Too poor to invest - living in the 12% bracket

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MathIsMyWayr
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Re: Too poor to invest - living in the 12% bracket

Post by MathIsMyWayr »

Ron Ronnerson wrote: Sat Dec 14, 2019 10:34 am My salary is $115k and my wife is a stay-at-home parent. I do not max out tax-deferred space but am also in the 12% bracket. I do not pay any California income tax.
The standard deduction for California income tax is only $8,802 for married/registered domestic partners filing jointly plus more for additional dependents. Are you able to keep your taxable income below this?
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Re: Too poor to invest - living in the 12% bracket

Post by Ron Ronnerson »

MathIsMyWayr wrote: Sun Dec 15, 2019 8:31 am
Ron Ronnerson wrote: Sat Dec 14, 2019 10:34 am My salary is $115k and my wife is a stay-at-home parent. I do not max out tax-deferred space but am also in the 12% bracket. I do not pay any California income tax.
The standard deduction for California income tax is only $8,802 for married/registered domestic partners filing jointly plus more for additional dependents. Are you able to keep your taxable income below this?
I itemize on state taxes and there are also exemptions. Here are the numbers for us, married filing jointly with one child (age 5):

Federal
Gross Income: $115k from work + $5k interest (from churning bank accounts): $120k
Above-line deductions: $59k ($12k for pension contributions, $2k for dental premiums taken from paycheck, $19k for 457b, $19k for 403b, $1k for health FSA, $6k for traditional IRA)
AGI: $61k
Standard Deduction: $24.4k
Taxable Income: $36.6k
Tax: $4k
Child Tax Credit (one child) and Saver's Credit: $2400
Tax Owed: $1600

California
AGI: $61k
Itemized Deductions: $21.5k ($10k property tax and $11.5k mortgage interest)
Taxable Income: $39.5k
Tax: $600
Exemptions for 2 adults and 1 child: $600
Tax Owed: $0
mbasherp
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Re: Too poor to invest - living in the 12% bracket

Post by mbasherp »

danielc wrote: Sun Dec 15, 2019 3:32 am
mbasherp wrote: Fri Dec 13, 2019 5:39 pm Married, currently coming in near the top of the 12% bracket taxable income. I wish we made more but we are able to accomplish a lot with what we have.

Do the best you can and you’ll be surprised at the results. We saved 33% of gross income this year and I still feel like we lived it up!
It is good to see that I am not the only forum member that doesn't have a high income. You see so many posts from people with very high salaries, or who received a large inheritance... I remember the Boglehead survey that showed that most Bogleheads (that replied to the survey) are millionaires and I just don't see how I could keep up with them. It's a weird case of "keeping up with the Joneses", except it's comparing portfolio size rather than wasteful spending. In any case, I think we're saving around 45% of gross income, so we're making a brave effort, and as your case, we don't feel deprived.
Sometimes I feel the same way. I have to remind myself that this community is nowhere near any representation of median or average.

What I’ve noticed is that sustained efforts have put us in a place that I didn’t realize was so achievable even just 5 years ago. I hope to feel more of the same in 5 more!
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Whit
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Re: Too poor to invest - living in the 12% bracket

Post by Whit »

thelateinvestor43 wrote: Fri Dec 13, 2019 4:20 pm Does anyone else live in the 12% bracket like I do?
Yes, we are well into the 12% bracket and still filling out IRS Form 8880 to get our "Savers Credit". I live in a low cost of living area, and have paid off the house, youngling #4 is on the way, yet we are able to max out our IRA's every year. Child tax credit certainly helps. You can save if you want to, we save slow and steady, I have since my first job at age 14. I teach personal finance of all things, and I practice what I teach. Happiness is not measured by money or possessions. My JOY comes from somewhere else.

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Archimedes
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Re: Too poor to invest - living in the 12% bracket

Post by Archimedes »

I’m impressed by all of you who manage to save and invest on a lower than median income. I started investing my earnings in high school when I worked as a lifeguard, a waiter, and as a lawn cutter. The long term compounding starts to make a huge difference after a couple of decades.
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

I remember back when I was a grad student over 20 years ago. I think I made $13k the first year. I still saved $1300 (or something around that amount) into a Roth.

Doesn't matter how much you make, saving 10% of your income should be the goal.
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Re: Too poor to invest - living in the 12% bracket

Post by dalbright »

Although it has been mentioned, you would be wise to look heavily into the Saver's credit. I cannot speak to using it personally as I only found out about it recently, but it seems perfect for someone in your situation. https://www.irs.gov/retirement-plans/pl ... ers-credit
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Re: Too poor to invest - living in the 12% bracket

Post by willthrill81 »

unclescrooge wrote: Sun Dec 15, 2019 11:19 am Doesn't matter how much you make, saving 10% of your income should be the goal.
That should likely be the absolute floor for savings for those above the poverty line. I believe that 20% is a better goal, and higher is better.
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civility
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Re: Too poor to invest - living in the 12% bracket

Post by civility »

StealthRabbit wrote: Fri Dec 13, 2019 11:49 pm Currently in 12%, but it is the highest I have ever been. Saved, invested, and retired pre age 50 on single income, never over $60k gross. Started saving and investing pre-age 16
Nearly always worked 3 jobs, lived on PT income and usually invested 100% of my FT job. Finished a few degree programs while at it.

