Jump to content
Fantasy Football - Footballguys Forums

Personal Finance Advice and Education!


No. 16

Recommended Posts

2 hours ago, pecorino said:

Oh, I understand now. It’s possible, maybe likely, that your RMD would exceed the standard deduction especially if you have other income.

Right, but since you never know, probably best to use both.

And the first part (standard deduction) will be tax free in as well as out.

Edited by ghostguy123
Link to comment
Share on other sites

7 hours ago, pecorino said:

I value a Roth over just about anything else. It’s the Swiss-army knife of investments. You can access your principal with no penalty, grows tax free, no RMDs. Unless you’re in a high tax bracket and want to save on taxes now (and those tend to be richer folks than the crowd I run with), I’ll steer most to a Roth right away.

Plus you can use it for higher education without penalty.  Which is another reason to max it out before considering funding a kids 529.

Edited by rascal
Link to comment
Share on other sites

10 hours ago, ghostguy123 said:

I was wondering if and how much you guys factor in the standard deduction when deciding which type of account to prioritize.  

I don't.  I think about my current tax rate and my anticipated tax rate in retirement.

  • Like 1
Link to comment
Share on other sites

On 3/23/2019 at 9:17 AM, culdeus said:

Nowhere near retirement but curious how mandatory withdraw work if you have 401k and IRA. Should I be factoring in the mandatory for my tax bracket or not?

I probably should read a book on this.  My main approach has just been max everything and figure out retirement tax stuff if I live that long.  

At 70.5 you will have to start withdrawing, like it or not.  One approach to minimize these taxes is to retire early and convert traditional funds over to a Roth at very low tax rates.  Up through 12% it's incredibly likely to be accretive (i.e. if you have a decent amount in an IRA your chances of a 12% or higher tax rate at 70.5 is very, very likely).

 

16 hours ago, pollardsvision said:

I don't have a 401K (self-employed). Just a Roth (that I'm not in position to max out yet).

Unless you have access to an HSA contributing to a Roth first is a good move.  It sounds like you're not in a high tax bracket yet - so it's both prudent (saving something to allow compounding to happen) and mathematically correct.  If you get to a point that you can max the Roth, then look to an HSA next, if you can (and if it makes sense for you insurance).  An HSA is the closest thing to tax unicorn dust that exists.

Link to comment
Share on other sites

2 hours ago, rascal said:

Plus you can use it for higher education without penalty.  Which is another reason to max it out before considering funding a kids 529.

You can always withdraw your contributed principal without penalty.  For education you get hit with regular income taxes if you withdraw earnings, but escape the 10% penalty.  A 529 is tax free coming out, so technically a bit better for education (the 529 is much more limited for other purposes).  You are correct about the Roth being a swiss army knife, though.  It can be used in lots of ways.  

  • Like 2
Link to comment
Share on other sites

16 hours ago, ghostguy123 said:

Ok, I will just ask this as a general question then, because that is how I meant it to be anyway.

There has been talk about which is better to fund first between a Roth or traditional.  I was wondering if and how much you guys factor in the standard deduction when deciding which type of account to prioritize.  

If you know you won't have any income at the time of withdrawal maybe. Not my situation. 

Don't forget social security may be taxed, between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. more than $34,000, up to 85 percent of your benefits may be taxable.  You might want to estimate your benefits, and for this purpose at least assume you actually get SS.  For me, if I start taking at 62, that already puts me above the current standard deduction. If those are only taxed at 50%, you'd be able to take less from the IRA before paying taxes.  

Still, if your point is your effective tax rate is still significantly lower than your current marginal rate, agreed completely. Unless the tax rates rise significantly.

Edited by -OZ-
  • Like 1
Link to comment
Share on other sites

9 hours ago, Sand said:

At 70.5 you will have to start withdrawing, like it or not.  One approach to minimize these taxes is to retire early and convert traditional funds over to a Roth at very low tax rates.  Up through 12% it's incredibly likely to be accretive (i.e. if you have a decent amount in an IRA your chances of a 12% or higher tax rate at 70.5 is very, very likely).

 

Unless you have access to an HSA contributing to a Roth first is a good move.  It sounds like you're not in a high tax bracket yet - so it's both prudent (saving something to allow compounding to happen) and mathematically correct.  If you get to a point that you can max the Roth, then look to an HSA next, if you can (and if it makes sense for you insurance).  An HSA is the closest thing to tax unicorn dust that exists.

