Test Blog

Melanie writes:     "Hi! I discovered your blog thru a comment you left on another blog. I have been crunching numbers and reading for the past day. I love your concept of never exceeding the 10% tax bracket! I had never heard of that. I do have a question though. I know you have been at this for years. But if I am not at a point where I would want to withdraw from my IRA/tax-deferred savings, would you still suggest doing it the way you have outlined here? I notice you said that your family didn't start the 72(t) withdrawals until this year. I wanted to know what your strategy was up to this point to maximize savings and minimize taxes. My thought was to contribute enough so that my income doesn't exceed the $52k  $42K* . (I use that number because my family structure is like yours, married filing jointly + 1 child.) Any input would be appreciated. I am in awe! "        My response:       Thanks for the questions and the kind words.  I have to agree with you in that ...

Alright, questions from readers!  The first set of questions come from Laura: 1.)  How in the world do you live on $1,500 a month? (I thought I read that you pulled $18k from your $457.) At this point, we don't live on $1,500 a month ($18,000 a year).  Our goal this year is to live on  $51,750...I'll explain that figure later in my answer to question #4.  The $18,000 figure (actually $18,375) is the amount that we are pulling from our IRA accounts using the substantially equal periodic payments ( 72T ) provision of the tax code.  We started doing this in January of 2013 and we will continue taking these withdrawals until we turn 59.5.   Let's look at the numbers:  $51,750 - $18,375 = $33,375.  To get to our $51,750 figure we withdraw $33,375 from our 457 accounts.  For income, we withdraw from  our 457 accounts as needed; however, we will make sure that we will not surpass $52,000.  When you pull from a 457 account, be aware that there is a 20%  withholding required by la...