Hints;
Always work night shift and weekends, (more wages + less time to spend it + extra shifts)
Live cheap. (I still drive a 43 yo car that gets 50mpg on free fuel). That car cost me $35.
Never pass up overtime!
Diversify... The sooner your $$ are working for you, the better.
Have a plan. Stick with the plan.
Think you need to buy something? Think again, wait a few weeks. Still need it? Hopefully not!
Find smarter friends than you.
Take care of others before yourself. (I cared for a disabled parent for 30+ yrs, then started a DAF from my funds to be able to give to others perpetually. ). I survive fine. A treat for me is spending $2 contribution to orphans for my annual FREE Wendy's Frosty keychain. I hope to have a free Frosty sometime this week.

I travel very cheap. ($20/night guesthomes worldwide)
I eat via grocery produce departments (free culls everyday) .
I garden and swap via bartering, (have my own livestock)
I rent out my main home and live in adjacent slave qtrs. Plenty of space, easy to heat, no cooling required (moderate climate). Never have a car with AC.

No inheritance, except $100k in family debt from my disabled dad (when I was earning $1.50 / hr). That took several years to resolve.

You just do what it takes.
Save the rest.
+1, very motivating.
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

willthrill81 wrote: Sun Dec 15, 2019 11:34 am
unclescrooge wrote: Sun Dec 15, 2019 11:19 am Doesn't matter how much you make, saving 10% of your income should be the goal.
That should likely be the absolute floor for savings for those above the poverty line. I believe that 20% is a better goal, and higher is better.
Very true. But the earlier you start the less you need to save.

There are always people who claim they don't make enough to save for retirement. Everyone should always be able always save at least 10% of their income.
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ruralavalon
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Re: Too poor to invest - living in the 12% bracket

Post by ruralavalon »

unclescrooge wrote: Sun Dec 15, 2019 1:31 pm
willthrill81 wrote: Sun Dec 15, 2019 11:34 am
unclescrooge wrote: Sun Dec 15, 2019 11:19 am Doesn't matter how much you make, saving 10% of your income should be the goal.
That should likely be the absolute floor for savings for those above the poverty line. I believe that 20% is a better goal, and higher is better.
Very true. But the earlier you start the less you need to save.

There are always people who claim they don't make enough to save for retirement. Everyone should always be able always save at least 10% of their income.
Some of make poverty wages so cannot save.

For households with below average income Social Security can replace almost all of their income.

The median household income in the U.S. is about $63k annually. St. Louis FED (9/10/2019), "Median Household Income in the United States". The most common federal tax bracket is probably the 12% tax bracket. For most households saving 10% (i.e. $6k, enough to max an IRA) will be a very good savings rate.

For higher income households, the savings rate needs to be higher, because Social Security will replace only a small proportion of their income.
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Re: Too poor to invest - living in the 12% bracket

Post by livesoft »

ruralavalon wrote: Sun Dec 15, 2019 1:49 pmThe most common federal tax bracket is probably the 12% tax bracket.
More than 40% of US families do not pay federal income taxes, so perhaps the most common federal tax bracket is not 12%.
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vipertom1970
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Re: Too poor to invest - living in the 12% bracket

Post by vipertom1970 »

ruralavalon wrote: Sun Dec 15, 2019 1:49 pm
unclescrooge wrote: Sun Dec 15, 2019 1:31 pm
willthrill81 wrote: Sun Dec 15, 2019 11:34 am
unclescrooge wrote: Sun Dec 15, 2019 11:19 am Doesn't matter how much you make, saving 10% of your income should be the goal.
That should likely be the absolute floor for savings for those above the poverty line. I believe that 20% is a better goal, and higher is better.
Very true. But the earlier you start the less you need to save.

There are always people who claim they don't make enough to save for retirement. Everyone should always be able always save at least 10% of their income.
Some of make poverty wages so cannot save.

For households with below average income Social Security can replace almost all of their income.

The median household income in the U.S. is about $63k annually. St. Louis FED (9/10/2019), "Median Household Income in the United States". The most common federal tax bracket is probably the 12% tax bracket. For most households saving 10% (i.e. $6k, enough to max an IRA) will be a very good savings rate.

For higher income households, the savings rate needs to be higher, because Social Security will replace only a small proportion of their income.
We were so poor as a first generation immigrant with just a shirt on our back, mom was a dish washer, dad was a cook raising 5 boys but they were able to afford a house in California and they are now retired in AZ with more then $200,000 in saving with no mortgage.
Last edited by vipertom1970 on Sun Dec 15, 2019 2:14 pm, edited 2 times in total.
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

ruralavalon wrote: Sun Dec 15, 2019 1:49 pm
unclescrooge wrote: Sun Dec 15, 2019 1:31 pm
willthrill81 wrote: Sun Dec 15, 2019 11:34 am
unclescrooge wrote: Sun Dec 15, 2019 11:19 am Doesn't matter how much you make, saving 10% of your income should be the goal.
That should likely be the absolute floor for savings for those above the poverty line. I believe that 20% is a better goal, and higher is better.
Very true. But the earlier you start the less you need to save.

There are always people who claim they don't make enough to save for retirement. Everyone should always be able always save at least 10% of their income.
Some of make poverty wages so cannot save.

The median household income in the U.S. is about $63k annually. St. Louis FED (9/10/2019), "Median Household Income in the United States". The most common federal tax bracket is probably the 12% tax bracket. For most households saving 10% (i.e. $6k, enough to max an IRA) will be a very good savings rate.

