Net Worth ??

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abuss368
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Re: Net Worth ??

Post by abuss368 » Sun Jan 12, 2020 10:29 am

acegolfer wrote:
Sun Jan 12, 2020 10:08 am
FYI, how the Fed calculates Net Worth. (list of assets and liabilities)

https://www.federalreserve.gov/econres/ ... wchart.pdf
Thanks for sharing that interesting chart.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

EnjoyIt
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Re: Net Worth ??

Post by EnjoyIt » Sun Jan 12, 2020 10:38 am

smitcat wrote:
Sun Jan 12, 2020 9:58 am
EnjoyIt wrote:
Sun Jan 12, 2020 9:12 am
smitcat wrote:
Sun Jan 12, 2020 8:25 am
EnjoyIt wrote:
Sat Jan 11, 2020 2:29 pm
Bovinae wrote:
Sat Jan 11, 2020 2:22 pm
I don’t worry about future tax liabilities in calculating net worth, but I do discount the value of my tax-deferred and taxable accounts for AA purposes, as I plan my AA across all accounts. My rough rule of thumb is to value assets in Roth at 100% and everything else at 80%. Not very refined but probably good enough.
20% is a huge tax cut. Unless you are worth 8 figures, I highly doubt you will be paying 20% in capital gains / dividends and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up.

Also, the purpose of having an AA and mainly having bonds in your account is for some stability to your investments. It is to keep you from making mistakes during a downturn, and it is to provide you with some fixed income incase you need it. I do not see how adjusting your asset allocation by 20% in certain accounts adds value in determining an AA. All it dose is add complexity.

I can understand maybe doing some mental accounting to hep you understand your net worth. But doing so to figure out your AA in my opinion is an added complexity that adds no additional benefit.

This is just my opinion so do with it as you will.
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
FWIW - not that unlikely in our experience when folks have pensions from various occupations such as fireman, LEO, teacher, VA, Fed., local government, etc.
And when both spouse's have these pensions the tax is usually higher.
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases. My goal was to have that one person evaluate their own situation instead of making a blanket conclusion that added unnecessary complexity. What is your goal?
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases"
Unlikely and rare not in my experience - there are so many folks I know that are teachers, LEO's, fireman , Fed and the like.
"What is your goal?"
My goal is to potentially assist people with these posts. Since I know many folks that have or will have pensions like these (VA, Fireman, Fed , Police, local govmt, etc) yet they do not understand these future tax situations I wanted to make sure they consider it.
We also have many family members that have these pensions and have not considered this.
For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
Last edited by EnjoyIt on Sun Jan 12, 2020 1:41 pm, edited 1 time in total.

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JoMoney
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Re: Net Worth ??

Post by JoMoney » Sun Jan 12, 2020 11:03 am

You wouldn't have any tax liability on your tax deferred accounts if you kept your income/withdrawals below the standard deduction.
At the current $12,000 (single), that would be living at the poverty level, but I don't think it's hard to imagine if someone otherwise had there rent/housing expenses covered, and maybe went without a car.
If you had the means to do better though, I think it might be worth paying taxes to have a higher standard of living.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

EnjoyIt
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Re: Net Worth ??

Post by EnjoyIt » Sun Jan 12, 2020 1:48 pm

JoMoney wrote:
Sun Jan 12, 2020 11:03 am
You wouldn't have any tax liability on your tax deferred accounts if you kept your income/withdrawals below the standard deduction.
At the current $12,000 (single), that would be living at the poverty level, but I don't think it's hard to imagine if someone otherwise had there rent/housing expenses covered, and maybe went without a car.
If you had the means to do better though, I think it might be worth paying taxes to have a higher standard of living.
Livesoft a few years back showed how someone can live on $100k/yr and pay $0 in taxes. A married couple can withdraw $24,800 from a pre-tax account and the rest come from Roth, taxable (taxed at 0% capital gains,) HSA for medical expenses and pay $0 in taxes. Again, once SS kicks in all of that goes out the window and more complex entirely new calculations need to be done.

smitcat
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Re: Net Worth ??

