I no longer have any deductions. I am 49 and my wife 45. We get hit hard with having to write the IRS a nice fat check at the end if the year. We both claim 0 dependants but I refuse to give them more money out of every check. If we both bump up our pre-tax 401k deductions would that bring down our taxable income. We don't need as much as we make to live on and I would rather I get the money at 62 than the Government. Will this work, really don't know who to ask, hoping a tax or financial guru on here knows.
Financial Question on Taxes
- Thread starter Panzerman
- Start date
- Status
Yes, put as much in 401k as you can.
Good rule of thumb is 15% towards retirement. Are you already above that?
Yes, adding more to 401k should decrease your total taxes paid.
It will come out of your paychecks so you will still claim the standard deduction.
You can always up charitable donations, if you want to give more away.
Yes, adding more to 401k should decrease your total taxes paid.
It will come out of your paychecks so you will still claim the standard deduction.
You can always up charitable donations, if you want to give more away.
Last edited:
Standard way to lower taxes is to max out your 401k if you can, then traditional IRA. A Roth IRA is also good, but it doesn't lower your taxes initially.
As for taking SS at 62, there's whole books about SS out there. The basic theory is that you can take it as early as 62 and as late as 70. I believe you take about an 8% hit each year it's early and an 8% bonus every year it's late. It's supposed to be neutral in that your break even is about 82 years of age, but the average age that people live to is 84. So if you expect to die early, take it early, otherwise if you think you're average and don't need it, take it late. Everyone also worries about it going bankrupt, but the insolvency date is 17 years in the future and when it becomes insolvent, it will only be able to pay out 70%. People seem to think it will be 0. By that date, Congress will probably do something to fix it, but they tend to like to wait til the last minute.
As for taking SS at 62, there's whole books about SS out there. The basic theory is that you can take it as early as 62 and as late as 70. I believe you take about an 8% hit each year it's early and an 8% bonus every year it's late. It's supposed to be neutral in that your break even is about 82 years of age, but the average age that people live to is 84. So if you expect to die early, take it early, otherwise if you think you're average and don't need it, take it late. Everyone also worries about it going bankrupt, but the insolvency date is 17 years in the future and when it becomes insolvent, it will only be able to pay out 70%. People seem to think it will be 0. By that date, Congress will probably do something to fix it, but they tend to like to wait til the last minute.
Always max out your 401K and Roth IRA contributions.
We put 30% of gross pay towards retirement.
Take the $$$ at 62 and enjoy your retirement while the both of you are still healthy and mobile. Taking it at 67 or 70 is not worth it if you can't enjoy it.
We put 30% of gross pay towards retirement.
Take the $$$ at 62 and enjoy your retirement while the both of you are still healthy and mobile. Taking it at 67 or 70 is not worth it if you can't enjoy it.
Yes, Roth IRA is good also. I cashed in one I had forgotten about that was in a fund I no longer liked. It paid off a new car after trade. I almost felt like I got it for free. Ha
Yes, 401k contributions will reduce taxable income. You will have to pay taxes when taking distributions though, but you might be in a lower tax braket at that time.
If your 2017 taxes came in over $1000 and you face a penalty it's not too late to backdate an IRA for that tax year. Fiddle with the numbers until your tax drops into 3 figures.
As for investing it I'd keep it in cash or something very conservative until you figure out where the market's going (dropping).
As for investing it I'd keep it in cash or something very conservative until you figure out where the market's going (dropping).
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Originally Posted By: JohnnyJohnson
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
Yes, max out on all pretax options available...cannot do a tax deductible IRA if a participant/eligible in a pretax plan. See if your company offers a deferred compensation plan. 2018 tax year the standard deduction is doubling which should help your situation.
Last edited:
You can open IRA before April 15 and take it off your income. Unless you earn a lot.
Not a lot else you can do. Next year it will be even harder to itemize for many people.
Not a lot else you can do. Next year it will be even harder to itemize for many people.
Originally Posted By: mbacfp
Yes, max out on all pretax options available...cannot do a tax deductible IRA if a participant/eligible in a pretax plan. See if your company offers a deferred compensation plan. 2018 tax year the standard deduction is doubling which should help your situation.
While the standard deduction goes up the personal exemption is eliminated. The net is only a few thousand more for the standard deduction. Not double.
Yes, max out on all pretax options available...cannot do a tax deductible IRA if a participant/eligible in a pretax plan. See if your company offers a deferred compensation plan. 2018 tax year the standard deduction is doubling which should help your situation.
While the standard deduction goes up the personal exemption is eliminated. The net is only a few thousand more for the standard deduction. Not double.