For higher income househo!ds, the savings rate needs to be higher.
$13k a year was poverty wages, and I still saved.

Being wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.

Most able-bodied people who claim they can't save have a hole in their budget.

Either they waste too much money on housing, food, cars, entertainment, or beauty products.

My wife sees low wage workers in her office with perfectly manicured nails and who have taken advances on their wages for various cosmetic procedures. None of them contribute to the retirement plan at work and I assume they save nothing outside of that plan either.

High wage earner should save more but many don't. One of my wife's friends spends $2000/mo on hair and makeup. That's twice what she saves for retirement.
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Re: Too poor to invest - living in the 12% bracket

Post by fru-gal »

vipertom1970 wrote: Fri Dec 13, 2019 6:43 pm there is no such thing is "too poor to invest"
My goodness, you've lived a sheltered life.
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Re: Too poor to invest - living in the 12% bracket

Post by vipertom1970 »

fru-gal wrote: Sun Dec 15, 2019 2:18 pm
vipertom1970 wrote: Fri Dec 13, 2019 6:43 pm there is no such thing is "too poor to invest"
My goodness, you've lived a sheltered life.
I bet you no one on this forum was more poor then me and my family growing up. We were immigrants, mom was a dish washer and dad was a cook rasing 5 boys, I could not speak one word of English at 15, we collected cans and news paper from trash days was one way to make $$$. Got married, our honey moon was a trip to the movie and decided only to have one kid because that's all we could afford so we could max out the 401K and now retired at 50 in Socal.
Last edited by vipertom1970 on Sun Dec 15, 2019 5:38 pm, edited 4 times in total.
gtrplayer
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Re: Too poor to invest - living in the 12% bracket

Post by gtrplayer »

I make a little more now but low compared to many people on here. When I started, I made about 32k a year. Easiest thing to do if your company offers it is to put a percentage in a 401k, up to the match if you can, and budget based on the paychecks you start getting. After a while you forget about it and just take for granted that’s what you make. I also set up my checking account to move some money automatically to savings and built up an emergency fund slowly. If I had tried to actively save he money, it would have felt much more difficult.

I will add being single and having minimal costly interests helped. I doubt I would have been able to save what I did if I had kids or was into fancy cars...
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willthrill81
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Re: Too poor to invest - living in the 12% bracket

Post by willthrill81 »

unclescrooge wrote: Sun Dec 15, 2019 2:10 pm $13k a year was poverty wages, and I still saved.
We can sympathize. We lived below the poverty line for four years in a VLCOL area and had about a 10% savings rate.
unclescrooge wrote: Sun Dec 15, 2019 2:10 pmBeing wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.

Most able-bodied people who claim they can't save have a hole in their budget.

Either they waste too much money on housing, food, cars, entertainment, or beauty products.

My wife sees low wage workers in her office with perfectly manicured nails and who have taken advances on their wages for various cosmetic procedures. None of them contribute to the retirement plan at work and I assume they save nothing outside of that plan either.

High wage earner should save more but many don't. One of my wife's friends spends $2000/mo on hair and makeup. That's twice what she saves for retirement.
It always amazes me to see how many low-income folks consume so much alcohol and tobacco. That stuff is expensive.
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

willthrill81 wrote: Sun Dec 15, 2019 5:11 pm
unclescrooge wrote: Sun Dec 15, 2019 2:10 pm $13k a year was poverty wages, and I still saved.
We can sympathize. We lived below the poverty line for four years in a VLCOL area and had about a 10% savings rate.
unclescrooge wrote: Sun Dec 15, 2019 2:10 pmBeing wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.

Most able-bodied people who claim they can't save have a hole in their budget.

Either they waste too much money on housing, food, cars, entertainment, or beauty products.
It always amazes me to see how many low-income folks consume so much alcohol and tobacco. That stuff is expensive.
Oh yes, I forgot vices.

Lottery tickets are disproportionally bought by poor people too.

If they spent that money accumulating vice stocks instead they would have a great retirement!
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

vipertom1970 wrote: Sun Dec 15, 2019 2:24 pm
fru-gal wrote: Sun Dec 15, 2019 2:18 pm
vipertom1970 wrote: Fri Dec 13, 2019 6:43 pm there is no such thing is "too poor to invest"
My goodness, you've lived a sheltered life.
I bet you no one on this forum was more poor then me and my family growing up. We were immigrants, mom was a dish washer and dad was a cook rasing 5 boys, I could not speak one word of English at 15, we collected cans and news paper from trash days was one way to make $$$. Got married, our honey moon was a trip to the movie and decided only to have one kid because that's all we could afford so we could max out the 401K and now retired at 50 in Socal.
Congrats! 👏
MathIsMyWayr
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Re: Too poor to invest - living in the 12% bracket

Post by MathIsMyWayr »

willthrill81 wrote: Sun Dec 15, 2019 5:11 pm
unclescrooge wrote: Sun Dec 15, 2019 2:10 pm $13k a year was poverty wages, and I still saved.
We can sympathize. We lived below the poverty line for four years in a VLCOL area and had about a 10% savings rate.
unclescrooge wrote: Sun Dec 15, 2019 2:10 pmBeing wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.

Most able-bodied people who claim they can't save have a hole in their budget.

Either they waste too much money on housing, food, cars, entertainment, or beauty products.

My wife sees low wage workers in her office with perfectly manicured nails and who have taken advances on their wages for various cosmetic procedures. None of them contribute to the retirement plan at work and I assume they save nothing outside of that plan either.