Post by smitcat » Sun Jan 12, 2020 2:56 pm

EnjoyIt wrote:
Sun Jan 12, 2020 10:38 am
smitcat wrote:
Sun Jan 12, 2020 9:58 am
EnjoyIt wrote:
Sun Jan 12, 2020 9:12 am
smitcat wrote:
Sun Jan 12, 2020 8:25 am
EnjoyIt wrote:
Sat Jan 11, 2020 2:29 pm


20% is a huge tax cut. Unless you are worth 8 figures, I highly doubt you will be paying 20% in capital gains / dividends and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up.

Also, the purpose of having an AA and mainly having bonds in your account is for some stability to your investments. It is to keep you from making mistakes during a downturn, and it is to provide you with some fixed income incase you need it. I do not see how adjusting your asset allocation by 20% in certain accounts adds value in determining an AA. All it dose is add complexity.

I can understand maybe doing some mental accounting to hep you understand your net worth. But doing so to figure out your AA in my opinion is an added complexity that adds no additional benefit.

This is just my opinion so do with it as you will.
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
FWIW - not that unlikely in our experience when folks have pensions from various occupations such as fireman, LEO, teacher, VA, Fed., local government, etc.
And when both spouse's have these pensions the tax is usually higher.
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases. My goal was to have that one person evaluate their own situation instead of making a blanket conclusion that added unnecessary complexity. What is your goal?
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases"
Unlikely and rare not in my experience - there are so many folks I know that are teachers, LEO's, fireman , Fed and the like.
"What is your goal?"
My goal is to potentially assist people with these posts. Since I know many folks that have or will have pensions like these (VA, Fireman, Fed , Police, local govmt, etc) yet they do not understand these future tax situations I wanted to make sure they consider it.
We also have many family members that have these pensions and have not considered this.
For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.

EnjoyIt
Posts: 3123
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Re: Net Worth ??

Post by EnjoyIt » Sun Jan 12, 2020 4:10 pm

smitcat wrote:
Sun Jan 12, 2020 2:56 pm
EnjoyIt wrote:
Sun Jan 12, 2020 10:38 am
smitcat wrote:
Sun Jan 12, 2020 9:58 am
EnjoyIt wrote:
Sun Jan 12, 2020 9:12 am
smitcat wrote:
Sun Jan 12, 2020 8:25 am


"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
FWIW - not that unlikely in our experience when folks have pensions from various occupations such as fireman, LEO, teacher, VA, Fed., local government, etc.
And when both spouse's have these pensions the tax is usually higher.
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases. My goal was to have that one person evaluate their own situation instead of making a blanket conclusion that added unnecessary complexity. What is your goal?
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases"
Unlikely and rare not in my experience - there are so many folks I know that are teachers, LEO's, fireman , Fed and the like.
"What is your goal?"
My goal is to potentially assist people with these posts. Since I know many folks that have or will have pensions like these (VA, Fireman, Fed , Police, local govmt, etc) yet they do not understand these future tax situations I wanted to make sure they consider it.
We also have many family members that have these pensions and have not considered this.
For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.
Who is talking about the 22% tax bracket? Why are you bringing up another topic?

JustinR
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Re: Net Worth ??

Post by JustinR » Sun Jan 12, 2020 4:25 pm

I feel you're paying taxes after retirement you're bad at planning.

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Sun Jan 12, 2020 4:26 pm

EnjoyIt wrote:
Sun Jan 12, 2020 4:10 pm
smitcat wrote:
Sun Jan 12, 2020 2:56 pm
EnjoyIt wrote:
Sun Jan 12, 2020 10:38 am
smitcat wrote:
Sun Jan 12, 2020 9:58 am
EnjoyIt wrote:
Sun Jan 12, 2020 9:12 am


Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases. My goal was to have that one person evaluate their own situation instead of making a blanket conclusion that added unnecessary complexity. What is your goal?
Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases"
Unlikely and rare not in my experience - there are so many folks I know that are teachers, LEO's, fireman , Fed and the like.
"What is your goal?"
My goal is to potentially assist people with these posts. Since I know many folks that have or will have pensions like these (VA, Fireman, Fed , Police, local govmt, etc) yet they do not understand these future tax situations I wanted to make sure they consider it.
We also have many family members that have these pensions and have not considered this.
For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.
Who is talking about the 22% tax bracket? Why are you bringing up another topic?
When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Sun Jan 12, 2020 4:39 pm

smitcat wrote:
Sun Jan 12, 2020 4:26 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:10 pm
smitcat wrote:
Sun Jan 12, 2020 2:56 pm
EnjoyIt wrote:
Sun Jan 12, 2020 10:38 am
smitcat wrote:
Sun Jan 12, 2020 9:58 am


