ExileOnDaytonStreet
Drunkard
I stand corrected. I missed the pun.
USCHO Fan Forum
This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!
-
The USCHO Fan Forum has migrated to a new plaform, xenForo. Most of the function of the forum should work in familiar ways. Please note that you can switch between light and dark modes by clicking on the gear icon in the upper right of the main menu bar. We are hoping that this new platform will prove to be faster and more reliable. Please feel free to explore its features.
Tax Season 2012: Work No Longer Pays
- Thread starter FlagDUDE08
- Start date
I stand corrected. I missed the pun.
Re: Tax Season 2012: Work No Longer Pays
Yeah, I figured as much.
Yeah, I've always done the E pay option on everything. And yeah, don't think I'll have to worry about being over $75,000 on the year. If I was making that kind of scratch a year the Student loan would have been done with by now, along with my car loan. Only another $9,000+ to go on that yet. Just not really a fan of debt.FYP. I'm not sure how the government refinancers work, as I've never had to use them, so I'm not sure if Sallie sends one. Bigmrg, you'll definitely need one from Citi. If you've been paying them online (checking, OK the name isn't Brent), you should be able to download the 1098 information from your account. However, if your adjusted gross income before this deduction is more than $75,000, don't bother, because you won't be eligible to claim the deduction.
Re: Tax Season 2012: Work No Longer Pays
I suspect the urge to pay down mortgage principal is driven at least in part by the individual not wanting to be in debt. Another consideration is people paying it down aggressively who didn't put 20% down on the original note and are trying to eliminate PMI.
Re: Tax Season 2012: Work No Longer Pays
Usually income tax law is driven by expediency and political posturing, occasionally it is affected by atypical bouts of principle. Most of the time we come to expect a tussle between the President and Congress. Every now and then the judicial system has something incredibly salient to contribute as well.
The most famous non-Supreme Court jurist, Judge Learned Hand: "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. " -- Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).
Ironic to me that BHO claims to be a constitutional scholar yet behaves as if he is unfamiliar with the law
Usually income tax law is driven by expediency and political posturing, occasionally it is affected by atypical bouts of principle. Most of the time we come to expect a tussle between the President and Congress. Every now and then the judicial system has something incredibly salient to contribute as well.
The most famous non-Supreme Court jurist, Judge Learned Hand: "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. " -- Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).
Ironic to me that BHO claims to be a constitutional scholar yet behaves as if he is unfamiliar with the law
FlagDUDE08
Banned
Re: Tax Season 2012: Work No Longer Pays
One interesting thing about opportunity cost is that you also have to weigh how much principal is involved in each one. At least I find it important to weigh nominally how much you are losing in a month in interest (or quarter, or year, or whatever measure you choose) vs. how much you are gaining in dividends and distributions. Now that my principal value is smaller for my loans, I'm more likely to introduce my money to dividends and distributions. Obviously this thinking is short-term instead of long-term, and other things need to be taken into account, such as the cost of the product (I mean, why put in your money so far from the next ex-dividend date when you can hold out for a better price, perhaps even set up a ladder for it).
Saving for retirement is a long-term activity (especially at my age). Paying off loans is relatively short term. Probably the best way to look at it is to budget a certain comfortable amount for retirement savings, budget to pay the loan at the on-time level, and then use your surplus (after bills, food, etc.) to decide whether to get extra into the market or to put the extra towards the loan.
One interesting thing about opportunity cost is that you also have to weigh how much principal is involved in each one. At least I find it important to weigh nominally how much you are losing in a month in interest (or quarter, or year, or whatever measure you choose) vs. how much you are gaining in dividends and distributions. Now that my principal value is smaller for my loans, I'm more likely to introduce my money to dividends and distributions. Obviously this thinking is short-term instead of long-term, and other things need to be taken into account, such as the cost of the product (I mean, why put in your money so far from the next ex-dividend date when you can hold out for a better price, perhaps even set up a ladder for it).
Saving for retirement is a long-term activity (especially at my age). Paying off loans is relatively short term. Probably the best way to look at it is to budget a certain comfortable amount for retirement savings, budget to pay the loan at the on-time level, and then use your surplus (after bills, food, etc.) to decide whether to get extra into the market or to put the extra towards the loan.
FlagDUDE08
Banned
Re: Tax Season 2012: Work No Longer Pays
Like Lionel Hutz on the Simpsons said, "There's the truth... and THE TRUTH!
"
Usually income tax law is driven by expediency and political posturing, occasionally it is affected by atypical bouts of principle. Most of the time we come to expect a tussle between the President and Congress. Every now and then the judicial system has something incredibly salient to contribute as well.
The most famous non-Supreme Court jurist, Judge Learned Hand: "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. " -- Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).
