White Coat Investor: Enough is Enough!

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obgraham
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Re: White Coat Investor: Enough is Enough!

Post by obgraham »

Interesting thread. What I don't quite understand is why folks think that once you "have enough" you would suddenly change your living habits and start spending money lavishly. Most of us are creatures of habit. If I have put enough aside to fund the same life style in retirement hat I enjoyed while working, that is my definition of a life well lived.

I have driven main line cars (Hondas, Camrys, a Ford or two) for decades. No desire now to go out and get a Jag or top end Beemer. Just as happy with a new Subaru every 3-4 years.

Others have a different life plan. Hopefully their nest egg will accommodate it.
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willthrill81
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Re: White Coat Investor: Enough is Enough!

Post by willthrill81 »

obgraham wrote: Wed Dec 25, 2019 3:16 pm Interesting thread. What I don't quite understand is why folks think that once you "have enough" you would suddenly change your living habits and start spending money lavishly. Most of us are creatures of habit. If I have put enough aside to fund the same life style in retirement hat I enjoyed while working, that is my definition of a life well lived.
I agree that it's hard to change one's habits. We've heard from many here that moving from the accumulation to the decumulation phase can be very difficult, even when they certainly have more than enough.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
HEDGEFUNDIE
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

rich126 wrote: Wed Dec 25, 2019 2:41 pm And I’d rather have someone who saves too much than someone who spends too much. The latter can become a burden to family and society.
If everyone were a miserly saver the economy would come crashing to a halt and our stocks would drop to zero.

We need more compulsive spenders, not fewer.
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Re: White Coat Investor: Enough is Enough!

Post by Godot »

rich126 wrote: Wed Dec 25, 2019 2:41 pm While I do find it a bit sad or annoying that some are so tight with money, I think it isn’t worth the effort to change them because that is simply what they are. And I’d rather have someone who saves too much than someone who spends too much. The latter can become a burden to family and society.

I worked with an engineer decades ago and still know him. He wouldn’t use the AC in his car, would let the car coast as much as possible and even to this day, in his mid 50s mostly bikes to work. He would stay at the end of parties and picnics to take the leftovers home. Nice guy and his brothers were normal but spending money just wasn’t in his dna.
Absolutely nothing wrong with any of that behavior. In the US we live in country of surplus, fueled by (often) irrational spending on junk and services that add little joy to one's life. I also don't use AC. In fact my 22-year old truck doesn't even have AC, and I mostly bike everywhere (I'm 61). Funny that you describe the engineer's brothers as "normal." I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Estragon: I can't go on like this. | Vladimir: That's what you think. | ― Samuel Beckett, Waiting for Godot
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willthrill81
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Re: White Coat Investor: Enough is Enough!

Post by willthrill81 »

HEDGEFUNDIE wrote: Wed Dec 25, 2019 3:40 pm
rich126 wrote: Wed Dec 25, 2019 2:41 pm And I’d rather have someone who saves too much than someone who spends too much. The latter can become a burden to family and society.
If everyone were a miserly saver the economy would come crashing to a halt and our stocks would drop to zero.

We need more compulsive spenders, not fewer.
I don't personally find the paradox of thrift compelling, mainly because I believe that real paradoxes are very rare, but there are some strictly logical criticisms of the concept. I won't get into them here in order to keep the thread on the rails.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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cashboy
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Re: White Coat Investor: Enough is Enough!

Post by cashboy »

Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)
obgraham
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Re: White Coat Investor: Enough is Enough!

Post by obgraham »

HEDGEFUNDIE wrote: Wed Dec 25, 2019 3:40 pm
rich126 wrote: Wed Dec 25, 2019 2:41 pm And I’d rather have someone who saves too much than someone who spends too much. The latter can become a burden to family and society.
If everyone were a miserly saver the economy would come crashing to a halt and our stocks would drop to zero.

We need more compulsive spenders, not fewer.
The problem, of course, is to link the idea of "spending" to those who can afford it, rather than those who cannot.
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bligh
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Re: White Coat Investor: Enough is Enough!

Post by bligh »

flyingaway wrote: Wed Dec 25, 2019 11:01 am
Dandy wrote: Wed Dec 25, 2019 7:39 am
Despite being forced into retirement twice :oops: I amassed sufficient assets/retirement income. I painted my house twice inside and out, changed my oil, rotated my tires etc. was on the cheap side of being fugal. When I finally retired at age 60 I used to walk every morning toward any place that served coffee and would fret just a bit when the price went up. I was facing 30 years or so of retirement. Of course retiring in 2008 - 9 was full of fear due to the market plunge.
You cannot be a model of frugality, I don't even drink coffee in a store, I drink tea at home in the morning.
Bah! You're not frugal unless you dry out the tea bags and re-use them.
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bligh
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Re: White Coat Investor: Enough is Enough!