Thanks for pulling up an example that is “unlikely” but possible I can think of a few other rare cases"
Unlikely and rare not in my experience - there are so many folks I know that are teachers, LEO's, fireman , Fed and the like.
"What is your goal?"
My goal is to potentially assist people with these posts. Since I know many folks that have or will have pensions like these (VA, Fireman, Fed , Police, local govmt, etc) yet they do not understand these future tax situations I wanted to make sure they consider it.
We also have many family members that have these pensions and have not considered this.
For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.
Who is talking about the 22% tax bracket? Why are you bringing up another topic?
When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.
But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.

aristotelian
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Re: Net Worth ??

Post by aristotelian » Sun Jan 12, 2020 4:42 pm

It depends on the purpose of the calculation. Generally I would consider taxes to be an expense in retirement and to count the full pretax value of investment accounts.

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abuss368
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Re: Net Worth ??

Post by abuss368 » Sun Jan 12, 2020 4:44 pm

aristotelian wrote:
Sun Jan 12, 2020 4:42 pm
It depends on the purpose of the calculation. Generally I would consider taxes to be an expense in retirement and to count the full pretax value of investment accounts.
Correct. Once tax expense is determined and due then it is a liability on the balance sheet.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Sun Jan 12, 2020 4:44 pm

EnjoyIt wrote:
Sun Jan 12, 2020 4:39 pm
smitcat wrote:
Sun Jan 12, 2020 4:26 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:10 pm
smitcat wrote:
Sun Jan 12, 2020 2:56 pm
EnjoyIt wrote:
Sun Jan 12, 2020 10:38 am


For some accuracy, please create a scenario using todays tax code that will get someone paying 20% in federal taxes? The income required to hit 20% taxes using todays tax code is about $375k/yr. Go ahead and show us a likely scenario that two teachers or firefighters will get there.

Having pensions or other sources of income in retirement will put people in higher tax brackets but it is a rare situation where it will make their federal tax 20% which was the discussion at hand. The actual math is important.
The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.
Who is talking about the 22% tax bracket? Why are you bringing up another topic?
When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.
But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.
This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Sun Jan 12, 2020 4:51 pm

smitcat wrote:
Sun Jan 12, 2020 4:44 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:39 pm
smitcat wrote:
Sun Jan 12, 2020 4:26 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:10 pm
smitcat wrote:
Sun Jan 12, 2020 2:56 pm


The 22% marginal tax bracket starts much lower today ($102K MFJ after $24K ded) and will be higher when this tax rebate sunsets.
Who is talking about the 22% tax bracket? Why are you bringing up another topic?
When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.
But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.
This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Mon Jan 13, 2020 9:23 am

EnjoyIt wrote:
Sun Jan 12, 2020 4:51 pm
smitcat wrote:
Sun Jan 12, 2020 4:44 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:39 pm
smitcat wrote:
Sun Jan 12, 2020 4:26 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:10 pm


Who is talking about the 22% tax bracket? Why are you bringing up another topic?
When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.
But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.
This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.
I pointed out that you would be paying more than 20% tax on your pre-tax account dollars if you have a reasonable pension.
If you have a pension and you do not plan for that it will be a very unpleasant surprise when you have RMD's &/or whenever you take the funds out of the pre tax accounts.
It will not be the case as in your post quoted again here..."and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."

dbr
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Re: Net Worth ??

Post by dbr » Mon Jan 13, 2020 9:32 am

It is entirely possible to pay an effective tax rate at near 20% if a person has pensions, Social Security, and RMDs in account (or any of a variety of other sources of taxable income). It is also entirely possible that the effective tax rate is much less than that.

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Mon Jan 13, 2020 10:17 am

smitcat wrote:
Mon Jan 13, 2020 9:23 am
EnjoyIt wrote:
Sun Jan 12, 2020 4:51 pm
smitcat wrote:
Sun Jan 12, 2020 4:44 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:39 pm
smitcat wrote:
Sun Jan 12, 2020 4:26 pm


When you are married filing jointly your standard deduction is $24K.
So zero to $24K is zero tax
Above that your next bracket is 24-43K at 10%.
Above that is 43-102K at 12%.
So above $102K MFJ your taxes will be at least 22% for all dollars.
Any pension(s) that exceed that level of $102K per year will be at least at a 22% level and likely more considering SS and the like.

