Thanks for the affirmation. We are doing our best to swim against the current and wisely manage what has been given to us.
OT - Financial advisors
- Thread starter Seinfeld
- Start date
I have been following the Money Guy show recently. They have a good solid plan and give a lot of different options for your stage of life and financial situation
Couldn't we just give them all a workforce participation trophy to make them happy?
Roth’s give you certainty. It’s easier to plan your financial strategy when you KNOW what tax rate you lock in at. What will be the tax rates in 25 years?? We don’t know that and can only guess.
529's got a decent upgrade this year! Unused assets can be rolled into a ROTH with caveats. Limited to the annual maximums, lifetime limit of $35,000 currently, and has to have been open 15 years.
Certainly not mainstream yet but there have already been people suggesting it (of course with 300M+ people there is always somebody suggesting something stupid or evil). Basically want to "nationalize" 401k accounts and use them to fund annuities for retirees. One I've seen presented it as a way to "protect" retirees and make sure their assets are converted into a lifetime stream of income. Another was a little more honest about it being for redistribution and more like social security, where you do get slightly more after paying more, but it being heavily tilted against high earners/savers in favor of low earners/non-savers.
I think 401k's will be relatively safe though. The contribution limits will probably keep it from being desirable enough for the political fight to try to confiscate "excess" 401k savings. Makes more sense to apply the eat the rich type strategy to other assets that are bigger.
I'm all for it. Would not be in my immediate interests, but I have no problem with it. Why? I brought in $150k in income last year and owed no federal income tax. I don't mean my withholding was sufficient, I mean I owed no tax. In fact, I'm getting $4800 paid to me via the tax code. $50k+ into tax free accounts. Per year. I'm not complaining, but I can recognize that's not sound for the country.
Besides, the only proposal that's been out there is a wealth tax on wealth over like $10M. If we ever get a wealth tax, it will surely be means tested.
Agree completely. I should have included the caveat that 10% is only enough if you start from your first paycheck & continue to your last one. And never take early withdrawals. If you’re starting later, you need to save more to catch up.
You definitely ain't solely W2 brother ***
I'm a W2 sucker that pays f'n plenty of taxes and have made sacrifices to build what I have. So, I'm not as cavalier about the government double and triple taxing me.
I am, actually. I don't mean to be cavalier about it though, the tax code is crap and there's people that pay too much in taxes at all levels, rich and poor. A wealth tax above $10M sure does seem like the least bad option though.
If you are 50 and older that goes up to 8000.00 but both the 7K and 8K is total for both the Roth and the Traditional IRA combine max.
I agree, I went in about 50/50 but the last few years I've been only contributing to Roths.
AGI down to $70k after personal deduction, 401ks, HSA.
Initial tax calc of $7k after non-refundable credits. That gets wiped by an adoption credit, then $4800 in refundable CTC.
Still owe $5k in state taxes and $11k in FICA. Not sure what my property taxes will be, I'm gonna guess $5k, gonna guesstimate $3500 in sales tax. So overall tax of around $20k on $150k of income. So around a 13% overall effective tax rate. Without the adoption credit, it would be around 18%. Not so high that I would object to a means tested wealth tax.
If I wasn't using any tax deferred savings, my rate would be 23%. Without 3 kids on the CTC too, it would be around 26%. That would he high enough that I would consider any wealth tax unfair, due to paying a higher rate already than most others.
I finally got a financial guy when I got tired of tracking 3 different 401k's that I never rolled over and wanted something with a little more guidance and flexibility than I would get by rolling it into current 401k.
I think you are understating your burden. You are not avoiding taxes on the money put into tax advantaged savings. You are deferring them. Granted they very likely could be lower when you pay taxes, but you shouldn't use that income in your denominator for determining your tax rate unless you are putting some estimated tax burden for them in the numerator.