I need to start working on this stuff. I don’t know enough about HSA, but I did see what you are talking about for the Roth conversion. I’ve always done 401ks because my wife and I both working meant the last income (what you save in 401ks) was near or at the top of the tax rates, especially now. I’d love to retire in 10 years when my kids are done with college and then I’d have a period of much lower taxes to do the conversions. I have to read up on all of this. 

Link to comment
Share on other sites

2 hours ago, stbugs said:

I need to start working on this stuff. I don’t know enough about HSA, but I did see what you are talking about for the Roth conversion. I’ve always done 401ks because my wife and I both working meant the last income (what you save in 401ks) was near or at the top of the tax rates, especially now. I’d love to retire in 10 years when my kids are done with college and then I’d have a period of much lower taxes to do the conversions. I have to read up on all of this. 

If a high deductible insurance plan works for you and is offered, etc. then maxing out an HSA is second on the contribution list, right behind a 401k to capture any employer matching.  Tax free in, tax free out for medical expenses (Medicare premiums count, so it's easily spent).  You can save receipts for forever and reimburse yourself way down the road, so it can also be an emergency fund of sorts.  Just don't do what Culdeus did.  :P

Good article on HSAs.

Good article on Roth conversions.

Edited by Sand
  • Like 2
Link to comment
Share on other sites

6 hours ago, -OZ- said:

If you know you won't have any income at the time of withdrawal maybe. Not my situation. 

Don't forget social security may be taxed, between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. more than $34,000, up to 85 percent of your benefits may be taxable.  You might want to estimate your benefits, and for this purpose at least assume you actually get SS.  For me, if I start taking at 62, that already puts me above the current standard deduction. If those are only taxed at 50%, you'd be able to take less from the IRA before paying taxes.  

Still, if your point is your effective tax rate is still significantly lower than your current marginal rate, agreed completely. Unless the tax rates rise significantly.

Right.  TONS of unknowns.  I am 39.  I have no idea what sort of income I will have after 60.  I know I can continue with a decent income if I want, just not sure I want to do the actual WORK part of that equation.  I currently have some rental property, not sure if I will still have those in retirement or not.  Maybe I won't have any or maybe I will have 10 more, who knows.  

Social security, like some others here I believe it HAS to still exist otherwise the world will tear itself apart, though I am planning as though it won't exist and that I will be ok without it.  

Currently all my investments in the market are through my fidelity work 403b and none in roth.  Fidelity has a roth option, and I am thinking it is time to start making sure I max that out.  Really not sure why I haven't been.  

I suppose when I look to the future I have been planning for more of a worst case scenario where I won't have much of any other income other than my 403b, in which case it would be very beneficial to have the money in the traditional.  

I suppose if I am well off I might end up "losing out" by paying more taxes in the 403b withdrawals, but I sort of look at that as a good problem to have (if it comes to that).

Link to comment
Share on other sites

3 hours ago, Walking Boot said:

Yep. Even despite the fact that California makes me pay taxes on my HSA, it's still my favorite vehicle. After maxing my 401k match it's the next thing I ensure I completely fund every year. 

You know, California is a beautiful state, but you guys have some nutballs setting tax policy.  Tax income all over the place, tax HSAs, but if you win the lottery - FREE money.  Not a cent in taxes.  :crazy:

  • Like 2
Link to comment
Share on other sites

Two questions. 

1) what’s  good place to keep your emergency funding? Looking at Ally high yield savings

2) If you had 25-30k to park for a year, what would you do with it? 

Link to comment
Share on other sites

12 minutes ago, Maddenf said:

Two questions. 

1) what’s  good place to keep your emergency funding? Looking at Ally high yield savings

2) If you had 25-30k to park for a year, what would you do with it? 

1.  Good spot.

2.  TVIX. The answer is always TVIX.

 

 

 

 

 

 

 

 

2a.  Please don't do that.

Edited by Sand
Link to comment
Share on other sites

7 hours ago, Maddenf said:

Two questions. 

1) what’s  good place to keep your emergency funding? Looking at Ally high yield savings

2) If you had 25-30k to park for a year, what would you do with it? 

Both of these are all about risk vs reward. When you talk about “parking” money, how crippling would it be if you were to lose any of it, or possibly a lot of it? Do you need liquidity? Assuming you don’t need liquidity for one year and assuming you don’t want to put any at risk, a 12-month CD or a high yield online account may be the ticket. You may only get 2.5% but that’s still over $500 just to park it.

Link to comment
Share on other sites

9 hours ago, Maddenf said:

Two questions. 

