Bogleheads.org

As discussed in prior threads, I used brokered CDs in an IRA in the special situation of estate management. The death put feature of brokered CDs allows you to get long term rates on short term investments, and even to get significant capital gains by buying on the secondary market at discount -- I ...

Perhaps your CPA is missing this: the marginal tax rate on the earned income you could shelter in your 401k's may be over 35%. This will happen if all of your LTCG don't fit in the 15% (0% LTCG) bracket. In that situation, each dollar of earned income is taxed at 15% and it displaces a dollar of LTC...

he does not believe the additional income would increase our taxes and thus the 401k contribution would not give us any current tax benefit. In addition he is concerned that in retirement when we took the money as RMD we would pay taxes at a possibly higher rate than we do presently, and it would b...

Selling it all at once would be a bad idea. Even the long term gains would be taxed at 27% at the margin* (15% LTCG tax + 3.8% ACA tax + 1% ATRA tax due to exemption phaseout + 6.85% NY + 0.7% Yonkers -- I didn't research the Yonkers tax thoroughly so double check me there). As livesoft suggests, yo...

Let's clear up your tax situation first. You are not in the 25% bracket, and you live in Illinois, which has unusual treatment of IRAs, strongly favoring traditional over Roth. In 2013, your gross income will be less than $30,000 because you are working only half of the year. Your taxable income wil...

Since in a prior post you said you are already in the 28% bracket without this large bonus, your tax situation might be worse than you think. If the extra income puts your wages over $200,000 you'll pay the 0.9% ACA tax on the overage. In addition, the additional earned income may displace investmen...

An ESPP is just a cash flow pipe, not an investment. You sell the stock immediately, so it's just a delayed paycheck, with a bonus thrown in. You should max both the ESPP and the 401k. If you're asking why tax-advantaged investments are superior to taxed investments, consult the wiki.

Edit: Trying not to confuse the matter. Isn't it true that if you invest the cash on hand rather than paying off the HELOC, you're borrowing at 3.5% (2.1% effectively) to invest? If you "invest" in cash that's available to pay of the HELOC if the rate rises, then your investment return is ...

Since the debt is not equivalent to a stock investment, I think a comparison to bond investments is appropriate and at your income level the total marginal rate is either: 39.6% federal nominal + 3.8% ACA tax + 1% ATRA itemized deduction phaseout + 5.25% MA tax reduced by 39.6% = 3.2% --------------...

Since your income is over half a million, you are subject to all the new surtaxes, including the ACA taxes on investment income, the ATRA rates on capital gains, and the ATRA phaseouts. The $50,000 you have invested in taxable and the additional $50,000 you have in cash might be best applied to some...

boston2013 wrote:we should roll her 401k into a Vanguard IRA when the year ends? There will be no difference from a tax point of view to leaving it in the 401k but more investment options with lower er. Is this correct?

The difference was explained by respondents in your other thread. Don't do it.

I can't.

... and the ATRA phaseouts would add to that if they apply rather than the AMT.

... and the ACA would add to that if it applies.

you'll have to pay CG taxes on that extra capital at the end If the investment is for retirement you can sell it in retirement at the 0% rate. If it's for a kid's college, you can gift it to the kid and the kid can pay 0%. If it's for your heirs there's a step-up basis at death and they'll pay 0%. ...

I think you have the "small portion" argument backwards. This is such a small portion of your portfolio that you shouldn't pay 25% tax on the gain to conform to your AA down to the 1% mark. Let it ride, or donate it to charity in lieu of tax, or if you have minor kids gift it to them and l...

The direct Roth and spousal TIRA MAGI phaseouts are the same, so your situation is typical: the deductible spousal TIRA is usually preferable because your marginal rate is high, but if you're phased out of eligibility you can do a back door Roth instead. Do note that the phaseout is based on MAGI, n...