Also, it looks like you're only including the employee side of FICA. I undersatnd the argument for simplicity and avoiding arguments about tax incidence, but I think it's pretty accepted that the employee bears most if not all of the FICA burden in most instances.
And your statement about a wealth tax being unfair also doesn't seem to make sense. The vast majority of people that would be subjected to a wealth tax would have already paid a much higher rate than typical. The ones that haven't would include a lot of people who avoid income by doing things the federal governmetn encourages with favorable tax treatment, such as investing in Muni bonds (where you essentially take lower interest than otherwise to account for the fact that you aren't paying taxes).
I don't expect to pay any tax on those funds, or barely any. I expect to only need to withdraw from the 401k up to the no-tax limit, and will have the HSA, Roth, and private accounts to backstop for additional spending and large unplanned expenses.
Correct. I agree, and that's not helping your case against a wealth tax, as that's another 7% or whatever that I'm paying and those that would be subject to a wealth tax likely never did, right?
Incorrect. The vast majority would have paid only capital gains taxes, and would have the benefit of exploiting the tax code to boot.
Disagree on the proportion, and on relevance. Those investments are still encouraged if there's a wealth tax.
AGI is before personal deducts. I guess you mean taxable income. Oh and $7k initial calc means you have a tax burden whether or not you owe or get a refund.
Right, taxable income. $7k is before applying credits. I don't have a tax burden because I owe nothing after credits. If I didn't have those credits, I would have a tax burden of $7k. As it is, I have all withholding and all refundable credits paid to me as a refund.
If you look at it that way, my final tax bill is only like 6K. Main difference is your adoption credit I am guessing.
But you don't see me running around saying that I don't pay much taxes. If anything, I'm not a good example of that at all.
What other way would it be looked at? Your final bill is the bill. What does it matter what it says on what early line of the form?
Your lifestyle combined with the adoption tax credits basically turn your income taxes into an inefficient consumption tax. Which I wish the tax code would allow more of, but it would need to be combined with some minimum tax rate on withdrawals to make it a little more efficient. Probably can't get to a consumption tax with anything like our current politics, but just removing limits on 401k/IRA/457 contributions and making first dollar income subject to at least a minimum tax gets you pretty close to the same place. Sort of neither here not there, but that's just sort of an idea I've seen floated to get to a consumption tax and it's interesting to see that you are sort of getting there already.
Depends on how they made their money. Most wealthy people essentially turn work into equity without ever recognizing the earned income first. Pretty hard to disentangle. Elon Musk's equity gains are likely dominated by true capital gains. Smaller companies probably have a lot more equity gain driven by actual personal work.
I would say before doing something destructive like a wealth tax, I'd try to make social security less inequitable. Just get rid of the distinction between social security tax and income tax and just build the social security into the income tax code and do it transparently. Of course you can't do that because if people realized the hidden taxes they bear the burden of they'd revolt.
I'd say they likely paid personal taxes and then capital gains also with some exceptions.
I'm not saying they're discouraged. I'm saying it's ridiculous to offer tax benefits to indirectly convert would be federal tax money into savings for local government and then use that as a reason to complain about the people doing what Congress wanted them to do not paying more taxes. They essentially paid the taxes in the form of reduced returns.
That was always a stupid policy and should be done away with for it's own lack of merit (why is the federal government encouraging local government to take on more debt? If the federal government wants to fund local government, they should just appropriate it and put it on the books). But certainly if the complaint is that some people in the top .1% are able to use that to reduce their effective tax rate to below that paid by those at just the top 1%, then do away with that tax break. Don't try to claw it back with a separate, really inefficient tax.
Kinda, also basically a flat tax. But at my option.
Maybe, but that equity starts small and then grows without additional equivalent work. So, capital gains applies.
Why would a wealth tax be destructive?
interesting you call it that. Isn't it a flat tax?
I don't think turning the regressive SS tax into a progressive one would make the ones bearing the burden of the regressive tax revolt. Out elites would revolt, so that's probably what you meant.**
You mean like incentives for business to locate?