Ironic to me that BHO claims to be a constitutional scholar yet behaves as if he is unfamiliar with the law
Like Lionel Hutz on the Simpsons said, "There's the truth... and THE TRUTH!
"Re: Tax Season 2012: Work No Longer Pays
I will concede that with the relative ease there is to getting out from under an upside down house with a short sale or such, the risk of gambling by overextending your finances, rather than being conservative financially, living within your means, and paying down your debts, is significantly reduced.
I will concede that with the relative ease there is to getting out from under an upside down house with a short sale or such, the risk of gambling by overextending your finances, rather than being conservative financially, living within your means, and paying down your debts, is significantly reduced.
Re: Tax Season 2012: Work No Longer Pays
Saving "for retirement" is probably the single most destructive myth to personal financial security perpetuated by the financial services advertisements. I cannot think of very many things that distort sensible decision-making more.
We save money to have cash available for opportunities and emergencies. If you develop good savings habits at a young age, you don't need to save "for retirement" ... you'll have savings throughout your entire life, which will include retirement when you get there. In the meantime you'll also have had use of your money along the way as well.
In fact, because of the 10% penalty tax, and limitations on the kinds of assets one typically can own inside a retirement plan, saving "for retirement" restricts your options: while you save for opportunites (they are limited) or emergencies (which requires either a penalty tax or a loan against the plan).
Saving "for retirement" is probably the single most destructive myth to personal financial security perpetuated by the financial services advertisements. I cannot think of very many things that distort sensible decision-making more.
We save money to have cash available for opportunities and emergencies. If you develop good savings habits at a young age, you don't need to save "for retirement" ... you'll have savings throughout your entire life, which will include retirement when you get there. In the meantime you'll also have had use of your money along the way as well.
In fact, because of the 10% penalty tax, and limitations on the kinds of assets one typically can own inside a retirement plan, saving "for retirement" restricts your options: while you save for opportunites (they are limited) or emergencies (which requires either a penalty tax or a loan against the plan).
Re: Tax Season 2012: Work No Longer Pays
I think the only reason I'd recommend paying down extra principal on a mortgage is if you're doing it to increase your equity and qualify for a refinance. If you're sitting on a 30 year loan right now and happened to buy when interest rates were substantially higher (they were 6-7% not *THAT* long ago - in the early to mid 2000s), the trade-off is considerably more favorable than simply dumping money into a 4-5% loan just for the sake of knocking down principal owed.
Saving money in a 401k or a Roth IRA isn't *that* limiting. Plus there's the whole issue of capturing employer matches which amount to free money (also, contributions to a Roth IRA can be withdrawn at any time without penalty - it's the earnings on the contributions that are limited in their use).
The bottom line is you don't want to overextend yourself in any one investment.
Establishing an emergency reserve account is a must for everyone as well. It's basically a form of "**** happens" insurance. Unfortunately, such things will earn next to nothing if you want to maintain any liquidity (via money market, savings accounts, or CD's).
I think the only reason I'd recommend paying down extra principal on a mortgage is if you're doing it to increase your equity and qualify for a refinance. If you're sitting on a 30 year loan right now and happened to buy when interest rates were substantially higher (they were 6-7% not *THAT* long ago - in the early to mid 2000s), the trade-off is considerably more favorable than simply dumping money into a 4-5% loan just for the sake of knocking down principal owed.
Saving money in a 401k or a Roth IRA isn't *that* limiting. Plus there's the whole issue of capturing employer matches which amount to free money (also, contributions to a Roth IRA can be withdrawn at any time without penalty - it's the earnings on the contributions that are limited in their use).
The bottom line is you don't want to overextend yourself in any one investment.
Establishing an emergency reserve account is a must for everyone as well. It's basically a form of "**** happens" insurance. Unfortunately, such things will earn next to nothing if you want to maintain any liquidity (via money market, savings accounts, or CD's).
Last edited:
FlagDUDE08
Banned
Re: Tax Season 2012: Work No Longer Pays
Hence why I have been "saving" post-tax (with the exception of the 401k, but only because I get free money from the company for this), as if either an opportunity or a near future purchase comes along (like a house or being able to support a future FlagDUDETTE and Little FlagDUDEs), I'm ready for it.
One of the biggest reasons I talk about "saving for retirement" is to make sure there is a flow of income available from dividends, capital gains, and royalties. While you have a career, you're good to re-invest the dividends (whether automatically or to push them to something else; personally I don't like to invest in non-dividend-paying stocks), but make sure the amount on lines 8a + 9a + 17 (royalties) gets as close as you can to line 7 before you retire. I wouldn't even count line 13 (capital gains) in your formula unless you absolutely did not sell stock.