The Target Retirement fund is fine, but you could cut your ER from 0.18% to 0.07% for the same content if you held TSM and TBM in the 403b and TISM Admiral shares in your IRAs. You'd have to rebalance yourselves, but you'd save about 0.1%/year in expenses. Other great deals in his 403b are Small Val...

You probably know this already, but your MD tax rate is really 7.95% (a little less in some counties). The county tax is collected with and indistinguishable from the state tax, so for investment advice purposes it's better to show the combined rate, so respondents will see that your bracket is high.

Cool. So then: $70,000 gross - $7,500 401k contributions - $2,500 pre-tax health, dental, and disability insurance premiums withheld from your pay (guess) ----------- $60,000 AGI - $7,800 personal exemptions - $12,200 standard deduction ------------ $40,000 taxable income --> way, way down in the 15...

bungalow10 wrote:We also do not currently get any child tax credits.

That doesn't seem right. With three kids your phaseout should be $110,000 - $170,000 AGI, which equates to something like $134,000 - $194,000 gross.

my income puts us in a high tax bracket Since this is a finance forum, let's talk finance. Gross income of $155k should put you well down in the 25% bracket: $155,000 gross - $2,500 health FSA - $5,000 daycare FSA (I didn't bother to look up the maximum; adjust as necessary) - $4,000 pre-tax health...

Tax Rate: 25% Federal, 6% State Annual Contributions $7,500 her 401k $5,500 her Roth IRA $5,500 his Roth IRA We aren't maxing out our 401k because at the moment, retirement is currently 29% of our take-home income. My husband is in grad school for the next two years and we're also paying off school...

My wife stayed home many, but not all years. She's great with the kids, but she isn't so great at cooking, cleaning, scheduling, organizing. I do all that, and the groceries. I don't understand your question.

ugaDAWGS09 wrote:we have about 50k available to invest in a taxable account

Sounds like you're borrowing at 6.8% to invest in taxable. It doesn't make sense for Roth either (and by the way it doesn't make sense to prioritize Roth over 401k when you're in the 28% bracket and live in Georgia).

It's a factor of two difference, which is a bigger difference than the current duration difference between the Intermediate-Term fund and the Long-Term fund.

It's nice to have the choices, because you can TLH (subject to the loss limitations for muni funds) by switching among them.

Thank you for the responses! One thing I forgot to add - we will very likely be ineligible for the Roth in a year or two due to the income limit so I want to get the tax advantage while I can. Should I just forget it and stop saving for retirement altogether, and put all that cash towards the loan?...

Jack wrote:If you are maxing out your SEP, you might be better off with a 401(k) which has a higher ceiling. You don't necessarily need to do a Roth conversion of a SEP to increase your tax-deferred contributions.

Gifting to heirs also avoids federal taxation and RMDs. The step up basis also avoids taxation and RMDs. Realizing LTCG in the 15% bracket also avoids taxation and RMDs. Personal residence also avoids taxation and RMDs. What's unique about Roth is the propensity to make it an ACRONYM, and that makes...

Ten years ago, the couple retired with an IRA account worth $2 million. They did not take any money out on the advice of their adviser. The account earned 7% per year since retirement, and is now worth $4 million. Through good financial planning described in Mr. Baldwin’s article, they have paid no...

$100,000 gross income - $0 401k deductible contributions - $4,000 pre-tax health, dental, and disability insurance premiums withheld from your pay (guess) ------------- $96,000 AGI - $11,700 personal exemptions - $12,200 standard deduction ------------- $72,100 taxable income That puts you in the 15...

That's too bad -- hopefully the policy will change before she's 50 or she'll likely be denied catch-up contributions. If tax laws don't change :D your situation with respect to taxable investing could be interesting in about eight years, because you might be able to make big enough 401k contribution...

Ages 42 and 40. combined income of $147,000. Approximate amount of Expected Annual Contributions to Investing: 401K and Roth IRA Contributions = $61,277/yr. His 401k: Lately, little to no company match Her 401K: Her company provides a 2% match if she invests 4% Two maxed 401k's and two Roth IRAs = ...