High wage earner should save more but many don't. One of my wife's friends spends $2000/mo on hair and makeup. That's twice what she saves for retirement.
It always amazes me to see how many low-income folks consume so much alcohol and tobacco. That stuff is expensive.
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Re: Too poor to invest - living in the 12% bracket

Post by fru-gal »

vipertom1970 wrote: Sun Dec 15, 2019 2:24 pm
fru-gal wrote: Sun Dec 15, 2019 2:18 pm
vipertom1970 wrote: Fri Dec 13, 2019 6:43 pm there is no such thing is "too poor to invest"
My goodness, you've lived a sheltered life.
I bet you no one on this forum was more poor then me and my family growing up. We were immigrants, mom was a dish washer and dad was a cook rasing 5 boys, I could not speak one word of English at 15, we collected cans and news paper from trash days was one way to make $$$. Got married, our honey moon was a trip to the movie and decided only to have one kid because that's all we could afford so we could max out the 401K and now retired at 50 in Socal.
I guess we're playing How Poor Were We? Poor enough to not have food on the table some days. Like many other people, unfortunately. At least we had a roof over our heads.
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unclescrooge
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

fru-gal wrote: Sun Dec 15, 2019 2:18 pm
vipertom1970 wrote: Fri Dec 13, 2019 6:43 pm there is no such thing is "too poor to invest"
My goodness, you've lived a sheltered life.
I think the people who believe they are too poor to invest are the ones who are living a sheltered life.

US residents can basically invest for free in broad based ETFs. It doesn't get any easier than this.

When I owned 18 investment homes, every single one of my tenants lived better than I did. They had newer cars, big TVs, iPhones and rented houses because they had large dogs.

Meanwhile, I made more money than them, lived in a small condo, had no TV, no smartphone and saved a high percentage of my income.

Every single one of them had poor financial habits that kept them poor.
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Re: Too poor to invest - living in the 12% bracket

Post by danielc »

unclescrooge wrote: Sun Dec 15, 2019 2:10 pm $13k a year was poverty wages, and I still saved.

Being wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.
While I am glad that you managed to save with such a low income, I think that a little more empathy is in order. Especially given the subject of this thread. I understand that there are many people who don't save but definitely could. But to say that "there is no reason" for not saving other than disability is, in my opinion, a little too far. There is little limit to the diversity of people's personal circumstances and struggles. There will be exceptions that you have not considered.

I had a 6-year period where I honestly could not save a dime, and for two of those years I actually burned through all of my savings as me and my wife lived entirely off of our previous savings. Later we moved to the US and here we've faced many obstacles against my DW maintaining a work permit. It often feels that the system is designed to make us fail and it has been very stressful. I think that the Bogleheads forum works best when its members show empathy rather than hostility.
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Re: Too poor to invest - living in the 12% bracket

Post by vipertom1970 »

cut out the Starbucks Coffee, alcohol, smoking, vacation, eating out, cable and please read this article.

https://www.marketwatch.com/story/save- ... 39XeVLRiDA
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Re: Too poor to invest - living in the 12% bracket

Post by danielc »

unclescrooge wrote: Sun Dec 15, 2019 6:11 pm When I owned 18 investment homes, every single one of my tenants lived better than I did. They had newer cars, big TVs, iPhones and rented houses because they had large dogs.

Meanwhile, I made more money than them, lived in a small condo, had no TV, no smartphone and saved a high percentage of my income.

Every single one of them had poor financial habits that kept them poor.
My DW and I both live frugally and that has helped us a lot. We don't work at it; we just don't have any expensive interests. We don't own a car, no pets, we do own a medium size TV, and we find smartphones incredibly convenient (alarm clock, GPS, Wikipedia, dictionary, web browser, etc.). Though I'm always amazed to see that the smartphones I consider pricey are apparently classified as "budget". My phone cost around $170 or so and I liked the fact that I was indulging, but if you search for "cheap phones" you'll find pages that say "best cheap phones under $400". Quite incredible.
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Re: Too poor to invest - living in the 12% bracket

Post by David Jay »

I never had a year where we hit the 22% (formerly 25%) bracket in my entire working lifetime. In peak earning years there were a few years where it took a few thousand into my tIRA in March or April to get my income below the limit, but my record was maintained.

One big advantage of a simple standard of living in a LCOL area is that retirement expenses are largely covered by SS. A 10% savings rate will probably set one up nicely for a comfortable retirement @ full retirement age (67 for those born after 1960). 15% probably gets you out a few years earlier. 20% for a significantly early retirement.

[Edit] I retired January 2019 at age 62.
Last edited by David Jay on Tue Dec 17, 2019 6:24 pm, edited 1 time in total.
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

danielc wrote: Sun Dec 15, 2019 6:28 pm
unclescrooge wrote: Sun Dec 15, 2019 2:10 pm $13k a year was poverty wages, and I still saved.

Being wealthy is choice. It's hard, requires sacrifice and patience, and takes decades. Unless you're disabled, or otherwise unable to work 72 hours a week, there is no reason why anyone should not be able to save at least 10% of their income.
While I am glad that you managed to save with such a low income, I think that a little more empathy is in order. Especially given the subject of this thread. I understand that there are many people who don't save but definitely could. But to say that "there is no reason" for not saving other than disability is, in my opinion, a little too far. There is little limit to the diversity of people's personal circumstances and struggles. There will be exceptions that you have not considered.