Post by bligh »

BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm SSI is only 6.2% on first $130k?
Yes, if you are not self employed. You pay double that (12.4%) if you are.

Let's look at that hypothetical self-employed person making $500K / year living in California.
Property tax/state income tax?
State Income taxes. California. If you are making over 280K you are looking at 9.3% and then 10.3% past 340K.
Federal is pretty low.
Past 200K this hypothetical person's marginal tax rate is 35%.

Now add in medicare taxes that are levied at a flat rate on the entire amount. Which I believe is 2.9%.

You can see the marginal tax rate for this individual being 35% + 10.3% + 2.9 % = 48.2%

Now consider that the majority of their income is getting taxed at their marginal tax rate AND they paid 12.4% self employment tax on the first $130K. I haven't done all the numbers but I am sure you could find people making less than seven figures paying a tax rate of 40-45% over all.

Obviously these people are super high income and doing well for themselves too, but I can also see it hurting to pay that much :D ... I suppose it is a great problem to have lol
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

obgraham wrote: Wed Dec 25, 2019 4:45 pm
HEDGEFUNDIE wrote: Wed Dec 25, 2019 3:40 pm
rich126 wrote: Wed Dec 25, 2019 2:41 pm And I’d rather have someone who saves too much than someone who spends too much. The latter can become a burden to family and society.
If everyone were a miserly saver the economy would come crashing to a halt and our stocks would drop to zero.

We need more compulsive spenders, not fewer.
The problem, of course, is to link the idea of "spending" to those who can afford it, rather than those who cannot.
Most Bogleheads can afford most things that are discussed here. Houses, cars, college tuitions. And yet most threads make you out to be a deadbeat if you choose not to max out your 401k, Backdoor Roth, and taxable on your way to a 4% SWR.

I would not say Bogleheads has a compulsive spending problem.
ThankYouJack
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Re: White Coat Investor: Enough is Enough!

Post by ThankYouJack »

willthrill81 wrote: Tue Dec 24, 2019 11:16 pm Jim Dahle of the White Coat Investor reposted a very good blog post from 2012 with some updates today. Basically, it lays out what makes someone a 'compulsive saver' (e.g. spending money is literally painful, cannot fully enjoy activities that cost money) and tries to lay out ways that such a person can be 'treated' (e.g. remembering that different stages of life have different priorities and letting your significant other spend money on you).

While I don't think that I or my DW quite meet the 'compulsive saver' critieria, I must say that we do try to wring out a lot of value from the money we spend, though we're not as successful at this as some, like Justin at the Root of Good. Personally, I think of us as just being very frugal, not cheap. If we think that something that's 'expensive' will really provide us with a lot of value, we don't mind spending money for it.

What do you think makes someone a compulsive saver? How do we avoid becoming one?
I'm not a compulsive saver, but from personal experience I bet for many it comes down to their upbringing (maybe they grew up where money was a concern/anxiety) and the psychology behind feeling that there's not enough.

The feeling that there's a scarcity of money and not an abundance.

I'm similar to you Will trying to maximize value with purchases, but honestly I'd be happier if I was more of a satisfier instead of maximizer in that regard. I hate buyer's remorse and wasting money even if it's a fraction of a percent of my portfolio. I should care less.

In terms of avoiding becoming a compulsive saver, maybe assessing where the feelings are coming from. Is the need to save so much, because one is scared/anxious about the future? Why is that? And what sort of legacy does one want to leave - the largest estate possible, the largest impact possible, or? I think getting to the psychology behind why we feel anxious or whatever else will lead to greater happiness.
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Re: White Coat Investor: Enough is Enough!

Post by Cash »

The problem I have with the plan of thirds is that it can lead to lifestyle inflation. What if there is a future salary/bonus decrease after you have become accustomed to spending a larger amount? That can be a tough pill to swallow.
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

Cash wrote: Wed Dec 25, 2019 10:56 pm The problem I have with the plan of thirds is that it can lead to lifestyle inflation. What if there is a future salary/bonus decrease after you have become accustomed to spending a larger amount? That can be a tough pill to swallow.
You downsize, just like how in retirement when you have no new savings and the market crashes, you decrease your withdrawal rate.

The rule of thirds is intended to avoid the much more common affliction seen around here, and that is dying with a boatload of cash in your coffin. Lifestyle inflation is the point.
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Re: White Coat Investor: Enough is Enough!

Post by Artsdoctor »

BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Taking your example of $500,000 per year in California:

Total federal might be 24%
Total state might be 9%
FICA might be 6.2% but if one or two is self-employed, it’s 12.4%
Medicare would be 1.45% or 2.9% if self-employed plus surcharge for over $250,000
State disability 1%

Total would be about 45%, roughly.
New York City and others would be same or slightly more
shess
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Re: White Coat Investor: Enough is Enough!