That would result in all RMD's from pre tax accounts being above 22%.
But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.
This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.
I pointed out that you would be paying more than 20% tax on your pre-tax account dollars if you have a reasonable pension.
If you have a pension and you do not plan for that it will be a very unpleasant surprise when you have RMD's &/or whenever you take the funds out of the pre tax accounts.
It will not be the case as in your post quoted again here..."and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
dbr wrote:
Mon Jan 13, 2020 9:32 am
It is entirely possible to pay an effective tax rate at near 20% if a person has pensions, Social Security, and RMDs in account (or any of a variety of other sources of taxable income). It is also entirely possible that the effective tax rate is much less than that.
Of course it is possible. Have you two figured out how much income a family of 2 needs to make to pay an effective 20% in federal taxes? Please do that and then realize how rare that really is in todays tax code.

It is also possible that once certain sources of income start coming in, it will place a family into the 22% and even the 24% tax brackets and that is far more common, but to get to an effective 20% federal tax, that income needs to be very high which very few retirees in the US get to see. I know what that income needs to be because I calculated it, and urge you to do the same before continuing this discussion further.

Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own.

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Mon Jan 13, 2020 11:46 am

EnjoyIt wrote:
Mon Jan 13, 2020 10:17 am
smitcat wrote:
Mon Jan 13, 2020 9:23 am
EnjoyIt wrote:
Sun Jan 12, 2020 4:51 pm
smitcat wrote:
Sun Jan 12, 2020 4:44 pm
EnjoyIt wrote:
Sun Jan 12, 2020 4:39 pm


But that is not what the discussion was about. I know how the tax brackets work. Please feel free to go back as I think you may have misread and misinterpreted the discussion that stemmed this dialogue.
This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.
I pointed out that you would be paying more than 20% tax on your pre-tax account dollars if you have a reasonable pension.
If you have a pension and you do not plan for that it will be a very unpleasant surprise when you have RMD's &/or whenever you take the funds out of the pre tax accounts.
It will not be the case as in your post quoted again here..."and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
dbr wrote:
Mon Jan 13, 2020 9:32 am
It is entirely possible to pay an effective tax rate at near 20% if a person has pensions, Social Security, and RMDs in account (or any of a variety of other sources of taxable income). It is also entirely possible that the effective tax rate is much less than that.
Of course it is possible. Have you two figured out how much income a family of 2 needs to make to pay an effective 20% in federal taxes? Please do that and then realize how rare that really is in todays tax code.

It is also possible that once certain sources of income start coming in, it will place a family into the 22% and even the 24% tax brackets and that is far more common, but to get to an effective 20% federal tax, that income needs to be very high which very few retirees in the US get to see. I know what that income needs to be because I calculated it, and urge you to do the same before continuing this discussion further.

Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own.
"Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own."

I am curious how you knew that Mr. Bovinea did not have any pensions coming in his family?
I also believe that others could be misled by this response as well as the follow on's.
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Mon Jan 13, 2020 12:22 pm

smitcat wrote:
Mon Jan 13, 2020 11:46 am
EnjoyIt wrote:
Mon Jan 13, 2020 10:17 am
smitcat wrote:
Mon Jan 13, 2020 9:23 am
EnjoyIt wrote:
Sun Jan 12, 2020 4:51 pm
smitcat wrote:
Sun Jan 12, 2020 4:44 pm


This is the line I quoted from you in my very first response ….its still there.
EnjoyIt said...
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.
I pointed out that you would be paying more than 20% tax on your pre-tax account dollars if you have a reasonable pension.
If you have a pension and you do not plan for that it will be a very unpleasant surprise when you have RMD's &/or whenever you take the funds out of the pre tax accounts.
It will not be the case as in your post quoted again here..."and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
dbr wrote:
Mon Jan 13, 2020 9:32 am
It is entirely possible to pay an effective tax rate at near 20% if a person has pensions, Social Security, and RMDs in account (or any of a variety of other sources of taxable income). It is also entirely possible that the effective tax rate is much less than that.
Of course it is possible. Have you two figured out how much income a family of 2 needs to make to pay an effective 20% in federal taxes? Please do that and then realize how rare that really is in todays tax code.