I had a 6-year period where I honestly could not save a dime, and for two of those years I actually burned through all of my savings as me and my wife lived entirely off of our previous savings. Later we moved to the US and here we've faced many obstacles against my DW maintaining a work permit. It often feels that the system is designed to make us fail and it has been very stressful. I think that the Bogleheads forum works best when its members show empathy rather than hostility.
I was on a student visa at the time, and I understand your predicament.

After the 6 year period did you figure it a way to overcome the system that was designed to make you fail?
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Re: Too poor to invest - living in the 12% bracket

Post by danielc »

unclescrooge wrote: Sun Dec 15, 2019 7:33 pm I was on a student visa at the time, and I understand your predicament.

After the 6 year period did you figure it a way to overcome the system that was designed to make you fail?
I think a couple of details were not conveyed clearly. We have only been in the US for two years, and that is where we encountered work permit rules that seemed designed to fail --- I am a J-1 scholar. I get 1-year extensions on my status here. Every year we pay $400 and go through a stressful legal process just to re-apply for my wife's work permit. The work permit takes about 5 months to process and we are only allowed to apply 6 months before the current one expires. Getting this to work is harder than it sounds. I started a new position 2 months ago and it took me 1.5 months to go through all the hoops to get to the point where we could even send that application. I don't have a solution except eventually applying for a green card. I have a friend who has the same visa status that I do and his wife doesn't work at all because they found the process too difficult.

The 6 year period I referred to was prior to moving to the US. That was a 2 year masters and a 4-year PhD. While I was a PhD student we were fine because I got a stipend and my DW had a job. But the 2 years doing a masters were very difficult and we almost didn't make it.
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Re: Too poor to invest - living in the 12% bracket

Post by unclescrooge »

danielc wrote: Sun Dec 15, 2019 7:45 pm
unclescrooge wrote: Sun Dec 15, 2019 7:33 pm I was on a student visa at the time, and I understand your predicament.

After the 6 year period did you figure it a way to overcome the system that was designed to make you fail?
I think a couple of details were not conveyed clearly. We have only been in the US for two years, and that is where we encountered work permit rules that seemed designed to fail --- I am a J-1 scholar. I get 1-year extensions on my status here. Every year we pay $400 and go through a stressful legal process just to re-apply for my wife's work permit. The work permit takes about 5 months to process and we are only allowed to apply 6 months before the current one expires. Getting this to work is harder than it sounds. I started a new position 2 months ago and it took me 1.5 months to go through all the hoops to get to the point where we could even send that application. I don't have a solution except eventually applying for a green card. I have a friend who has the same visa status that I do and his wife doesn't work at all because they found the process too difficult.

The 6 year period I referred to was prior to moving to the US. That was a 2 year masters and a 4-year PhD. While I was a PhD student we were fine because I got a stipend and my DW had a job. But the 2 years doing a masters were very difficult and we almost didn't make it.
Immigration is an exceedingly frustrating process, and possibly designed to encourage applicants to quit the process midway.

But I'm sure you will figure out how to work the system to your advantage.

Lesser men have overcome the hurdles, myself included. It took me 121 months to get my green card, during which my ex couldn't work for most of that time. But we figured it out and now life is good for us both. Separately, but still good.
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Re: Too poor to invest - living in the 12% bracket

Post by Bluce »

thelateinvestor43 wrote: Fri Dec 13, 2019 4:20 pm Does anyone else live in the 12% bracket like I do? I happened to get lucky with a sizeable inheritance and also have a part time cleaning job to "make ends meet". Right now I'm managing the $6k max to my ROTH and have opened a small taxable to put about $10k for now to grow a little.

I forgot to add that I don't pay a mortgage or rent right now (haven't for over 10 years) and I have more to invest for that reason.

I'm wondering if there are others similar to my position making a under $40k and still investing?
I usually make less than $40k, am 69 and still working (self-employed), drawing SS and still paying into it too, also maxing out my SEP every year. Figure that one out, lol.

I don't even know what tax bracket I'm in; I thought it was 15% . . . ?
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Re: Too poor to invest - living in the 12% bracket

Post by David Jay »

Bluce wrote: Sun Dec 15, 2019 8:53 pmI don't even know what tax bracket I'm in; I thought it was 15% . . . ?
I can assure you that you're not in the 15% tax bracket.

There used to be a 15% tax bracket, but since 2018 the tax brackets have been 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you used to be in the 15% tax bracket you are most likely in the 12% tax bracket.
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Re: Too poor to invest - living in the 12% bracket

Post by LadyGeek »

I removed an off-topic post regarding lifestyle and socio-economic concerns in a bad neighborhood.