1) what’s  good place to keep your emergency funding? Looking at Ally high yield savings

2) If you had 25-30k to park for a year, what would you do with it? 

1.  Yes.  There are many good high yield savings accounts on-line.  You should be seeing at least 2% interest rates.

2.  Umm.....just a year really isn't that long.  I like the idea of putting it in your high yield savings account or a CD if you see a better rate.

Link to comment
Share on other sites

12 hours ago, Maddenf said:

Two questions. 

1) what’s  good place to keep your emergency funding? Looking at Ally high yield savings

2) If you had 25-30k to park for a year, what would you do with it? 

ally high yield is fine

Honestly unless your risk tolerance is super high just pick a target fund from vanguard for the year you see yourself spending that money and forget about it.

Link to comment
Share on other sites

The Roth vs Traditional argument has many variables. I think that’s been covered here. 

I will say this though, we are probably at the lowest possible tax threshold of your lifetime, no where to go but up. It’s a good time to load up on Roth Vehicles imo. 

  • Like 2
Link to comment
Share on other sites

7 hours ago, Doctor Detroit said:

The Roth vs Traditional argument has many variables. I think that’s been covered here. 

I will say this though, we are probably at the lowest possible tax threshold of your lifetime, no where to go but up. It’s a good time to load up on Roth Vehicles imo. 

agree

Link to comment
Share on other sites

Not sure where to put this so I'll start here.  My lady and I split up after 9 years in December.  We bought a house together and both names are on the mortgage and title. I HAVE to refinance in order to remove her name.  There was no buy out as I'm just assuming the mortgage and have made all the payments since November.  

I'm looking for the easiest, lowest cost way to refinance that is not going to cost me a lot of $$.  I'm talking to my current bank at the moment to see what options are available.  Curious if anyone has had to do this before.  

Link to comment
Share on other sites

2 minutes ago, urbanhack said:

Not sure where to put this so I'll start here.  My lady and I split up after 9 years in December.  We bought a house together and both names are on the mortgage and title. I HAVE to refinance in order to remove her name.  There was no buy out as I'm just assuming the mortgage and have made all the payments since November.  

I'm looking for the easiest, lowest cost way to refinance that is not going to cost me a lot of $$.  I'm talking to my current bank at the moment to see what options are available.  Curious if anyone has had to do this before.  

Go to aimloan.com and bankrate.com. Lots of much lower cost loans than “bank” ones. I’d never go through the bank. It’ll cost you, well depending on the mortgage size, thousands more to get the same rate. 

  • Like 1
Link to comment
Share on other sites

2 hours ago, urbanhack said:

Not sure where to put this so I'll start here.  My lady and I split up after 9 years in December.  We bought a house together and both names are on the mortgage and title. I HAVE to refinance in order to remove her name.  There was no buy out as I'm just assuming the mortgage and have made all the payments since November.  

I'm looking for the easiest, lowest cost way to refinance that is not going to cost me a lot of $$.  I'm talking to my current bank at the moment to see what options are available.  Curious if anyone has had to do this before.  

I am refinancing right now. A guy from Lenderfi beat the next best rate by a half a point, plus closing fee credits. PM me if you want his contact info.

Link to comment
Share on other sites

It's been discussed elsewhere but while trying to keep politics out of it (might be a challenge), can someone give a convincing argument as to why the federal government should have the SALT deduction in the first place? 

I get why Californians and others don't like the cap, but why should the federal government subsidize states with high tax rates? 

Of course you could ask the same question about any other deduction or credit, some of which I appreciate. 

Link to comment
Share on other sites

43 minutes ago, -OZ- said:

It's been discussed elsewhere but while trying to keep politics out of it (might be a challenge), can someone give a convincing argument as to why the federal government should have the SALT deduction in the first place? 

I get why Californians and others don't like the cap, but why should the federal government subsidize states with high tax rates? 

Of course you could ask the same question about any other deduction or credit, some of which I appreciate. 

I could be wrong, but I always assumed it was considered a form of double taxation.  You are paying federal tax on money paid in taxes to a political subdivision of the US.  Corporations are allowed a federal tax deduction for state income taxes paid which has not changed.

It's also a similar argument to the foreign tax credit, where US taxpayers can receive a credit for taxes paid to a foreign country to avoid paying tax twice on the same income.

Link to comment
Share on other sites

13 minutes ago, Tom Hagen said:

I could be wrong, but I always assumed it was considered a form of double taxation.  You are paying federal tax on money paid in taxes to a political subdivision of the US.  Corporations are allowed a federal tax deduction for state income taxes paid which has not changed.