A single taxpayer has to have a six figure income to be in the 28% bracket. A retired couple has to have over $170,000 of income, in 2013 dollars, to be in the 28% bracket. Most retired couples, even those who were high earners throughout their careers and never had a setback, don't have $170,000 of...

You used "journalist" and "basic course in math" in the same sentence.

Wait, I just used "journalist" and "sentence" in the same sentence.

retiredjg wrote:How did we get this far into this discussion without determining the poster's tax bracket?

I believe we've established that it's 0% with $20k of headroom, because "he has no need for a tax deduction".

IF you are discussing the saturated case (maxing out all accounts), you must compare Roth to an equal dollar amount of traditional plus the saved taxes invested in tax-efficient assets in taxable space. Now that the munificent 0% LTCG/QD rate has been made permanent for couples making under six figu...

I have no need for a tax deduction and would love to reap the benefits of tax free money later on. I'm only 26 years old This statement indicates you are in the 0% bracket now and expect to be in a higher tax bracket when you are retired and no longer have earned income. If that's not the case, you...

tfb's chart may be useful: http://thefinancebuff.com/fiscal-cliff-deal-and-dividends-and-capital-gains.html ... or make things worse :) tfb notes in the article that his chart doesn't capture phaseout effects, which increase the effective marginal rate on both ordinary income and LTCG/QD. For exampl...

I didn't know anybody read the NYT anymore.

Your marginal tax rate is computed based on the income other than qualified dividends and long-term gains, which is 25% in your example. It would be unusual -- but not impossible -- for someone with $50k of income to be in the 25% bracket. Since the standard deduction and personal exemption total $...

That's a good question, since the document is unclear. Tax brackets are based on taxable income. Phaseouts are based on AGI or MAGI (and the formula for MAGI varies across the tax code). The 0.9% ACA tax is based on wages. The 3.8% ACA tax (which I don't see mentioned, but it must be in that mess so...

JamesSFO wrote:This College for Financial Planning limit summary for 2013 is a helpful PDF: http://www.cffpinfo.com/pdfs/2013_Annual_Limits.pdf

This is much better than the link I posted, although what's missing on the phaseouts is the effective incremental marginal rate due to the phaseout.

I think it's safe to say that 100% in either type of account is probably a mistake. Not necessarily. Roth wasn't available when I was younger and my marginal rate has persistently been above 40% and often above 50% (due to phaseouts) for the past decade. I don't believe the average rate I'll pay on...

Your question doesn't make much sense, but I'll try to answer. A single person with $50k of earned income and $50k of capital gains might have $2,000 of pre-tax health insurance premiums withheld from his pay and contribute $13,000 to his 401k, so his AGI would be $85,000 and his taxable income woul...

curiouskitty wrote:The Deductible and Roth IRA phaseouts (they are different)

Except for a spouse not covered by a retirement plan, in which case they're the same.

This list is out of date (some of the phaseouts are inflation-adjusted, so they're higher for 2013) and contains at least two errors*, but it's a good place to start: http://www.taxpolicycenter.org/briefing-book/background/issues/phaseouts.cfm Check everything at irs.gov, but this is a handy list. N...

You're in the 15% bracket and the student loan interest is fully deductible, so her student loan rate is effectively 2%, while the mortgage is likely deductible at the margin (meaning that most of the mortgage interest is not deductible because it falls within the standard deduction) so it is effect...

He is 24, in the 28% bracket, and has been contributing to a Roth. He has three questions: 3. You can contribute $17,500 to a Traditional IRA each year (as of 2013). With a Roth IRA, you can contribute $23,000-$24,000 in order to get an after-tax amount of $17,500, correct? If you are willing to ma...

He is 24, in the 28% bracket, and has been contributing to a Roth. "A Roth" indicates he's not maxing both a Roth 401k and a Roth IRA, so he is not in the "saturated" condition in which his argument applies. To max your available Roth vehicles at age 24 (the numbers are higher o...

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