Requesting for comments on calculations of retirement income

[Cornbread OMalley]

I'm asking for input, suggestions, and troubleshooting of my math and methods.

I'm going through the process of calculating and projecting my after-tax income for when I retire from the military.  For simplicity I assumed consistent numbers from my mutual fund investments.  So I took my 2015 1099-DIV and used the numbers on it.  I also estimated my 20-year military pension amount.  I assumed 2016 tax implications for calculating taxes.  The following is my attempt at figuring out my retirement income when I retire in 2019.

(A) My annual income

Pension	$54224.87
Ordinary dividends	$9585.24 (of which $6975.67 is qualified dividends)
Capital gains	$9106.08

(B) Figuring out amount of total ordinary income

=Pension + (Ordinary dividends - Qualified dividends)

=$54224.87 + ($9585.24 - $6975.67)

=$54224.87 + $2609.57

Total ordinary income is $56834.44, which will be taxed at my marginal tax rate

(C) Totaling qualified dividends and capital gains

=$6975.67 + $9106.08

This amount totals $16081.75, which is taxed at 15%

(D) Figuring out income tax on total ordinary income; my total ordinary income puts me in the 25% tax bracket.  Refer to 2016 tax brackets for the numbers.

=($9275 x .1) + ($37650 x .15) + [(Total ordinary income - $37650) x .25]

=$927.50 + $5647.50 + [($56834.44 - $37650) x .25]

Income tax totals $11371.11

(E) Taxes on my qualified dividends and capital gains, 15% tax rate

=(Qualified dividends + capital gains) x .15

=($6975.67 + $9106.08) x .15

Tax on qualified dividends and capital gains totals $2412.26

(F) Bottom line

=Pension + Ordinary dividends + Capital gains - (Income tax + Dividend tax)

=$54224.87 + $9585.24 + $9106.08 - ($11371.11 + $2412.26)

Totals equal $59132.82

Annual after-tax income is $59,132.82

Again, any comments, input, suggestions, and troubleshooting of the calculations are welcome!

[MDM]

Appears you neglected to subtract your standard deduction and personal exemption, so the actual will be better.  From the case study spreadsheet:

Category	Monthly	Comments	Annual
Other ordinary income (e.g., tIRA distribution)	$217		$2,610
Qualified dividends + LTCG	$1,340		$16,082
Pension income	$4,519		$54,225
Federal Total Income	$6,076		$72,916
Federal tax	$817	2016 rates, S, stand. ded., 1 exempt.	$9,805
State/City tax	$0	Guess, using 0.00% * (AGI - Exempt'n)	$0
Total income taxes	$817		$9,805
Income before other expenses	$5,259		$63,112

Filing Status	1	1=S, 2=MFJ, 3=HOH
# Exemptions	1
	Adult #1
Age	55
Total Income	$72,916
Std. Deduct.	$6,300
Act. Deduct.	$6,300
Exemption	$4,050
AGI	$72,916
MAGI	$72,916
Taxable	$62,566
1040 Tax	$9,805
AMT adder	$0
Saver's credit	$0
Tax after n-r credit	$9,805
NIIT	$0
EIC	$0
Child Tax Cred.	$0
Net Tax	$9,805
Monthly	$817
Item. Deduct.	$0
Version	V8.10

[Frugalman19]

From my investments, the capital gains distributions can be very hit or miss, I had big cap gains dist in 2015, so you might be over estimating a bit.

[Cornbread OMalley]

MDM and Awgolfer, thanks for the input!  I really need to sit down to work and understand that spreadsheet.

[MDM]

MDM and Awgolfer, thanks for the input!  I really need to sit down to work and understand that spreadsheet.

You're welcome.

Might be useful to have Form 1040 and Form 1040 Instructions handy when you go through the tax calculations.

[Cornbread OMalley]

[Might be useful to have Form 1040 and Form 1040 Instructions handy when you go through the tax calculations.

Thanks again.  Forgot to clarify one thing:  I know my pension is not subject to FICA, but what about my ordinary dividends?  Is my $2609.57 worth of ordinary dividends subject to FICA?

[MDM]

Thanks again.  Forgot to clarify one thing:  I know my pension is not subject to FICA, but what about my ordinary dividends?  Is my $2609.57 worth of ordinary dividends subject to FICA?

No.  The spreadsheet (or any commercial tax software) should handle that correctly.