Hence why I have been "saving" post-tax (with the exception of the 401k, but only because I get free money from the company for this), as if either an opportunity or a near future purchase comes along (like a house or being able to support a future FlagDUDETTE and Little FlagDUDEs), I'm ready for it.
One of the biggest reasons I talk about "saving for retirement" is to make sure there is a flow of income available from dividends, capital gains, and royalties. While you have a career, you're good to re-invest the dividends (whether automatically or to push them to something else; personally I don't like to invest in non-dividend-paying stocks), but make sure the amount on lines 8a + 9a + 17 (royalties) gets as close as you can to line 7 before you retire. I wouldn't even count line 13 (capital gains) in your formula unless you absolutely did not sell stock.
Last edited:
Re: Tax Season 2012: Work No Longer Pays
This is not a benefit for the majority of Americans that would spend all their money on glitter ponies and hovercraft instead of investing it, if they could access it.
If I can invest a percentage of my income, pre-tax, and my employer GIVES me money, pre-tax, in my retirement plan, why wouldn't I want to take advantage of that as a portion of my investment plan? Just in CASE something horrible happens, and I have to pay a 10% penalty? That's not a certainty. I certainly would not advocate having ONLY a retirement plan as your entire investment strategy, but I think there's a lot of gray area there.
This is not a benefit for the majority of Americans that would spend all their money on glitter ponies and hovercraft instead of investing it, if they could access it.
If I can invest a percentage of my income, pre-tax, and my employer GIVES me money, pre-tax, in my retirement plan, why wouldn't I want to take advantage of that as a portion of my investment plan? Just in CASE something horrible happens, and I have to pay a 10% penalty? That's not a certainty. I certainly would not advocate having ONLY a retirement plan as your entire investment strategy, but I think there's a lot of gray area there.
FlagDUDE08
Banned
Re: Tax Season 2012: Work No Longer Pays
As Cramer says about every day on his show, "Diversify!"
This is not a benefit for the majority of Americans that would spend all their money on glitter ponies and hovercraft instead of investing it, if they could access it.
If I can invest a percentage of my income, pre-tax, and my employer GIVES me money, pre-tax, in my retirement plan, why wouldn't I want to take advantage of that as a portion of my investment plan? Just in CASE something horrible happens, and I have to pay a 10% penalty? That's not a certainty. I certainly would not advocate having ONLY a retirement plan as your entire investment strategy, but I think there's a lot of gray area there.
As Cramer says about every day on his show, "Diversify!"
Re: Tax Season 2012: Work No Longer Pays
We started putting a bit of money into post-tax savings as a hedge against the inevitably higher federal taxes down the road when the feds eventually have to develop a modicum of fiscal responsibility. With the ability to withdraw the principal from a Roth after five years, it's a pretty nice way to diversify pre and post-tax savings and use it as a rainy day fund.
Certainly if an employer does matching, that's a great thing and I'd recommend taking advantage of it if possible. Working for the government, we don't get those sorts of perks like the private sector often offers.
We started putting a bit of money into post-tax savings as a hedge against the inevitably higher federal taxes down the road when the feds eventually have to develop a modicum of fiscal responsibility. With the ability to withdraw the principal from a Roth after five years, it's a pretty nice way to diversify pre and post-tax savings and use it as a rainy day fund.
Certainly if an employer does matching, that's a great thing and I'd recommend taking advantage of it if possible. Working for the government, we don't get those sorts of perks like the private sector often offers.
FlagDUDE08
Banned
Re: Tax Season 2012: Work No Longer Pays
When you work for the government, though, there's also a pension which could be factored in.
Which brings me to a thought: How much dependence, if any, should be placed on these government(-and-company)-provided "savings plans" such as pensions and Social Security? Obviously I disagree with how they're funded (especially social security), but should we assume there to be a time when these would not be available to us, despite our payment into the system?
When you work for the government, though, there's also a pension which could be factored in.
Which brings me to a thought: How much dependence, if any, should be placed on these government(-and-company)-provided "savings plans" such as pensions and Social Security? Obviously I disagree with how they're funded (especially social security), but should we assume there to be a time when these would not be available to us, despite our payment into the system?
Re: Tax Season 2012: Work No Longer Pays
The federal government does offer a match. There's a 1% automatic agency contribution to the TSP (the federal government's 401k system) whether or not the employee contributes. Beyond that, there's a dollar for dollar match on the first 3% and a $0.50 per dollar match for the next 2%. So, if you contribute 5%, you're effectively getting 10% of your salary thrown into retirement.
The federal government does offer a match. There's a 1% automatic agency contribution to the TSP (the federal government's 401k system) whether or not the employee contributes. Beyond that, there's a dollar for dollar match on the first 3% and a $0.50 per dollar match for the next 2%. So, if you contribute 5%, you're effectively getting 10% of your salary thrown into retirement.