It is also possible that once certain sources of income start coming in, it will place a family into the 22% and even the 24% tax brackets and that is far more common, but to get to an effective 20% federal tax, that income needs to be very high which very few retirees in the US get to see. I know what that income needs to be because I calculated it, and urge you to do the same before continuing this discussion further.

Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own.
"Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own."

I am curious how you knew that Mr. Bovinea did not have any pensions coming in his family?
I also believe that others could be misled by this response as well as the follow on's.
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Clearly you have not looked at how much income it takes to have an effective tax of 20% today, and keep arguing with me. Even with a pension reaching that income and having an effective federal tax of 20% is unlikely. Please, I beg you, do the calculation before you continue this discussion. Taxcaster is a nice app you can try out to help you do this if you don't want to sit there with an excel spreadsheet.

wrongfunds
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Re: Net Worth ??

Post by wrongfunds » Mon Jan 13, 2020 2:25 pm

How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.

EnjoyIt
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Re: Net Worth ??

Post by EnjoyIt » Mon Jan 13, 2020 2:40 pm

wrongfunds wrote:
Mon Jan 13, 2020 2:25 pm
How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.
I don't nor is this conversation about Smitcat. Though, having two people with $200k each pensions is "unlikely."

User avatar
bligh
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Re: Net Worth ??

Post by bligh » Mon Jan 13, 2020 3:14 pm

bryanm wrote:
Fri Jan 10, 2020 12:44 pm
bligh wrote:
Fri Jan 10, 2020 12:23 pm
But you do not know you can only cash it for $850.

1) You do not know your future tax rate. when you end up cashing that check. ...
2) You have control over how much you get taxed. ...
3) You do not know what changes may occur to tax laws. ...
Agree on all points. Since we're calculating "present net worth," doesn't it make just as much sense to use your current tax rate? After all, that's what you'd get if you sold it today.

Given the uncertainty of future value, I would argue that assuming a 0% discount is much the same as trying to account for future growth of stocks. It's just speculation to think it's ever going to be redeemable for the present nominal value.
Yeah you could. Plus you should throw in the 10% penalty that you would have to pay for withdrawing early. How does it actually help anything though?

It just feels like an unnecessary extra step that adds very little value. Imagine if Mark Zuckerberg, Jeff Bezos or Bill Gates had to calculate their net worth on how much cash they could raise if they had to make a fire sale of all their stock tomorrow. I imagine they would get a small fraction for it.
Not to mention the massive tax bill they would receive. Or if you calculated your house value based on how much someone would be able to be willing to pay for it in Cash tomorrow with no contingencies. You could do all of those things, they are just unnecessary and unrealistic is all.

Either way, You can calculate your net worth however you like, it is just not how most people do it or talk about it. :sharebeer

smitcat
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Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 8:58 am

EnjoyIt wrote:
Mon Jan 13, 2020 12:22 pm
smitcat wrote:
Mon Jan 13, 2020 11:46 am
EnjoyIt wrote:
Mon Jan 13, 2020 10:17 am
smitcat wrote:
Mon Jan 13, 2020 9:23 am
EnjoyIt wrote:
Sun Jan 12, 2020 4:51 pm


Righty. Effective tax rate. Not tax brackets. No one in that conversation is discussing tax brackets except you.
I pointed out that you would be paying more than 20% tax on your pre-tax account dollars if you have a reasonable pension.
If you have a pension and you do not plan for that it will be a very unpleasant surprise when you have RMD's &/or whenever you take the funds out of the pre tax accounts.
It will not be the case as in your post quoted again here..."and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
dbr wrote:
Mon Jan 13, 2020 9:32 am
It is entirely possible to pay an effective tax rate at near 20% if a person has pensions, Social Security, and RMDs in account (or any of a variety of other sources of taxable income). It is also entirely possible that the effective tax rate is much less than that.
Of course it is possible. Have you two figured out how much income a family of 2 needs to make to pay an effective 20% in federal taxes? Please do that and then realize how rare that really is in todays tax code.

It is also possible that once certain sources of income start coming in, it will place a family into the 22% and even the 24% tax brackets and that is far more common, but to get to an effective 20% federal tax, that income needs to be very high which very few retirees in the US get to see. I know what that income needs to be because I calculated it, and urge you to do the same before continuing this discussion further.

Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own.
"Smitcat, you are arguing something that does not require arguing. You misread the discussion I had with one poster and just went off trying to correct me with information that is irrelevant to that topic and continue doing so. I will not regurgitate that discussion, but feel free to look back and find it on your own."

I am curious how you knew that Mr. Bovinea did not have any pensions coming in his family?
I also believe that others could be misled by this response as well as the follow on's.
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
Clearly you have not looked at how much income it takes to have an effective tax of 20% today, and keep arguing with me. Even with a pension reaching that income and having an effective federal tax of 20% is unlikely. Please, I beg you, do the calculation before you continue this discussion. Taxcaster is a nice app you can try out to help you do this if you don't want to sit there with an excel spreadsheet.
"Even with a pension reaching that income and having an effective federal tax of 20% is unlikely.
I agree with your statement here in this thread...

"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."
I do not agree with your initial statement (posted above) that it is unlikely you will be paying 20% on average pulling money from your pre tax accounts ….

I do not agree with your statement to Mr. Bovinea unless you have information that confirms he does not have any pensions in his future - I was unable to extract that information from his posts.

smitcat
Posts: 4580
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Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 9:11 am

EnjoyIt wrote:
Mon Jan 13, 2020 2:40 pm
wrongfunds wrote:
Mon Jan 13, 2020 2:25 pm
How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.
I don't nor is this conversation about Smitcat. Though, having two people with $200k each pensions is "unlikely."

We have zero pensions and my best guess is that EnjoyIt does not have pensions either.

It is very common for a teacher . police or firefighter to have pensions worth $100k each.
Actually there are many pensions where a single pensioner is at or above $150K per year.
Examples of some actual pensions we know of off the top of my head:
- Sister in law is State pension (retired)
- Cousin is NY firefighter
- Father in law was Fed Inspector (deceased)
- Wife's cousin is VA in Oregon and husband is Oregon Firejumper paramedic
- neighbor across the street is teacher
- Neighbor next door is NY firefighter
- Neighbor 2 doors down they are both NY Police (retired)
- etc , many others we know

Another future example would be our 26 year old daughter and her fiancé - they have 4 pensions so far between them and will likely have 6 before they are 30 or so.
Most of those pensions are small but two of them will be large and they do add up over time and when you have many of them.

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 9:16 am

wrongfunds wrote:
Mon Jan 13, 2020 2:25 pm
How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.
While we do not have any pensions your thoughts are exactly correct - these are some examples of pensions we know of:
$100K or so - many local Gvt, most teachers, most police, most Firefighters, many VA, many Fed ,etc
$150K + - Sgt police
$150K + - school principal
$200K+ - Captain Firefighter
$200+ - School superintendent

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Tue Jan 14, 2020 9:51 am

smitcat wrote:
Tue Jan 14, 2020 9:11 am
EnjoyIt wrote:
Mon Jan 13, 2020 2:40 pm
wrongfunds wrote:
Mon Jan 13, 2020 2:25 pm
How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.
I don't nor is this conversation about Smitcat. Though, having two people with $200k each pensions is "unlikely."

We have zero pensions and my best guess is that EnjoyIt does not have pensions either.

It is very common for a teacher . police or firefighter to have pensions worth $100k each.
Actually there are many pensions where a single pensioner is at or above $150K per year.
Examples of some actual pensions we know of off the top of my head:
- Sister in law is State pension (retired)
- Cousin is NY firefighter
- Father in law was Fed Inspector (deceased)
- Wife's cousin is VA in Oregon and husband is Oregon Firejumper paramedic
- neighbor across the street is teacher
- Neighbor next door is NY firefighter
- Neighbor 2 doors down they are both NY Police (retired)
- etc , many others we know

Another future example would be our 26 year old daughter and her fiancé - they have 4 pensions so far between them and will likely have 6 before they are 30 or so.
Most of those pensions are small but two of them will be large and they do add up over time and when you have many of them.

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....
Despite all your words, you have still not looked at how much income it takes to reach a 20% effective federal tax rate. Because if you have, you would realize that it takes $375k in income to get to 20% and two pensions at $150k each still don’t get you there.

Yes, everyone needs to do their own math, but you are bringing up a conversation that was completely outside of what me and the person I was commenting to. We were never taking about tax brackets, we were talking about discounting his net worth and by how much. You interjected with irrelevant information to that topic.

