Normchad wrote: ↑Mon Dec 28, 2020 10:52 pm
TravelGeek wrote: ↑Mon Dec 28, 2020 10:42 pm
corp_sharecropper wrote: ↑Mon Dec 28, 2020 10:31 pm
Haven't read every post but having been a member here for a good bit I can say there are tons of people and tons of advice that are letting the tax tail wag the dog around these parts. It's as if logic & reason go out the window as soon taxes come into play. Sometimes I'm not even sure some posters actually understand that taxes are owed on profits, literally I get the impression that there are people who actively avoid gains because they're gonna get taxed.
I am more concerned/surprised about the amount of time some people spend discussing strategies to save a few bucks on their tax software... every
That's a good point too! I'm always amazed at how little most people understand about their own taxes. I don't think I know anybody in real life that could *their own taxes* with a pencil and the forms from the library.
Unfortunately for them, they will never know how much their own ignorance is costing them.....
I do and have done my taxes by hand for over 20 years. I do it to see how my government interprets and incentives certain behaviors/businesses. The simplification that supposedly occurred a few years ago didn't simplify anything for me. I have double the amount of forms now for a very similar income situation.
To the OP, tax efficiency can become important when one is older and has RMDs. There are many models available to determine whether or not to do Roth conversions or RMDs. That type of decision is very specific to the income and investment scenario of the person. It also depends on the age of that person and their marital status.
Also, the tax laws and retirement vehicle investment opportunities have changed significantly over the last 20-30 years. Many of us have lived through those changes and have had to adapt to our income, retirement and tax situations. The tax rates have fluctuated as well as the tax treatment of investment gains.
As most here, I would choose financial behavior as #1 with income a very close #2. Changing behavior can be much more difficult once it is entrenched. Ask any doctor about patients they have who need to change their behavior for health reasons (smoking, drinking, drugs, obesity, etc). I would place tax strategies in the top ten and if one has a 'gap' to be able to transition tax deferred savings to a Roth situation, then if the model shows tax savings over RMD taxes, it's probably best to convert. But as above, YMMV and that is due to your income stream situation over time.
I-orp/RPM do fairly decent jobs of modeling possible tax scenarios based on one's situation. Compared to what was available 10-20 years ago to model one's situation, we are fortunate indeed to be able to make very well-informed decisions if we wish to.
Happy New Year