Plan your future based on not getting any help from these things so that you'll be pleasantly surprised should they still be around at the time of retirement. I think social security still existing is a safe bet, but the payouts will almost certainly be less generous than they've been for recipients thus far.
Re: Tax Season 2012: Work No Longer Pays
I assume Social Security and federally funded medical coverage will be nil by the time I can access them. I just view those deductions from my paycheck as an intergenerational tax that I likely will get little value from down the road. The boomers will ransack those programs for all they can get, leaving little for later generations.
Re: Tax Season 2012: Work No Longer Pays
I work for a state government, not the feds, and they don't offer some of the goodies the feds do, including any sort of match.
Almington
Blood Boiling with Rage and Hate
Re: Tax Season 2012: Work No Longer Pays
You shouldn't be saving EXCLUSIVELY in tax advantaged retirement accounts, but they have an important role to play in most peoples retirement account. For long term savings goals, the tax advantages of retirement accounts are the tradeoff with reduced access to the money.
I have (and I believe that most people should have):
1.) a highly Liquid Emergency Fund
2.) short term savings goals in a low risk location (time horizon of under 5 years)
3.) longer term savings goals and investments (time horizon of over 5 years, but less than retirement)
4.) tax advantaged retirement accounts: A.) an IRA and B.) a 401k/403b/457 plan that includes any employer matching
If you are under 35 and choosing to not contribute to a Roth IRA (either through a direct contribution or using the current rollover loophole) you are doing your future-self a disservice.
You shouldn't be saving EXCLUSIVELY in tax advantaged retirement accounts, but they have an important role to play in most peoples retirement account. For long term savings goals, the tax advantages of retirement accounts are the tradeoff with reduced access to the money.
I have (and I believe that most people should have):
1.) a highly Liquid Emergency Fund
2.) short term savings goals in a low risk location (time horizon of under 5 years)
3.) longer term savings goals and investments (time horizon of over 5 years, but less than retirement)
4.) tax advantaged retirement accounts: A.) an IRA and B.) a 401k/403b/457 plan that includes any employer matching
If you are under 35 and choosing to not contribute to a Roth IRA (either through a direct contribution or using the current rollover loophole) you are doing your future-self a disservice.
Re: Tax Season 2012: Work No Longer Pays
When in doubt, work for the gov't that can print its own money.
SS/Medicare will still be there decades from now. They're entitlement programs that support a group of people that votes in droves. Even politicians aren't stupid enough to eliminate such things because AARP will see to it they don't get re-elected.
On Almington's list, I'd say #1-2 are pretty much the same thing / will be parked in the same place (money market account / savings account / CDs).
Intermediate term savings goals are trickier - if it's < 10 years, the stock market is probably a bit too risky, but if it's > 5 years, you don't want to be losing ground to inflation by parking it in CD's either. Personally, I'd opt to put this money on a site like lendingclub, but that probably isn't for everyone (for those who don't know, that's a site that offers you the opportunity to invest in loans - as little as $25 per loan). If you invest the minimum per loan and spread it around among dozens of loans, the risk isn't quite so bad, and the returns are fairly decent (through one year of this, I've managed an 11.5% return even with several loans defaulting / being written off).
When in doubt, work for the gov't that can print its own money.
SS/Medicare will still be there decades from now. They're entitlement programs that support a group of people that votes in droves. Even politicians aren't stupid enough to eliminate such things because AARP will see to it they don't get re-elected.
On Almington's list, I'd say #1-2 are pretty much the same thing / will be parked in the same place (money market account / savings account / CDs).
Intermediate term savings goals are trickier - if it's < 10 years, the stock market is probably a bit too risky, but if it's > 5 years, you don't want to be losing ground to inflation by parking it in CD's either. Personally, I'd opt to put this money on a site like lendingclub, but that probably isn't for everyone (for those who don't know, that's a site that offers you the opportunity to invest in loans - as little as $25 per loan). If you invest the minimum per loan and spread it around among dozens of loans, the risk isn't quite so bad, and the returns are fairly decent (through one year of this, I've managed an 11.5% return even with several loans defaulting / being written off).
Last edited:
Almington
Blood Boiling with Rage and Hate
Re: Tax Season 2012: Work No Longer Pays
I like to keep them separate. My E-fund lives lives in the MM account at the credit union where my parents opened an account for me when I was 6 months old. The money that I am saving for specific goals it direct deposited to an ING savings account with multiple sub-accounts. That's what works for me, but you have to go with what is best for you.
I like to keep them separate. My E-fund lives lives in the MM account at the credit union where my parents opened an account for me when I was 6 months old. The money that I am saving for specific goals it direct deposited to an ING savings account with multiple sub-accounts. That's what works for me, but you have to go with what is best for you.