11 Sep What taxes will I owe in retirement?
Photo: igibertoldi/morguefile.comQ. Can you give me an idea how much in taxes I will pay on my New Jersey state pension? I will be receiving approximately $48,428 a year, along with Social Security. I am single and will be 66 when I retire.
— Planning
A. We’d all love to pay as little as possible when it comes to taxes.
To do a proper estimate for you, we had to make a few assumptions.
First, we assumed you will be taking the federal standard deduction. Then we assumed you will be receiving maximum Social Security benefits, which are $2,687 per month or $32,244 per year. Finally, we assumed you don’t have any other significant income, such as interest, dividends or capital gains.
Keep in mind if your situation is different than what’s above, the numbers will be different, too.
“We estimate total federal and New Jersey taxes to be $12,000 — $11,750 federal and $250 New Jersey — using 2017 tax rates, standard deductions and exclusions,” said Timothy Torres, a senior tax accountant with Wilkin & Guttenplan in East Brunswick.
Torres said this calculation takes into consideration the following important factors:
“Based on your level of pension income, 85 percent of your Social Security benefits are taxable federally,” he said. “These benefits are not taxable to New Jersey.”
Also, Torres said, being age 66 allows for an additional standard deduction and exemption federally and in New Jersey. The amounts are $1,550 and $1,000, respectively.
“New Jersey, starting in 2017, allows for single filing taxpayers, age 62 and above, with gross income less than $100,000, a retirement/pension exclusion of $30,000,” he said.
That amount will increase for singles by $15,000 a year until it maxes out at $75,000 in 2020. For married couples, the 2017 exclusion is $40,000 and rises $20,000 every year until it maxes out at $100,000 in 2020.
What you didn’t tell us is in what year you plan to retire. If it’s not for a few more years, again, the numbers will change.
Email your questions to .
This post was originally published in September 2017.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.