Post by shess »

goblue100 wrote: Wed Dec 25, 2019 7:53 am Sometimes having the bell hop handle the bags
This one gets me. So far, every time I've ever let the bellhop handle the bags, we got to sit around for 15 or 20 minutes waiting for the damn bags to get there so we could do whatever we were planning to do next. So now I'll only do this if we want to checkin and want to leave immediately for an activity.

Same basic experience with other "time savers" like room service. Expensive food delivered later and cooler than pizza delivery.

Maybe I need to stay in nicer hotels :-).
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JoMoney
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Re: White Coat Investor: Enough is Enough!

Post by JoMoney »

Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm I’m curious about the ~45%’ers here. Can you provide some details?
FWIW, the post that started the topic/question of tax rate was only talking about 33% ... and included "charity" in that, for a good bit of people, 33% depending on what's counted in to taxes, doesn't leave much or anything for "charity"
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
mrsbetsy
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Re: White Coat Investor: Enough is Enough!

Post by mrsbetsy »

As small business owners, we can smell that "compulsive saver" from a mile away.

If you have a hard time getting those in the trades to show up, do any work for you, or call you back, you might want to check your persona.

We have to make a buck, too.

:moneybag :moneybag :moneybag
HEDGEFUNDIE
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm
BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Taking your example of $500,000 per year in California:

Total federal might be 24%
Total state might be 9%
FICA might be 6.2% but if one or two is self-employed, it’s 12.4%
Medicare would be 1.45% or 2.9% if self-employed plus surcharge for over $250,000
State disability 1%

Total would be about 45%, roughly.
New York City and others would be same or slightly more
From a real CA $500k’er:

500k dual earner W2 income
- 53k 401k contributions and company match
- 7k HSA
- 5k dependent care FSA
- 2k limited purpose FSA
- 3k pre-tax parking & transit
- 10k SALT
- 20k mortgage interest
- 10k charity
= 390k Federal taxable income

Federal tax: 85k
CA tax (slightly lower taxable income due to Federal nonconformity): 29k
Fed Payroll tax: 24k
CA Disability: 2k

Total income tax = 140k
29% effective rate

Replace my itemized deductions with the standard deduction, and you still don’t come close to 45%.
Last edited by HEDGEFUNDIE on Wed Dec 25, 2019 11:54 pm, edited 1 time in total.
HEDGEFUNDIE
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

JoMoney wrote: Wed Dec 25, 2019 11:36 pm
Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm I’m curious about the ~45%’ers here. Can you provide some details?
FWIW, the post that started the topic/question of tax rate was only talking about 33% ... and included "charity" in that, for a good bit of people, 33% depending on what's counted in to taxes, doesn't leave much or anything for "charity"
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
As my personal example shows, a 33% effective income tax rate means you are at $400–500k income in CA or even higher in a lower / no tax state.
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Artsdoctor
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Re: White Coat Investor: Enough is Enough!

Post by Artsdoctor »

^ Not everyone is a W2 employee. Some people don’t have 401ks but might have SIMPLEs. Some people pay double FICA and Medicare. Some people don’t itemize.

I’m not saying that it is a given that you’d approach 45%, and I personally do not. But I can see how you might start seeing those numbers under some circumstances.
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JoMoney
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Re: White Coat Investor: Enough is Enough!

Post by JoMoney »

HEDGEFUNDIE wrote: Wed Dec 25, 2019 11:53 pm
JoMoney wrote: Wed Dec 25, 2019 11:36 pm
Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm I’m curious about the ~45%’ers here. Can you provide some details?
FWIW, the post that started the topic/question of tax rate was only talking about 33% ... and included "charity" in that, for a good bit of people, 33% depending on what's counted in to taxes, doesn't leave much or anything for "charity"
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
As my personal example shows, a 33% effective income tax rate means you are at $400–500k income in CA or even higher in a lower / no tax state.
Not necessarily...
$130k a year in CA could easily be paying
17.3% to Federal + 7% to State + 7.7% OASDI/Medicare = 32%
Self Employed would double the OASDI/Medicare, if you counted any other use taxes, regulatory fees, sales taxes, etc... it's not that hard to get up there in the taxes earning a lot less..
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Ferdinand2014
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Re: White Coat Investor: Enough is Enough!

Post by Ferdinand2014 »

JoMoney wrote: Thu Dec 26, 2019 12:20 am
HEDGEFUNDIE wrote: Wed Dec 25, 2019 11:53 pm
JoMoney wrote: Wed Dec 25, 2019 11:36 pm
Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm I’m curious about the ~45%’ers here. Can you provide some details?
FWIW, the post that started the topic/question of tax rate was only talking about 33% ... and included "charity" in that, for a good bit of people, 33% depending on what's counted in to taxes, doesn't leave much or anything for "charity"
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
As my personal example shows, a 33% effective income tax rate means you are at $400–500k income in CA or even higher in a lower / no tax state.
Not necessarily...
$130k a year in CA could easily be paying
17.3% to Federal + 7% to State + 7.7% OASDI/Medicare = 32%
Self Employed would double the OASDI/Medicare, if you counted any other use taxes, regulatory fees, sales taxes, etc... it's not that hard to get up there in the taxes earning a lot less..