Please stay focused on the investing aspects.
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Re: Too poor to invest - living in the 12% bracket

Post by Amadis_of_Gaul »

I'm also in the 12-percent-or-lower club. indeed, my family and I are in the 10-percent bracket, and what with the various credits, it's rare for us to have to pay out anything in federal income taxes at all. I probably could make a lot more money than I do, but I've chosen a profession that, though not very remunerative, is very fulfilling. Likewise, my wife has chosen to stay home with our children rather than pursuing her career. We've also decided that it's appropriate to save 20 percent of our gross income every year. All of this means that we have a. . . measured lifestyle, but it is certainly doable. When I consider the lot of countless millions of others, i have no complaints and no regrets.
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Re: Too poor to invest - living in the 12% bracket

Post by teen persuasion »

livesoft wrote: Sun Dec 15, 2019 1:56 pm
ruralavalon wrote: Sun Dec 15, 2019 1:49 pmThe most common federal tax bracket is probably the 12% tax bracket.
More than 40% of US families do not pay federal income taxes, so perhaps the most common federal tax bracket is not 12%.
Many refundable and nonrefundable credits exist to wipe out taxes owed in the 12% bracket. CTC for children under 17 is $2k EACH now or $500 age 17+, AOTC is max $2500, Retirement Saver's credit is max $2k for MFJ at 50%. Even EITC (max $6k range), but it's largely phased out for MFJ at 12% bracket/median income levels.
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Re: Too poor to invest - living in the 12% bracket

Post by frugalmama »

Whit wrote: Sun Dec 15, 2019 10:44 am
thelateinvestor43 wrote: Fri Dec 13, 2019 4:20 pm Does anyone else live in the 12% bracket like I do?
Yes, we are well into the 12% bracket and still filling out IRS Form 8880 to get our "Savers Credit". I live in a low cost of living area, and have paid off the house, youngling #4 is on the way, yet we are able to max out our IRA's every year. Child tax credit certainly helps. You can save if you want to, we save slow and steady, I have since my first job at age 14. I teach personal finance of all things, and I practice what I teach. Happiness is not measured by money or possessions. My JOY comes from somewhere else.

-Whit

I agree with this entirely. We make more...with lots of side hustles but we have 13 people to support so we pay no FIT (although we pay quite a bit in SE). We max out our IRAs, will have a pension, and plan to pay for all of our kids' college (there are stipulations and limits to what we are willing to pay so it is not a blank check). We try to save outside that as well, although sometimes it can be tough, especially with medical care in a large family. I started saving with my first job as well and TVM has made a huge difference in our portfolio. For me, I take pride in our frugality...that we are using the resources to the best of our ability. I feel that by saving as much as we do on less, it makes us really figure out where our priorities are. For example, I bought myself 2 new pairs of pants this Christmas. I will really enjoy them as I haven't purchased new pants in years (I lost a lot of weight and needed new ones and decided I didn't want to purchase from the thrift store this one time). I feel that with our limited resources, I personally am more thankful for what I have.
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Re: Too poor to invest - living in the 12% bracket

Post by willthrill81 »

Amadis_of_Gaul wrote: Tue Dec 17, 2019 9:44 am I'm also in the 12-percent-or-lower club. indeed, my family and I are in the 10-percent bracket, and what with the various credits, it's rare for us to have to pay out anything in federal income taxes at all. I probably could make a lot more money than I do, but I've chosen a profession that, though not very remunerative, is very fulfilling. Likewise, my wife has chosen to stay home with our children rather than pursuing her career. We've also decided that it's appropriate to save 20 percent of our gross income every year. All of this means that we have a. . . measured lifestyle, but it is certainly doable. When I consider the lot of countless millions of others, i have no complaints and no regrets.
Good for you and your wife realizing that life isn't about how digits on a bank statement. Millions of Americans sadly believe that and experience the grave consequences of pursuing it at all costs.
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Re: Too poor to invest - living in the 12% bracket

Post by Bluce »

willthrill81 wrote: Tue Dec 17, 2019 10:28 am
Amadis_of_Gaul wrote: Tue Dec 17, 2019 9:44 am I'm also in the 12-percent-or-lower club. indeed, my family and I are in the 10-percent bracket, and what with the various credits, it's rare for us to have to pay out anything in federal income taxes at all. I probably could make a lot more money than I do, but I've chosen a profession that, though not very remunerative, is very fulfilling. Likewise, my wife has chosen to stay home with our children rather than pursuing her career. We've also decided that it's appropriate to save 20 percent of our gross income every year. All of this means that we have a. . . measured lifestyle, but it is certainly doable. When I consider the lot of countless millions of others, i have no complaints and no regrets.
Good for you and your wife realizing that life isn't about how digits on a bank statement. Millions of Americans sadly believe that and experience the grave consequences of pursuing it at all costs.
Agree 100%. :sharebeer
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Re: Too poor to invest - living in the 12% bracket

Post by Amadis_of_Gaul »

teen persuasion wrote: Tue Dec 17, 2019 9:58 am Many refundable and nonrefundable credits exist to wipe out taxes owed in the 12% bracket. CTC for children under 17 is $2k EACH now or $500 age 17+, AOTC is max $2500, Retirement Saver's credit is max $2k for MFJ at 50%. Even EITC (max $6k range), but it's largely phased out for MFJ at 12% bracket/median income levels.
+1. In large part, we are able to maintain our lifestyle because of dedicated tax ninja-ing. In lower tax brackets, credits make a HUGE difference, perhaps most of all when it comes to ACA credits. I know most people hate the ACA, but it was a godsend for us! If it went away, our ability to save for retirement would be crippled.

Of course, in order to take advantage of all those credits, you need enough legal and financial sophistication to understand them, as well as the foresight and self-discipline to plan ahead. Ironically, those are the traits that often will lift people out of the lower tax brackets to begin with. Repeat tax ninjas probably are in the lower tax brackets because, for whatever reason, they've chosen to be there.
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Re: Too poor to invest - living in the 12% bracket

Post by stoptothink »

Amadis_of_Gaul wrote: Tue Dec 17, 2019 11:05 am
teen persuasion wrote: Tue Dec 17, 2019 9:58 am Many refundable and nonrefundable credits exist to wipe out taxes owed in the 12% bracket. CTC for children under 17 is $2k EACH now or $500 age 17+, AOTC is max $2500, Retirement Saver's credit is max $2k for MFJ at 50%. Even EITC (max $6k range), but it's largely phased out for MFJ at 12% bracket/median income levels.
+1. In large part, we are able to maintain our lifestyle because of dedicated tax ninja-ing. In lower tax brackets, credits make a HUGE difference, perhaps most of all when it comes to ACA credits. I know most people hate the ACA, but it was a godsend for us! If it went away, our ability to save for retirement would be crippled.