Don't concur on reduced returns. Reduced before tax consideration returns, maybe.
the federal goct encourages all sorts of debt. Elites make money off debt.
You go to war with the Congress you have. Get rid of that one tax break, they'll just slip another one into the tax code. And another. Who knows how many there are that we don't even know of? They're gonna be there regardless, so maybe the question is why not claw some of it back? Why is that a bad thing?
Why is it inefficient? Seems much more efficient to target excess wealth rather than transitory income. (Maybe this is a distinction between efficient in purpose and efficient in process).
Because it provides a major disincentive for capital formation. With a few exceptions, people that would be subject to a wealth tax are pretty much by definition people that are good at allocating capital to high value uses and don't consume nearly as much as they should. Both are things that benefit other people more than themselves. You tell people that once they are worth a certain amount you're going to start taking it from them, first you are taking resources from somebody that uses them to create value. Maybe you convince them they'll just up consumption instead. More likely you just chase capital away to where it won't be subject to confiscation and/or create a bunch of socially destructive activity to avoid the wealth tax. Similar to the way we have a lot of very smart people dedicate basically all their time to helping people avoid estate taxes.
It's a flat tax that is used to transfer wealth from generally poorer workers to generally better off old people. The flat tax is fine'ish. Would certainly be better to fund it with consumption taxes but not as bad as it could be. But it's ridiculous to use it to transfer it to rich old people. If you want to do something for old people, do a guaranteed income type thing using a negative income tax rate.
If you wanted to collect the same amount of revenue, which is already insufficient for our drunken sailor spending, then there's no way to do that without taxing the middle class more. You could probably stop screwing the poorest workers, but provided the we actually maintain social security and medicare in place with the current benefit formulas, the poorest workers are actually probably getting an ok bang for the buck with SS and a fantastic one with medicare.
I would agree it would be much better to compete on generally low tax rates and a good business environment if that's what you mean.
Right. Reduced pre-tax return, and then it balances out after taxes. They're not giving anything up on an after tax basis, but they're also not really benefiting much on the tax break. The rates are bid down until the muni captures practically all of the tax benefit. Taxpayers in high brackets may come out a little ahead, but that's mostly not a benefit to them but to the entities issuing the debt.
Because it doesn't make sense to claw it back with a more inefficient tax. If you can't win on eliminating the stupid tax break, then you generally aren't going to win either way, but I'm not sure it's even a win if you have an inefficient subsidy to munis and then claw it back with a really inefficient tax on unrelated taxpayers.
It's inefficient because it encourages people that are good with capital to dispose of it or move it, it generates more compliance and enforcement costs than other taxes, and it creates more otherwise nonbeneficial tax avoidance behaviors.
There is absolutely no support to a position that a small wealth tax would noticeably disincentivize capital. We have property taxes, and there's plenty of capital for that. There's plenty of capital in general. And very VERY few people with this much money are actually directly allocating their last marginal 2% of investments. Besides, these are assets that are already undertaxed, by virtue of our crappy Congress and corrupt elites. Clawing back a little is not the same as destructive taxation.
If you were talking high rates, the yes. But at 2%? Please.
All taxes are going to go to uses that are transferring wealth from the poor to the better off, other than spending that is solely for the very poor.
Also keep in mind that high wage earners are basically paying for poor peoples retirements. So it's not exactly a transfer from the poor to the rich. That part is relative.
Not true, but probably easier to do it that way.
Theyd be getting a better deal with fully socialized medicine.
not really what i meant
I guess,but I'm not sure that's true in practice, at all times anyway. I would suspect the rich get a better overall deal than you or I could find.
Not inefficient though.
Not true (too marginal to drive behavior at low rates), maybe (but irrelevant unless that starts to swamp the income generated which there's no reason to think it would), unsupported claim (and you say this relative to our current tax code????!!!)
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