You can add property tax, federal and state gas tax as well.
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EddyB
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Re: White Coat Investor: Enough is Enough!

Post by EddyB »

bligh wrote: Wed Dec 25, 2019 4:52 pm
flyingaway wrote: Wed Dec 25, 2019 11:01 am
Dandy wrote: Wed Dec 25, 2019 7:39 am
Despite being forced into retirement twice :oops: I amassed sufficient assets/retirement income. I painted my house twice inside and out, changed my oil, rotated my tires etc. was on the cheap side of being fugal. When I finally retired at age 60 I used to walk every morning toward any place that served coffee and would fret just a bit when the price went up. I was facing 30 years or so of retirement. Of course retiring in 2008 - 9 was full of fear due to the market plunge.
You cannot be a model of frugality, I don't even drink coffee in a store, I drink tea at home in the morning.
Bah! You're not frugal unless you dry out the tea bags and re-use them.
The truly frugal dry out someone else’s tea bags.
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Re: White Coat Investor: Enough is Enough!

Post by EddyB »

HEDGEFUNDIE wrote: Wed Dec 25, 2019 11:44 pm
Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm
BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Taking your example of $500,000 per year in California:

Total federal might be 24%
Total state might be 9%
FICA might be 6.2% but if one or two is self-employed, it’s 12.4%
Medicare would be 1.45% or 2.9% if self-employed plus surcharge for over $250,000
State disability 1%

Total would be about 45%, roughly.
New York City and others would be same or slightly more
From a real CA $500k’er:

500k dual earner W2 income
- 53k 401k contributions and company match
- 7k HSA
- 5k dependent care FSA
- 2k limited purpose FSA
- 3k pre-tax parking & transit
- 10k SALT
- 20k mortgage interest
- 10k charity
= 390k Federal taxable income

Federal tax: 85k
CA tax (slightly lower taxable income due to Federal nonconformity): 29k
Fed Payroll tax: 24k
CA Disability: 2k

Total income tax = 140k
29% effective rate

Replace my itemized deductions with the standard deduction, and you still don’t come close to 45%.
Are you adding company 401(k) matches to W-2 income to get to the $500k, and then subtracting them out? Just curious about the -53k.
Cash
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Re: White Coat Investor: Enough is Enough!

Post by Cash »

HEDGEFUNDIE wrote: Wed Dec 25, 2019 11:05 pm
Cash wrote: Wed Dec 25, 2019 10:56 pm The problem I have with the plan of thirds is that it can lead to lifestyle inflation. What if there is a future salary/bonus decrease after you have become accustomed to spending a larger amount? That can be a tough pill to swallow.
You downsize, just like how in retirement when you have no new savings and the market crashes, you decrease your withdrawal rate.

The rule of thirds is intended to avoid the much more common affliction seen around here, and that is dying with a boatload of cash in your coffin. Lifestyle inflation is the point.
Yes, but it seems to me that it should be reasonable lifestyle inflation. I have thought about using the spending third to create a spending portfolio and withdrawing 4-5% of that annually to actually spend so that any lifestyle inflation could continue indefinitely. Maybe even increase the withdrawal rate to 10-25% and that would at least allow several years to adjust to a decrease in income.
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Re: White Coat Investor: Enough is Enough!

Post by HEDGEFUNDIE »

EddyB wrote: Thu Dec 26, 2019 1:25 am
HEDGEFUNDIE wrote: Wed Dec 25, 2019 11:44 pm
Artsdoctor wrote: Wed Dec 25, 2019 11:25 pm
BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Taking your example of $500,000 per year in California:

Total federal might be 24%
Total state might be 9%
FICA might be 6.2% but if one or two is self-employed, it’s 12.4%
Medicare would be 1.45% or 2.9% if self-employed plus surcharge for over $250,000
State disability 1%

Total would be about 45%, roughly.
New York City and others would be same or slightly more
From a real CA $500k’er:

500k dual earner W2 income
- 53k 401k contributions and company match
- 7k HSA
- 5k dependent care FSA
- 2k limited purpose FSA
- 3k pre-tax parking & transit
- 10k SALT
- 20k mortgage interest
- 10k charity
= 390k Federal taxable income

Federal tax: 85k
CA tax (slightly lower taxable income due to Federal nonconformity): 29k
Fed Payroll tax: 24k
CA Disability: 2k

Total income tax = 140k
29% effective rate

Replace my itemized deductions with the standard deduction, and you still don’t come close to 45%.
Are you adding company 401(k) matches to W-2 income to get to the $500k, and then subtracting them out? Just curious about the -53k.
Indeed I am
randomguy
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Re: White Coat Investor: Enough is Enough!

