Editor: Crass Cash
Rarely do people get raises when they retire. How is this possible? Well if you plan it correctly, then you can do just that by avoiding income tax on passive income and also avoiding payroll taxes. So many people have no idea what a burden taxes are on themselves because it's taken out before they even see it.
This has only gotten worse due to direct deposit. Most people don't even see their paycheck or paystub. All they know is how much gets deposited into the bank each week or biweekly. This is a sad state of affairs for the average workers.
When you retire though there's a way around this due to tax changes made about 6 years ago. This was done to help the poor, but as the data shows us people who are bringing in $36,000 or less in qualified dividends aren't poor. Instead this is going to help the middle class if you structure it correctly.
The key is to make at or less than the amount for the 15% tax bracket. In 2014 this comes out to be $36,900 for individuals and $73,800. The standard deduction will increase to $6,200. Now these numbers may not mean much to you now, but if you're living within this bracket now it would be great to shoot for it in the future as well.
I hate the idea of relying on social security in retirement and I always advocate that people not plan for it. But if you get to the situation where it's still around and these tax laws are still in effect, then you need to look at how your investments are structure so as not to go over the above amounts and get a big tax hit.
What exactly do I mean by this? I mean don't receive more in qualified dividends and social security so that it ends up costing you $3,500 in taxes or more when you could have avoided the entire thing with less dividends and then ended up making more money for yourself.
This has only gotten worse due to direct deposit. Most people don't even see their paycheck or paystub. All they know is how much gets deposited into the bank each week or biweekly. This is a sad state of affairs for the average workers.
When you retire though there's a way around this due to tax changes made about 6 years ago. This was done to help the poor, but as the data shows us people who are bringing in $36,000 or less in qualified dividends aren't poor. Instead this is going to help the middle class if you structure it correctly.
The key is to make at or less than the amount for the 15% tax bracket. In 2014 this comes out to be $36,900 for individuals and $73,800. The standard deduction will increase to $6,200. Now these numbers may not mean much to you now, but if you're living within this bracket now it would be great to shoot for it in the future as well.
I hate the idea of relying on social security in retirement and I always advocate that people not plan for it. But if you get to the situation where it's still around and these tax laws are still in effect, then you need to look at how your investments are structure so as not to go over the above amounts and get a big tax hit.
What exactly do I mean by this? I mean don't receive more in qualified dividends and social security so that it ends up costing you $3,500 in taxes or more when you could have avoided the entire thing with less dividends and then ended up making more money for yourself.
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