Of course, in order to take advantage of all those credits, you need enough legal and financial sophistication to understand them, as well as the foresight and self-discipline to plan ahead. Ironically, those are the traits that often will lift people out of the lower tax brackets to begin with. Repeat tax ninjas probably are in the lower tax brackets because, for whatever reason, they've chosen to be there.
During the handful of years I was in the 12% bracket (or whatever it was then - <$65k HHI income) and putting a wife through school, I paid essentially nothing in federal income tax and was able to maintain a savings rate >20%. Now I pay more federal income tax per month than I probably did total for those 5yrs. There is definitely a sweet spot tax-wise for those who are able to prioritize saving while having a median level of HHI.
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Re: Too poor to invest - living in the 12% bracket

Post by sedna273 »

Hi there,
I was in a somewhat similar situation to you not too long ago. As a young college grad who chose a liberal arts major, my first jobs were hourly, and I worked more than one. And my first salaried job was barely above $20k/yr (nonprofit), so I did gig work on the weekends. If it helps illuminate at all, being low-income meant that when I went to see a financial advisor, he told me I wasn't worth his time, so off to the library to read about personal finance books I went...

I was able to start investing into just a Roth IRA after college despite my low income. I credit this to the fact that my overall lifestyle was the same as when I was a frugal scholarship student. I ate very little meat, used public transportation, and "got lucky" in that I usually could barter my way to a better price. For example, for a year in my early 20's I was able to get a rent reduction from the older couple I was renting a room from in exchange for light cleaning duties and making dinner twice a week. They saved on hiring help, and I saved a few thousand a year, or basically most of a Roth contribution.

As others have already commented, even if your income is lower, as long as you don't spend all or most of it you may be more financially secure than those who need to keep up with the Joneses. I'm now pretty solidly middle-class and work for the government. I think I learned a lot during my early 20's about saving and working hard that'll serve me well no matter how the economy does, and to be grateful for what I do have now.
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Re: Too poor to invest - living in the 12% bracket

Post by retire2022 »

op millionaire janitor

https://teachandretirerich.libsyn.com/e ... p-his-403b

lived below his means, maxed out his 403b, he was able to legally transferred his 403b to Vanguard through a third party vendor.

another famous Janitor, Ronald Read of Windham county, Vermont:

https://financebuzz.com/how-a-janitor-b ... illionaire
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Re: Too poor to invest - living in the 12% bracket

Post by Amadis_of_Gaul »

sedna273 wrote: Tue Dec 17, 2019 5:30 pm Hi there,
I was in a somewhat similar situation to you not too long ago. As a young college grad who chose a liberal arts major, my first jobs were hourly, and I worked more than one. And my first salaried job was barely above $20k/yr (nonprofit), so I did gig work on the weekends. If it helps illuminate at all, being low-income meant that when I went to see a financial advisor, he told me I wasn't worth his time, so off to the library to read about personal finance books I went...
Having a financial advisor shoo you off might have been the best financial thing that ever happened to you. Imagine spending the rest of your life paying 1 percent of AUM every year! Basically, Count Dracula told you he wasn't hungry right now. . .
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Re: Too poor to invest - living in the 12% bracket

Post by Bluce »

Amadis_of_Gaul wrote: Wed Dec 18, 2019 3:17 pm
sedna273 wrote: Tue Dec 17, 2019 5:30 pm Hi there,
I was in a somewhat similar situation to you not too long ago. As a young college grad who chose a liberal arts major, my first jobs were hourly, and I worked more than one. And my first salaried job was barely above $20k/yr (nonprofit), so I did gig work on the weekends. If it helps illuminate at all, being low-income meant that when I went to see a financial advisor, he told me I wasn't worth his time, so off to the library to read about personal finance books I went...
Having a financial advisor shoo you off might have been the best financial thing that ever happened to you. Imagine spending the rest of your life paying 1 percent of AUM every year! Basically, Count Dracula told you he wasn't hungry right now. . .
Haha, yes. Whenever I hear the term "financial advisor" I cringe, and images of old-timey snake-oil salesmen dance in my head. I'm sure some are okay, and some people certainly need some guidance. But it's too bad that a lot of people will not pick the right one.

And the %AUM fee has always been nothing more than sleight-of-hand IMO. It doesn't take any more time or expertise to manage a $1M portfolio than it does to manage a $100k portfolio.

And, what most clients probably do not realize -- and the "advisor" sure isn't going to mention it -- is that a percent of AUM fee like that, over years, works like compound interest IN REVERSE.

Not to mention that in a year when the "expert" does worse than your portfolio's benchmark, you STILL HAVE TO PAY HIM. Just guessing here, but I'm betting that the majority of people who do hire a FA have no idea about comparing what they have to an index or equivalent benchmark, and then determining if they might be better off just buying a few dumb index funds from a discount broker.