Post by randomguy »

Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
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Re: White Coat Investor: Enough is Enough!

Post by Godot »

randomguy wrote: Thu Dec 26, 2019 10:29 am
Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
That's not extreme frugality; that's a propensity for self harm. Big difference.
Estragon: I can't go on like this. | Vladimir: That's what you think. | ― Samuel Beckett, Waiting for Godot
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Re: White Coat Investor: Enough is Enough!

Post by willthrill81 »

randomguy wrote: Thu Dec 26, 2019 10:29 am
Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
Wow, that is bad. We don't like paying full retail (or higher) for anything that we don't have to, but we certainly will if there is a genuine need. When we have to, I kindly remind my wife that we need to remember that we're rich. :D
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: White Coat Investor: Enough is Enough!

Post by SCV_Lawyer »

BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Marginal rate is 52.4%:

Federal: 37%
State: 12.3% (CA)
Medicare: 2.9% (self-employed)
Obamacare Medicare surtax: 0.9%
Subtract: 0.7% (half of Medicare is deductible against fed and state taxes)

37 + 12.3 + 2.9 + 0.9 - 0.7 = 52.4%
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Re: White Coat Investor: Enough is Enough!

Post by transient_academic »

Godot wrote: Wed Dec 25, 2019 2:26 pm
flyingaway wrote: Wed Dec 25, 2019 11:01 am
Dandy wrote: Wed Dec 25, 2019 7:39 am
Despite being forced into retirement twice :oops: I amassed sufficient assets/retirement income. I painted my house twice inside and out, changed my oil, rotated my tires etc. was on the cheap side of being fugal. When I finally retired at age 60 I used to walk every morning toward any place that served coffee and would fret just a bit when the price went up. I was facing 30 years or so of retirement. Of course retiring in 2008 - 9 was full of fear due to the market plunge.
You cannot be a model of frugality, I don't even drink coffee in a store, I drink tea at home in the morning.
Water for me, and I get it from my neighbor's hose when he's still sleeping. Utilities are going up!
Look at this fat cat here, that hose will eventually fall apart and then you'll have to replace it! I go through people's recycling bins for old milk jugs and leave them out to collect rain. Then I sell the water at the farmer's market.
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Re: White Coat Investor: Enough is Enough!

Post by ThankYouJack »

willthrill81 wrote: Thu Dec 26, 2019 11:33 am
randomguy wrote: Thu Dec 26, 2019 10:29 am
Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
Wow, that is bad. We don't like paying full retail (or higher) for anything that we don't have to, but we certainly will if there is a genuine need. When we have to, I kindly remind my wife that we need to remember that we're rich. :D
Why was the friend hospitalized? I'd say it's unfortunate, not bad.
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Re: White Coat Investor: Enough is Enough!

Post by drzzzzz »

You can't teach someone who has been a saver over a lifetime to suddenly turn into a spender - it's all about your resources, moderation, a mindset of realizing you can't take it with you, and appreciating that experiences (which cost money) will give you as much enjoyment, if not more, than just saving dollars and watching your account increase in size.
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Re: White Coat Investor: Enough is Enough!

Post by willthrill81 »

ThankYouJack wrote: Thu Dec 26, 2019 3:34 pm
willthrill81 wrote: Thu Dec 26, 2019 11:33 am
randomguy wrote: Thu Dec 26, 2019 10:29 am
Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
Wow, that is bad. We don't like paying full retail (or higher) for anything that we don't have to, but we certainly will if there is a genuine need. When we have to, I kindly remind my wife that we need to remember that we're rich. :D
Why was the friend hospitalized? I'd say it's unfortunate, not bad.
Probably dehydration leading to heat exhaustion or maybe even heat stroke, but it was randomguy's friend, not mine.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: White Coat Investor: Enough is Enough!

Post by SQRT »

drzzzzz wrote: Thu Dec 26, 2019 4:51 pm You can't teach someone who has been a saver over a lifetime to suddenly turn into a spender - it's all about your resources, moderation, a mindset of realizing you can't take it with you, and appreciating that experiences (which cost money) will give you as much enjoyment, if not more, than just saving dollars and watching your account increase in size.
Agree to some degree, but I would think most people would be flexible enough to change their habits to some degree over time. For the first 10 years of my retirement we generally only spent divs and pension. Now we are liquidating some of the portfolio to increase spending. There are plenty of things I can spend on that make me happy. I would also like to leave a reasonable legacy to my daughter. Balance seems the best approach,

it seems a little surprising to me that some people lock into a lifestyle and just can’t change. I guess a downward change would be actually easier for these people? I think I could easily reduce my lifestyle if necessary and looks like I’m proving to myself I can increase it too.
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Re: White Coat Investor: Enough is Enough!