My comment was that he will unlikely be paying 20% in taxes because I realize that having dan income of $375k/yr in retirement is in fact very very unlikely. Yes it can happen but again, “UNLIKELY.”

Also, I do have a pension which I have decided to take the lump sum of this year.

I have tried over and over again, nicely, to get you to see all of the above, but you keep having the same discussion and I’m not sure why. What are you trying to say over and over again that I am not getting that has anything to do with my original comment? If you remember, you started all this disagreeing that a “20% effective tax rate is unlikely.” No one said that it can’t happen. No one has ever argued with you about pensions, RMDs or tax brackets. Can we please realize that having an income of $375K/yr from pensions, pretax accounts and SS in retirement is unlikely and let’s move on from this conversation.

smitcat
Posts: 4580
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Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 10:05 am

EnjoyIt wrote:
Tue Jan 14, 2020 9:51 am
smitcat wrote:
Tue Jan 14, 2020 9:11 am
EnjoyIt wrote:
Mon Jan 13, 2020 2:40 pm
wrongfunds wrote:
Mon Jan 13, 2020 2:25 pm
How do you know that Smitcat and his spouse do not get $200K each in annual pension? Nothing prevents that as a scenario to consider.
I don't nor is this conversation about Smitcat. Though, having two people with $200k each pensions is "unlikely."

We have zero pensions and my best guess is that EnjoyIt does not have pensions either.

It is very common for a teacher . police or firefighter to have pensions worth $100k each.
Actually there are many pensions where a single pensioner is at or above $150K per year.
Examples of some actual pensions we know of off the top of my head:
- Sister in law is State pension (retired)
- Cousin is NY firefighter
- Father in law was Fed Inspector (deceased)
- Wife's cousin is VA in Oregon and husband is Oregon Firejumper paramedic
- neighbor across the street is teacher
- Neighbor next door is NY firefighter
- Neighbor 2 doors down they are both NY Police (retired)
- etc , many others we know

Another future example would be our 26 year old daughter and her fiancé - they have 4 pensions so far between them and will likely have 6 before they are 30 or so.
Most of those pensions are small but two of them will be large and they do add up over time and when you have many of them.

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....
Despite all your words, you have still not looked at how much income it takes to reach a 20% effective federal tax rate. Because if you have, you would realize that it takes $375k in income to get to 20% and two pensions at $150k each still don’t get you there.

Yes, everyone needs to do their own math, but you are bringing up a conversation that was completely outside of what me and the person I was commenting to. We were never taking about tax brackets, we were talking about discounting his net worth and by how much. You interjected with irrelevant information to that topic.

My comment was that he will unlikely be paying 20% in taxes because I realize that having dan income of $375k/yr in retirement is in fact very very unlikely. Yes it can happen but again, “UNLIKELY.”

Also, I do have a pension which I have decided to take the lump sum of this year.

I have tried over and over again, nicely, to get you to see all of the above, but you keep having the same discussion and I’m not sure why. What are you trying to say over and over again that I am not getting that has anything to do with my original comment? If you remember, you started all this disagreeing that a “20% effective tax rate is unlikely.” No one said that it can’t happen. No one has ever argued with you about pensions, RMDs or tax brackets. Can we please realize that having an income of $375K/yr from pensions, pretax accounts and SS in retirement is unlikely and let’s move on from this conversation.

"Despite all your words, you have still not looked at how much income it takes to reach a 20% effective federal tax rate"
Your original quote did not say 'effective tax rate"

It did say this indicating that he would be paying less than 20% on pre tax accounts….
"and unlikely you will be paying an average 20% pulling money from your pre-tax accounts considering all those other tax brackets you will need to fill up."

"unlikely you will be paying an average 20% pulling money from your pre-tax accounts"
This is where I was concerned that folks would think they will be below 20% on their RMD's especially if they had pensions.

And I have agreed with your statements when the overall effective rates were included in the line like above...
"Even with a pension reaching that income and having an effective federal tax of 20% is unlikely.
I agree with your statement here in this thread...

We still do not know of Mr Bovinae has a pension and if that pension might push all of his RMD's above a 20% rate.
But I am sure that if he rereads this post now he will be able to figure it out no matter if he has a pension or not and no matter how he read the posts originally.

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....

