Saturday, January 4, 2014

Tax Season.....What/If

Retirement?  Early retirement when not old enough for Social Security?  An elusive dream or creative entrapment?  As tax season approaches it might be time to look closer at just how much a person really makes a year.

Finding some spare time on my hands I have done my preliminary 2013 taxes already.  That got me to thinking and looking at the last pay stub I just received.  Since I only worked 5 months in 2013 I was a bit surprised by what I found.

Looking at the total earnings it isn’t bad for less than half a year.  But, then looking at the withholding/deductions section was like WTF!  Subtracting all the Arizona State Tax, ASRS Retirement, Federal Tax W/H, FICA Medicare, FICA Social Security and that total earnings took a nose dive.  So, subtracting all of the withholding/deductions from the gross, taking that number and dividing by the gross I find I am in a 42% withholding bracket for 2013 and that is just based on 5 months.  The true value of my income wasn’t what I made, it is 42% less than what I thought I was making.  42% that I don’t have to pay being retired!

Being interested in how that works for me, I found the new 2014 tax guide.  I did the projections for next year with my numbers and found I will only pay 8% tax on my total income.  No ASRS Retirement, no FICA Medicare, no FICA Medicare, and only a one time estimated 2014 tax payment if I’m not off on my calculations.  I could be off, but I estimated this year’s tax bill last February and am only $75 off.  Wasn’t expecting or counting that bonus check.

Next I compared 2013 spendable income to projected 2014 spendable income and found a reduction of only 9%.  I didn’t believe that number and went back several times and it always comes out the same. Because I had already cut the cable cord (small sacrifice to retire early and not planning to be home as much anyway) and restructured my cell phone plan without a smartphone I made up that 9%.  The reality, for me, is by looking closely at what I could live without and still live comfortably I am retired on even money.   Just to be safe going forward I am now budgeting more closely for this year to prevent any surprises.

Play the What/If game while doing your taxes and see what you find.  Maybe working those last couple or so years really isn’t as profitable as it would appear.


  1. Hmmm, thank you for the suggestion. I'm going to give that a serious look...

  2. I've often marveled at how much gets taken off the paychecks. And that is without paying into a private or work related retirement plan unless you count Social security.

    I am glad retirement is working out for you.

  3. Paul:

    Oh how I wished I could retire. Right now it's just a dream and I am already collecting my Government pension

    Riding the Wet Coast

  4. Richard; Good luck! I hope your numbers are as favorable as mine.

    Trobairitz; I knew it was a crazy amount, but seeing it in real life is eye opening.

    Bob Scoot; You just gotta do it!! You can't take the money with you when you're gone and can't get yesterday or last hour back again!!

  5. What about medical? I hope something affordable comes along before I turn 65. I would like to retire at 62. Can't happen without some kind of medical. I haven't really looked into Obama Care since I have medical at work but from what I hear it is not so affordable. If they keep raising the age to collect Medicare I'll be on the work till I die program.

  6. bikerbaby; I am very fortunate with healthcare because my school district still furnishes it until age 65 if I substitute 25 days a year. I would look into Obummer Care before age 62 and use expected retirement income to see what it cost.