Post by Artsdoctor »

SCV_Lawyer wrote: Thu Dec 26, 2019 12:09 pm
BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Marginal rate is 52.4%:

Federal: 37%
State: 12.3% (CA)
Medicare: 2.9% (self-employed)
Obamacare Medicare surtax: 0.9%
Subtract: 0.7% (half of Medicare is deductible against fed and state taxes)

37 + 12.3 + 2.9 + 0.9 - 0.7 = 52.4%
All is not lost. Remember, marginal rate is very different than total tax rate. It is true that your marginal federal tax rate may not have changed appreciably with the new federal tax law, but the absolute amount is almost certainly less than previously; you're going to go through multiple tax brackets to get where your current marginal rate is. I'm not sure who to attribute the 33-33-33 money "rule" to since its' been around for a long time.

The compulsive saver as questioned above is on a spectrum of obsessive-compulsive personality disorder, and probably overlaps a bit with hoarding. There's a big difference between super savers and people who are compulsive savers. Like most things, a "disorder" is something that truly interferes with your day-to-day fundamental living routine. I think you'd be looking for a pattern to demonstrate a real problem: continuing to buy super cheap things only to replace them continuously because they fall apart, not being able to enjoy special splurges for special events, obsessing over saving $1 while out to dinner or some other spending event, inability to go out with friends and family despite having the money to do so, being unwilling to buy necessities (food, basic clothing, shelter, medicine) despite having the money to do so, buying things compulsively because they're on sale despite not really needing them, etc., etc. Anytime there's truly fear associated with something, like money, you'd probably be wanting to look into it further.
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Re: White Coat Investor: Enough is Enough!

Post by dmcmahon »

SCV_Lawyer wrote: Thu Dec 26, 2019 12:09 pm
Marginal rate is 52.4%:

Federal: 37%
State: 12.3% (CA)
Medicare: 2.9% (self-employed)
Obamacare Medicare surtax: 0.9%
Subtract: 0.7% (half of Medicare is deductible against fed and state taxes)

37 + 12.3 + 2.9 + 0.9 - 0.7 = 52.4%
It’s a bit worse if you have investment income, because dollar for dollar above a certain level you start triggering a higher tax rate and then the Medicare surtax on your investment income. On a marginal basis you can get above 55%. I don’t know anyone who cares about the blended rate being lower - decisions about investments and work hours are made at the margin.
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Re: White Coat Investor: Enough is Enough!

Post by abuss368 »

randomguy wrote: Thu Dec 26, 2019 10:29 am
Godot wrote: Wed Dec 25, 2019 3:55 pm I derive a lot of satisfaction from both saving money and from not spending it. "Compulsive" is most often used to describe mental illnesses that sufferers have little control over. I'm not sure it's the right adjective for this thread.
Extreme frugality is a mental issue. I have a friend who ended up in in the hospital because they were unable to spend 2 dollars on a bottle of water on a hot day because paying for water wasn't something they could do.
Incredible. From a cost benefit analysis was the $2.00 bottle of water lowered than any medical costs incurred not covered by insurance.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: White Coat Investor: Enough is Enough!

Post by Artsdoctor »

dmcmahon wrote: Thu Dec 26, 2019 6:08 pm
SCV_Lawyer wrote: Thu Dec 26, 2019 12:09 pm
Marginal rate is 52.4%:

Federal: 37%
State: 12.3% (CA)
Medicare: 2.9% (self-employed)
Obamacare Medicare surtax: 0.9%
Subtract: 0.7% (half of Medicare is deductible against fed and state taxes)

37 + 12.3 + 2.9 + 0.9 - 0.7 = 52.4%
It’s a bit worse if you have investment income, because dollar for dollar above a certain level you start triggering a higher tax rate and then the Medicare surtax on your investment income. On a marginal basis you can get above 55%. I don’t know anyone who cares about the blended rate being lower - decisions about investments and work hours are made at the margin.
Marginal rate is definitely going to be the most useful for investment planning as well as income and even deductions. The total federal (and state) percentages can useful if you’re self-employed and trying to estimate your tax payments. But I also think it’s important for people to understand the difference: you may have a marginal tax rate of 50% but it would be incorrect to say that you’re paying 50% of your income in taxes. People DO say this if the subject of taxes comes up and your credibility takes a hit when you insist on it.
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Re: White Coat Investor: Enough is Enough!