Welcome to the 47%
2017 standard deduction for married filing jointly is currently $12,700. 2018 standard deduction for married filing jointly is going up to $24,000...not quite double. Not sure of OP's situation, but my bet is he will see some savings as he is not itemizing.
Last edited:
If you have a high deductible health plan, you can put $6900/yr in pretax to an HSA. Pretax money going in, pretax money to pay for health expenses, AND you can invest it, and tax free at withdrawal in retirement, and get to keep the whole account. Its supposedly one of, if not the best investment option available.
401K you can dump a few thousand dollars into your 2017 return to lower your taxes.
You probably should max out a Roth IRA yearly as well. It wont lower your taxes now, but it allows you to set your tax rate at retirement. (Instead of pulling out $40K out of your 401K, and having an income of $40K that you pay taxes on, you can pull out $20K from your 401K and $20K from your Roth IRA, which allows you to claim $20K as income, and pay the lower tax rate on $20K)
401K you can dump a few thousand dollars into your 2017 return to lower your taxes.
You probably should max out a Roth IRA yearly as well. It wont lower your taxes now, but it allows you to set your tax rate at retirement. (Instead of pulling out $40K out of your 401K, and having an income of $40K that you pay taxes on, you can pull out $20K from your 401K and $20K from your Roth IRA, which allows you to claim $20K as income, and pay the lower tax rate on $20K)
Originally Posted By: Wolf359
Originally Posted By: JohnnyJohnson
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
Sorry I had money in the market when there was a good chance of making good money and I did and got out what you're talking about is greed if you're in that mess now standby to be amazed! By the way bitcoin was worth 20K just a couple months ago now it worth what 8k?
Originally Posted By: JohnnyJohnson
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
Sorry I had money in the market when there was a good chance of making good money and I did and got out what you're talking about is greed if you're in that mess now standby to be amazed! By the way bitcoin was worth 20K just a couple months ago now it worth what 8k?
Last edited:
Originally Posted By: JohnnyJohnson
Originally Posted By: Wolf359
Originally Posted By: JohnnyJohnson
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
Sorry I had money in the market when there was a good chance of making good money and I did and got out what you're talking about is greed if you're in that mess now standby to be amazed! By the way bitcoin was worth 20K just a couple months ago now it worth what 8k?
Just pointing out the false logic that because the banks don't pay a good interest rate, it justifies a 0% investment.
Sorta like when people say they walked and saved $2 on bus fare. Could have been $15 if it were a taxi, maybe $100 if it were a limo.
Originally Posted By: Wolf359
Originally Posted By: JohnnyJohnson
I give just a little each month. I don't miss just a little but its [censored] nice to get a check back and no bank is going to pay you squat with interest rates what they are now. I guess its you can pay me now or you can pay me a lot later.
Yeah, but you could have invested the money in the S&P 500 which would have returned you over 20% last year. Or you could have bought bitcoin with it...
Sorry I had money in the market when there was a good chance of making good money and I did and got out what you're talking about is greed if you're in that mess now standby to be amazed! By the way bitcoin was worth 20K just a couple months ago now it worth what 8k?
Just pointing out the false logic that because the banks don't pay a good interest rate, it justifies a 0% investment.
Sorta like when people say they walked and saved $2 on bus fare. Could have been $15 if it were a taxi, maybe $100 if it were a limo.
Originally Posted By: Donald
Originally Posted By: mbacfp
Yes, max out on all pretax options available...cannot do a tax deductible IRA if a participant/eligible in a pretax plan. See if your company offers a deferred compensation plan. 2018 tax year the standard deduction is doubling which should help your situation.
While the standard deduction goes up the personal exemption is eliminated. The net is only a few thousand more for the standard deduction. Not double.
I don't think he is debating the net outcome of new exemptions.
But that personal exemptions had no effect on itemizing deductions.
Basically under new plan you need a lot more exemptions to itemize, which OP doesn't have.
401k doesn't effect itemizing because contributions don't count towards itemized deductions.
Originally Posted By: mbacfp
Yes, max out on all pretax options available...cannot do a tax deductible IRA if a participant/eligible in a pretax plan. See if your company offers a deferred compensation plan. 2018 tax year the standard deduction is doubling which should help your situation.
While the standard deduction goes up the personal exemption is eliminated. The net is only a few thousand more for the standard deduction. Not double.
I don't think he is debating the net outcome of new exemptions.
But that personal exemptions had no effect on itemizing deductions.
Basically under new plan you need a lot more exemptions to itemize, which OP doesn't have.
401k doesn't effect itemizing because contributions don't count towards itemized deductions.
- Status