threshold of 10%. So sleeve medical out of it for now is its unreimbursed medical and most people have insurance to get reimbursed. Anyhow, so, so it is really those things is your home interest your mortgage. Your property taxes in your charitable contributions. If there less than 27,300 then you don't even need to keep track of because you just get to put down in your tax return 27,300 which gets back to those brackets, you know, when you put that in conjunction with one another site now looking at it some sitting around on okay so you know if if I'm trying to get down below 80,000, and I've made 107 or whatever, all of a sudden, that $27,300 deduction. If you're over 65, you and your spouse brings you down to where like there you are, your only and so it is actually what I was called a tax cut and it was really tax simplification because of your deductions were less than that you keep track of. I take that now is that I don't have that much and so and you're not even 65 yet CM got to the big you got it and so I want to be aware of and for a single person 65 and over its 14,700 for a single person like my son mortgage even you know have property tax like us a little bit on his car. He gets to put down $12,950 a deductions.

We don't even have I pointed this out to him made. That's pretty good. And then he cut it.

Nice salary for us, not a college in an engineer he's ready. That is pretty cool and you know his top tax rates can be 12%. But they're going to deduct this first and so this whole thing is is better and then you know the sad part is is is going away in 2026 unless the change that's just how they do tax laws so you know this is now kind of get now will the getting's good, and so I am I'm not just saying Roth conversions for everybody. Put yourself up here in this. I'm just saying that when we do financial planning for people in retirement planning, income distribution planning. We sit down and we get out this chart and then we talk to them and we talk about what they want in inheritance and will look with her so spiritually look at their specific situation and we start making distributions with their approval. So it's distributing money to themselves and paying the taxes under a logical format so that they will increase their after-tax money and they'll decrease her before tax morning as they going to retirement so that later in retirement. You got access to a tax-free source of funds and then if you don't tap it and then you pass away, and this goes on to your kids, your kids are going to get their inherence inheritance without a tax mortgage.

Now there's another piece that we were about running out of time, but words can talk about long-term capital gains and qualified dividends to their long-term care, long-term capital gains are taxed at a significantly lower rate than ordinary income tax rate to talk about long-term capital gains lightens this is the selling of a piece of property you know where you bought it at one price and now you're selling it at a price and the gain got a pay tax on that is a smaller amount in there's a lot of people out there sitting on some asset.

Not wanting to sell it because they kinda need the money.

Their kids don't want it they don't want to pay the taxes and we get done doing the math of replanning. Probably there's a way to get into the 0% capital gains tax rate. In all, just leave it at that and not try to explain that on the radio, but there's a bracket that you could be in that allows you to pay 0% capital gains out of the state. If you're in North Carolina you have been estate 57%. You can't really get out of that. But if you're in a low enough adjusted gross income and tax bracket my talk about low is to say less than $100,000 for a couple and less than $50,000 for a single person that you celebrate property, even if it's in the hundreds of thousands of dollars. Again, there's a way to pay 0% another to chant just on the tax chart that's in the video@cargilladvisors.com. Of course we are shut was brought to by carnal guide.com or you can email Hans asked for his book the complete cardinal guide to planning for and living in retirement and wow is all sorts of cool stuff coming for some New Year's, and God is prepared also to neat works right for you. Been prepared for good works in and you get to do all those is getting to be a good steward of right when God's giving it so we appreciate you working on that list into our show today. Thank you. Finishing well is a general discussion and education of the issues facing retirees cardinal guide.com cardinal advisors upon child CFP some insurance this show does not offer investment products or investment advice. We hope you enjoyed finishing well brought you by carnal guide.com visit cardinal guide.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care, life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows get Hans book go to cardinal guide.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guide.com cardinal guide.com this is the Truth Network