Post by SCV_Lawyer »

Artsdoctor wrote: Thu Dec 26, 2019 7:37 pm
dmcmahon wrote: Thu Dec 26, 2019 6:08 pm
SCV_Lawyer wrote: Thu Dec 26, 2019 12:09 pm
Marginal rate is 52.4%:

Federal: 37%
State: 12.3% (CA)
Medicare: 2.9% (self-employed)
Obamacare Medicare surtax: 0.9%
Subtract: 0.7% (half of Medicare is deductible against fed and state taxes)

37 + 12.3 + 2.9 + 0.9 - 0.7 = 52.4%
It’s a bit worse if you have investment income, because dollar for dollar above a certain level you start triggering a higher tax rate and then the Medicare surtax on your investment income. On a marginal basis you can get above 55%. I don’t know anyone who cares about the blended rate being lower - decisions about investments and work hours are made at the margin.
Marginal rate is definitely going to be the most useful for investment planning as well as income and even deductions. The total federal (and state) percentages can useful if you’re self-employed and trying to estimate your tax payments. But I also think it’s important for people to understand the difference: you may have a marginal tax rate of 50% but it would be incorrect to say that you’re paying 50% of your income in taxes. People DO say this if the subject of taxes comes up and your credibility takes a hit when you insist on it.
Absolutely true that 52% is not my effective tax rate (thank God). My effective rate is around 38%. In addition to the tax rates being graduated, I am fortunate to have a lot of reductions and deductions available ($400K worth) from 401K/Keogh contributions, cash balance plan contributions, deferred comp, HSA, health care premium deductions, deduction for the self-employed half of FICA and Medicare and standard deduction.

But the marginal rate certainly comes into play for investments (munis vs regular bonds) and my motivaiton to work hard to make the next dollar.
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Re: White Coat Investor: Enough is Enough!

Post by texasdiver »

AlohaJoe wrote: Wed Dec 25, 2019 7:06 am
AlphaLess wrote: Wed Dec 25, 2019 3:12 am
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
How do you rebalance the tax piece?

Taxes are closer to 45% for us.
Taxes of 45% require an income of $750,000 a year for a single person or $1,500,000 a year for a married couple (assuming California state taxes).

I would assume the standard answer is that you negotiate with your employer to get a salary of less than $1.5 million a year in exchange for more equity or deferred compensation.

Either that, or realize that rules of thumb on the internet are worth what you paid for them.
Perhaps if you are only counting income taxes. Add in payroll taxes, property taxes, and sales taxes and I expect many here are pushing 45%.
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Re: White Coat Investor: Enough is Enough!

Post by MathIsMyWayr »

texasdiver wrote: Thu Dec 26, 2019 11:19 pm
AlohaJoe wrote: Wed Dec 25, 2019 7:06 am
AlphaLess wrote: Wed Dec 25, 2019 3:12 am
HEDGEFUNDIE wrote: Tue Dec 24, 2019 11:22 pm 1/3 spending
1/3 savings
1/3 taxes / charity

Just like with my portfolio, I try to rebalance if any piece becomes too large or small.
How do you rebalance the tax piece?

Taxes are closer to 45% for us.
Taxes of 45% require an income of $750,000 a year for a single person or $1,500,000 a year for a married couple (assuming California state taxes).

I would assume the standard answer is that you negotiate with your employer to get a salary of less than $1.5 million a year in exchange for more equity or deferred compensation.

Either that, or realize that rules of thumb on the internet are worth what you paid for them.
Perhaps if you are only counting income taxes. Add in payroll taxes, property taxes, and sales taxes and I expect many here are pushing 45%.
Unless you want to study how much is the government's total share of the economy, what is the point in counting property taxes or sales taxes? There are various taxes added even in the price before sales taxes.
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Re: White Coat Investor: Enough is Enough!

Post by heyyou »

By age 25, it was obvious that I only needed to work until I had saved enough to no longer need any job income.
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Re: White Coat Investor: Enough is Enough!

Post by timboktoo »

I can't think of a practice more important in my life than mindfulness. Understanding my feelings, rather than being ruled by them, seems to me to be the key to avoiding maladaptive behaviors, including unhealthy actions taken with money.

- Tim
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Re: White Coat Investor: Enough is Enough!

Post by willthrill81 »

timboktoo wrote: Fri Dec 27, 2019 12:18 am I can't think of a practice more important in my life than mindfulness. Understanding my feelings, rather than being ruled by them, seems to me to be the key to avoiding maladaptive behaviors, including unhealthy actions taken with money.
Very wisely said. Over the last several years, my wife and I have intentionally become increasingly purposeful with almost everything that we do (e.g. raising our daughter, our faith, eating, exercise, who we spend time with, how we spend), and we have both been extremely pleased with the results. We are really trying to implement Stephen Covey's idea of 'begin with the end in mind'. With regard to the topic of this thread, this doesn't mean at all that we don't do fun, luxuriant things from time to time. But when we do, they are special, out of the ordinary activities that build lasting memories, and, consequently, we enjoy them much more than if we did them all the time. We carefully weigh what will provide us with the most value when we determine how to spend. As Paula Pant says on every episode of her Afford Anything podcast, 'you can afford anything but not everything', and you have to prioritize your life's goals and activities or else you'll likely flounder.