Oh well. :?
"There are no new ideas, only forgotten ones." -- Amity Shlaes
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Re: Too poor to invest - living in the 12% bracket

Post by thelateinvestor43 »

I still feel like I may be the poorest person on this forum .... literally!

Oh well ..... :beer
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Re: Too poor to invest - living in the 12% bracket

Post by Silk McCue »

thelateinvestor43 wrote: Thu Dec 19, 2019 5:09 pm I still feel like I may be the poorest person on this forum .... literally!

Oh well ..... :beer
I probably missed it but how large is your large inheritance? That phrase is in conflict with “I may be the poorest person on the forum”

Cheers
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Re: Too poor to invest - living in the 12% bracket

Post by thelateinvestor43 »

Silk McCue wrote: Thu Dec 19, 2019 9:43 pm
thelateinvestor43 wrote: Thu Dec 19, 2019 5:09 pm I still feel like I may be the poorest person on this forum .... literally!

Oh well ..... :beer
I probably missed it but how large is your large inheritance? That phrase is in conflict with “I may be the poorest person on the forum”

Cheers
$70k ....
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Re: Too poor to invest - living in the 12% bracket

Post by Amadis_of_Gaul »

Bluce wrote: Wed Dec 18, 2019 4:17 pm
Haha, yes. Whenever I hear the term "financial advisor" I cringe, and images of old-timey snake-oil salesmen dance in my head. I'm sure some are okay, and some people certainly need some guidance. But it's too bad that a lot of people will not pick the right one.

And the %AUM fee has always been nothing more than sleight-of-hand IMO. It doesn't take any more time or expertise to manage a $1M portfolio than it does to manage a $100k portfolio.

And, what most clients probably do not realize -- and the "advisor" sure isn't going to mention it -- is that a percent of AUM fee like that, over years, works like compound interest IN REVERSE.

Not to mention that in a year when the "expert" does worse than your portfolio's benchmark, you STILL HAVE TO PAY HIM. Just guessing here, but I'm betting that the majority of people who do hire a FA have no idea about comparing what they have to an index or equivalent benchmark, and then determining if they might be better off just buying a few dumb index funds from a discount broker.

Oh well. :?
Let me hasten to add that there are honest financial advisors out there (some of whom post on the forum). However, they are greatly in the minority, and they're well aware of that fact. :)

I would guess that of the people with the sophistication to compare portfolio returns to a benchmark and realize that the index-fund option exists, approximately none of them go with an AUM-based advisor! It's not that hard to put all your money into a LifeStrategy fund and let it sit.
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Re: Too poor to invest - living in the 12% bracket

Post by Amadis_of_Gaul »

thelateinvestor43 wrote: Thu Dec 19, 2019 5:09 pm I still feel like I may be the poorest person on this forum .... literally!

Oh well ..... :beer
There's a graph floating around that depicts the results of a survey of Bogleheads forum members. It plotted net wealth by age. I was solidly under everyone else my age. Personal Capital also tells me that I have saved less than half as much as the average Personal Capital user my age.

Both of those things tell me much more about Bogleheads forum members and Personal Capital users than they do about me. :)

In real life, the amount of assets you have accumulated doesn't count for much, even looking at things from a purely financial perspective. The question is how many years' worth of expenses that amount represents, and how much time you have to add to the amount. My own retirement number has one comma in it, but there are many Bogleheads who would be in trouble with that amount because their expenses are so much greater than mine. Nor does that mean that they're spendthrifts. A dollar in rural Tennessee (where I live) goes a lot farther than a dollar in San Francisco.

In short, it's all very complicated. In terms of dollar amount, you may be the poorest person on the forum. In terms of getting to where you need to be, you probably aren't, and that's the part that matters!
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Re: Too poor to invest - living in the 12% bracket

Post by mtmingus »

Ron Ronnerson wrote: Sat Dec 14, 2019 10:34 am
willthrill81 wrote: Fri Dec 13, 2019 11:52 pm For a married-filing-jointly couple the 12% bracket goes just beyond $100k. That's significantly more than the median household income of about $60k.
If using tax-deferred space, someone could earn quite a bit more than $100k in certain cases and remain in the 12% bracket.

An example: I have a good friend who is 50 years old. I don't know his wife's exact age but she is around the same age as my friend. They're both California teachers, currently in their 22nd year of teaching, and they have children. They have a paid-off home in the Bay Area, near Silicon Valley. If they were to max out their tax-deferred space, this is what they would subtract:

Income: $120k each x 2 = $240k
Pension Contributions @10.25% of salary: $12,300 x 2 = $24,600
403b contributions: $25k x2 = $50k
457b contributions: $25k x2 = $50k
Traditional IRA: $7k x2 = $14k
Health insurance premiums: $24k (employee portion taken from one of their paychecks that covers the whole family)
Dental insurance premiums: $2k (employee portion taken from paycheck)
Health FSA: $2700
Dependent Care FSA: $5000
Educator Expenses: $250 x2
Total above-line deductions $172,800
Standard deduction: $24,400
Taxable income: $240k – (172,800 + 24,400) = $42,800

If their combined salary was $276k, they could still be in the 12% bracket.

I'm also a California teacher. My salary is $115k and my wife is a stay-at-home parent. I do not max out tax-deferred space but am also in the 12% bracket. I do not pay any California income tax.
So much in tax-deferred, you get to pay the IRS sooner or later. If not carefully managed tax-wise, even higher federal tax in the future (ignore the state part).
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