EnjoyIt
Posts: 3123
Joined: Sun Dec 29, 2013 8:06 pm

Re: Net Worth ??

Post by EnjoyIt » Tue Jan 14, 2020 11:03 am

smitcat wrote:
Tue Jan 14, 2020 10:05 am

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....
Yes....no blanket statement should be used for everyone without each person doing their own math/analysis.

One interesting thing that I believe is also misunderstood around here is how a pre-tax account can act like a Roth account. Allow me to elaborate:

If one is contributing to a pre-tax 401k account at let us say 24% and then in the future their RMD and SS puts them in the 24% tax bracket, they will be paying 24% on each additional dollar they save in their 401k and then withdraw at 24% in retirement. It makes no difference if one pays 24% now or 24% later. The net result is the same. Therefor doing pre-tax at 24% for this investor is not a mistake.

Now this is my personal opinion. I would rather have a larger pre-tax account that I contributed and saved 24% on taxes today compared to a Roth account which is 24% smaller. My reasoning is that the pre-tax account can afford me some options that the Roth does not. It allows me the option to do some Roth conversions prior to taking RMDs and SS at potentially lower rates. Also, if I become unemployed for a year or two it will put me in lower brackets and allow some conversions then. Take a bad event and do something positive with it. If I have large healthcare expense I can have a large tax deduction and again do more conversions.

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 11:55 am

EnjoyIt wrote:
Tue Jan 14, 2020 11:03 am
smitcat wrote:
Tue Jan 14, 2020 10:05 am

THE KEY POINT - it is very important for folks with pensions to model and plan for their tax % on RMD from pre tax accounts. This is an area where we have seen many of the people we know get very surprised late in the game....
Yes....no blanket statement should be used for everyone without each person doing their own math/analysis.

One interesting thing that I believe is also misunderstood around here is how a pre-tax account can act like a Roth account. Allow me to elaborate:

If one is contributing to a pre-tax 401k account at let us say 24% and then in the future their RMD and SS puts them in the 24% tax bracket, they will be paying 24% on each additional dollar they save in their 401k and then withdraw at 24% in retirement. It makes no difference if one pays 24% now or 24% later. The net result is the same. Therefor doing pre-tax at 24% for this investor is not a mistake.

Now this is my personal opinion. I would rather have a larger pre-tax account that I contributed and saved 24% on taxes today compared to a Roth account which is 24% smaller. My reasoning is that the pre-tax account can afford me some options that the Roth does not. It allows me the option to do some Roth conversions prior to taking RMDs and SS at potentially lower rates. Also, if I become unemployed for a year or two it will put me in lower brackets and allow some conversions then. Take a bad event and do something positive with it. If I have large healthcare expense I can have a large tax deduction and again do more conversions.
All a good thought and agreed.

"If one is contributing to a pre-tax 401k account at let us say 24% and then in the future their RMD and SS puts them in the 24% tax bracket, they will be paying 24% on each additional dollar they save in their 401k and then withdraw at 24% in retirement."
- Even better if you are in a higher tax state now and move to a low or no tax state

" I would rather have a larger pre-tax account that I contributed and saved 24% on taxes today compared to a Roth account which is 24% smaller. "
Probably generally accurate but it also depends greatly on the exact tax rates . the sizes of each type of account (Roth, pre tax, post tax). the 401K match, what happens to future Roth accounts, timing till less or no planned income, pensions, inheritances etc.
The only way we were able to reasonably model these types of tradeoffs were with the RPM spreadsheet calculator.
I am sure there are other tools out there to help ...just not that we are aware of.

wrongfunds
Posts: 2102
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Re: Net Worth ??

Post by wrongfunds » Tue Jan 14, 2020 3:26 pm

We still do not know of Mr Bovinae has a pension and if that pension might push all of his RMD's above a 20% rate.
Who is Mr Bovinae? Has he replied to this topic?

smitcat
Posts: 4580
Joined: Mon Nov 07, 2016 10:51 am

Re: Net Worth ??

Post by smitcat » Tue Jan 14, 2020 8:48 pm

wrongfunds wrote:
Tue Jan 14, 2020 3:26 pm
We still do not know of Mr Bovinae has a pension and if that pension might push all of his RMD's above a 20% rate.
Who is Mr Bovinae? Has he replied to this topic?
Yes - Sat. 2:22 PM , page 2.

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