I have a working friend who I recently had a tough conversation with. Her family clearly hasn't prioritized their goals, and they're being pulled in so many directions that they don't feel that they are making headway with anything. I told her what we've done (e.g. focus on what's truly important and reduce/eliminate everything else), and she was a bit surprised at the simplicity of the idea. I hope that they take it to heart.
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Re: White Coat Investor: Enough is Enough!

Post by sf_tech_saver »

BanquetBeer wrote: Wed Dec 25, 2019 12:53 pm I’m curious about the ~45%’ers here. Can you provide some details?

SSI is only 6.2% on first $130k?
Medicare is 1.45-2.35%
Property tax/state income tax?
Federal is pretty low.

Without prop/state on an income of $500k W2 (standard deductions and two 401k) gets you around $110k it tax or 22%

Are people saying they have another $120k of state/property? Or are they upset that they earn LOTS of money and spend most of it annually requiring high tax?
Top top marginal bracket in California is closer to 51% -- 37% Federal, 13% State, Medicare, SSI....

Getting to 45% total taxes is just a question of how far into 7 figures your W2 stretches....but it is not that uncommon in CA in IPO outcome years etc.
Last edited by sf_tech_saver on Fri Dec 27, 2019 2:30 am, edited 1 time in total.
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Re: White Coat Investor: Enough is Enough!

Post by sf_tech_saver »

Sales managers have a saying that they want a salesperson on their team to spend everything they make and more so they show up hungry.

As I approach a ~$4M portfolio this year at 41 years old I've been somewhat struggling with how much to spend/save. It a strange feeling to know I could retire modestly to a LCOL area and I've been watching how it affects my career psychology. I've decided to set new goals like an absolute minimum of $7M portfolio to ever step back at work, perhaps a vacation home for the family etc.

I love having more of a nest egg now in a nice 70/30 2 fund portfolio -- but there is also real power in staying ambitious and hungry in your pursuits/career.

Its healthy to keep chasing the ring....even if you have a few already in your pocket. So I think a spending plan can be just as important as a savings plan at some point....
VTI is a modern marvel
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Re: White Coat Investor: Enough is Enough!

Post by Xrayman69 »

sf_tech_saver wrote: Fri Dec 27, 2019 2:15 am Sales managers have a saying that they want a salesperson on their team to spend everything they make and more so they show up hungry.

As I approach a ~$4M portfolio this year at 41 years old I've been somewhat struggling with how much to spend/save. It a strange feeling to know I could retire modestly to a LCOL area and I've been watching how it affects my career psychology. I've decided to set new goals like an absolute minimum of $7M portfolio to ever step back at work, perhaps a vacation home for the family etc.

I love having more of a nest egg now in a nice 70/30 2 fund portfolio -- but there is also real power in staying ambitious and hungry in your pursuits/career.

Its healthy to keep chasing the ring....even if you have a few already in your pocket. So I think a spending plan can be just as important as a savings plan at some point....
It provides freedom to pursue activities that are more directed towards professional satisfaction as opposed to basic needs. [Comment deleted by moderator oldcomputerguy] Liberating to know as well as funny to realize that this position can further enhance income because professional growth is often rewarded, a positive feedback cycle.

Congrats on having perspective and having achieved a level in which your financial security has permitted the opportunity to reflect, reassess, and adjust in a healthy manner. It’s not “chasing” more money but rather pursuing interest that also happen to continue to be financially rewarding.
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Re: White Coat Investor: Enough is Enough!

Post by BanquetBeer »

sf_tech_saver wrote: Fri Dec 27, 2019 1:56 am
Top top marginal bracket in California is closer to 51% -- 37% Federal, 13% State, Medicare, SSI....

Getting to 45% total taxes is just a question of how far into 7 figures your W2 stretches....but it is not that uncommon in CA in IPO outcome years etc.
In CA you would have to earn about $2.9 million/yr with no deductions to hit 45% and $10 million/yr to get close to 50%

While it is possible, even for this forum it would be pretty rare event.

The previous posts referenced typical annual income less than $1mill so don’t think this was originally about once in a company IPO events.
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Re: White Coat Investor: Enough is Enough!

Post by getthatmarshmallow »

Cash wrote: Wed Dec 25, 2019 10:56 pm The problem I have with the plan of thirds is that it can lead to lifestyle inflation. What if there is a future salary/bonus decrease after you have become accustomed to spending a larger amount? That can be a tough pill to swallow.
The plan of thirds is more or less what I follow (a little more aggressive than that, but the principle is pay yourself first), and the key is to not let lifestyle inflation hit the big lifestyle upgrades (house, mostly), and have a healthy emergency fund. We can cut our income by more than half and meet all of our obligations (and we've done that, so it's not just speculation. More fun having more money tho.) Or one could set one's "third" excluding bonuses.

Beyond that, as long as we're not talking "losing the house" or "not eating", then one simply gets accustomed to spending less. All hoarding it does is ensure that one is swallowing the "tough pill" for no reason.
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