It's also a similar argument to the foreign tax credit, where US taxpayers can receive a credit for taxes paid to a foreign country to avoid paying tax twice on the same income.

That's an argument sure. Not much different than paying sales tax when we buy something with our money which was already taxed when we earned it.

Don't know if you'd agree with this guy, but it makes sense to me:

https://taxfoundation.org/state-local-tax-deduction-place-protect-double-taxation/

Link to comment
Share on other sites

I'm fine with the salt deduction going away in entirety, but I think it should have been gradually phased out rather than abruptly cut.   I would think wages in a particular area would be priced accordingly based upon the cost of living in that area.   By abruptly increasing the cost of living in an area, you don't allow time for wages to be adjusted to compensate for that increase in cost of living.   

Link to comment
Share on other sites

5 hours ago, -OZ- said:

That's an argument sure. Not much different than paying sales tax when we buy something with our money which was already taxed when we earned it.

Don't know if you'd agree with this guy, but it makes sense to me:

https://taxfoundation.org/state-local-tax-deduction-place-protect-double-taxation/

I am being taxed on money I don't have since I cut a check to someone else in that amount so it is clearly double taxation.  That articles view is just that this should be acceptable double taxation.  

One of the biggest problem is capping this deduction falls on middle/upper middle class.  Prior to tax reform this deduction was subject to phase-out starting at around 300K so high income earners would start losing the deduction as their income went up.  Now it is just capped at the same level for everybody so someone who might have had the deduction phased out will still get a deduction.  Also, the super wealthy will probably get the benefit because as others have pointed out the corporate tax code still has it and they will maximize the benefits of the tax code the way us regular people wont.      

Link to comment
Share on other sites

13 hours ago, Judge Smails said:

Got destroyed in taxes. Thanks Trump. Way to F Californians. I’ll be playing by his rules from now on. General partnerships galore. 

As a fellow person paying CA taxes this year, it's mostly CA's fault. From a national policy perspective, eliminating SALT and therefore deciding to reduce the amount by which some states are forced to subsidize the ability of other states to charge higher taxes is clearly the more efficient policy. 

 

Now states can make their own taxes with less influence by the federal government.

 

And that's why I am now moved back to Texas, among many other things.

  • Like 2
Link to comment
Share on other sites

1 hour ago, Redwes25 said:

I am being taxed on money I don't have since I cut a check to someone else in that amount so it is clearly double taxation.  That articles view is just that this should be acceptable double taxation.  

One of the biggest problem is capping this deduction falls on middle/upper middle class.  Prior to tax reform this deduction was subject to phase-out starting at around 300K so high income earners would start losing the deduction as their income went up.  Now it is just capped at the same level for everybody so someone who might have had the deduction phased out will still get a deduction.  Also, the super wealthy will probably get the benefit because as others have pointed out the corporate tax code still has it and they will maximize the benefits of the tax code the way us regular people wont.      

Your first line seems more broad than you probably intended. Just because you paid someone, so you don't have the money now, does not have anything to do with taxes necessarily.

But even assuming it's "double taxation", I have no issue with double taxation when it's federal and state, or state and city, etc. I would agree with SCOTUS (of course) that states charging income tax which results in double taxation with another state is illegal / unconstitutional. 

Your second argument comes up a lot when taxes are in the conversation. By itself, taxing the middle class, isn't convincing to me. 

Link to comment
Share on other sites

28 minutes ago, Instinctive said:

As a fellow person paying CA taxes this year, it's mostly CA's fault. From a national policy perspective, eliminating SALT and therefore deciding to reduce the amount by which some states are forced to subsidize the ability of other states to charge higher taxes is clearly the more efficient policy. 

 

Now states can make their own taxes with less influence by the federal government.

 

And that's why I am now moved back to Texas, among many other things.

Right. By all means get upset with high taxes in the state, especially if ineffectively used.  Or just enjoy that your state is generally better off than other states. 

Edited by -OZ-
Link to comment
Share on other sites

3 minutes ago, -OZ- said:

Your first line seems more broad than you probably intended. Just because you paid someone, so you don't have the money now, does not have anything to do with taxes necessarily.

But even assuming it's "double taxation", I have no issue with double taxation when it's federal and state, or state and city, etc. I would agree with SCOTUS (of course) that states charging income tax which results in double taxation with another state is illegal / unconstitutional. 

Your second argument comes up a lot when taxes are in the conversation. By itself, taxing the middle class, isn't convincing to me. 

No, that is what I intended.  I cut a check to pay taxes so that money has gone to the taxman.  I then have pay tax on money I don't have since it was spent already sent to the taxman.

 

  

Link to comment
Share on other sites

13 minutes ago, Instinctive said:

As a fellow person paying CA taxes this year, it's mostly CA's fault. From a national policy perspective, eliminating SALT and therefore deciding to reduce the amount by which some states are forced to subsidize the ability of other states to charge higher taxes is clearly the more efficient policy. 

 

Now states can make their own taxes with less influence by the federal government.

 

And that's why I am now moved back to Texas, among many other things.

Except this is all fallacy, states like CA and NY actually subsidize other states.  Removing the SALT deduction makes it worse. 

 

Link to fox news so I don't get some argument that is fake news.  

https://www.foxbusiness.com/markets/ap-fact-check-blue-high-tax-states-fund-red-low-tax-states 

Edited by Redwes25
  • Like 2
Link to comment
Share on other sites

21 minutes ago, Instinctive said:

As a fellow person paying CA taxes this year, it's mostly CA's fault. From a national policy perspective, eliminating SALT and therefore deciding to reduce the amount by which some states are forced to subsidize the ability of other states to charge higher taxes is clearly the more efficient policy. 

 

Now states can make their own taxes with less influence by the federal government.

 

And that's why I am now moved back to Texas, among many other things.

Excluding the SALT deduction creates the perverse incentive of rewarding States for not providing services to their citizens.  I haven't done the analysis, but I bet a venn diagram would show that most of the States getting ####ed by the recent SALT changes are also net donor states w/re to Federal Taxes.  California certainly is.    

ETA: Redwes beat me to the punch

 

Edited by tommyGunZ
Link to comment
Share on other sites

21 minutes ago, Redwes25 said:

Except this is all fallacy, states like CA and NY actually subsidize other states.  Removing the SALT deduction makes it worse. 

 

Link to fox news so I don't get some argument that is fake news.  

https://www.foxbusiness.com/markets/ap-fact-check-blue-high-tax-states-fund-red-low-tax-states 

Fox doesn't exactly warrant "unquestionable" status. But fair point nonetheless.

It could be because your almost 40 million people have the 6th highest average income. Generally, the high income earners are paying more than the poor and you have a lot of highly compensated people. 

Link to comment
Share on other sites

20 minutes ago, tommyGunZ said:

Excluding the SALT deduction creates the perverse incentive of rewarding States for not providing services to their citizens.  I haven't done the analysis, but I bet a venn diagram would show that most of the States getting ####ed by the recent SALT changes are also net donor states w/re to Federal Taxes.  California certainly is.    

ETA: Redwes beat me to the punch

 

No.

 

The fact that there are other dynamics, which make different states subsidize or receive, does not change that, fundamentally, that is the effect which SALT had, and no longer has.

 

I agree with you that we should find more ways to eliminate those effects in the other manners you describe. I said NOTHING about being net subsidies state to state across all aspects of taxes and government services.

Link to comment
Share on other sites

On 3/29/2019 at 6:53 AM, pecorino said:

Both of these are all about risk vs reward. When you talk about “parking” money, how crippling would it be if you were to lose any of it, or possibly a lot of it? Do you need liquidity? Assuming you don’t need liquidity for one year and assuming you don’t want to put any at risk, a 12-month CD or a high yield online account may be the ticket. You may only get 2.5% but that’s still over $500 just to park it.

Just to confirm, if you're in this situation and you need liquidity it probably isn't worthwhile to do anything with it, yes?  

Link to comment
Share on other sites

The SALT cap really stings in Texas.  Effectively costs me about $150 bucks more a month now.  

I've heard it is for all intents  $1 a month for every $1k valuation over $300k around here.  Not quite that bad for me but I can buy that depending on how much down payment you have.

Link to comment
Share on other sites

2 hours ago, SouthJersey said:

Tax question: a stock I own dropped significantly. If I buy more shares at the lower price (first) and sell the shares I bought previously after the purchase transaction do I get to keep the capital loss for tax purposes?

Can your stock be paralleled with an ETF?  As noted you need to be careful with wash sale rules.  However, if you can find something that is a parallel you can have a substitute for 31 days and get the tax loss.  QQQ and MTUM are like this. 

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Recently Browsing   1 member

×
×
  • Create New...