Financial Question on Taxes

[SevenBizzos]

With the tax code changing and $24000 being your standard deduction next year, it will be easy to predict your final tax bill. I'm in agreement that you should be dumping as much as you can into retirement funds. Do a quick check using how much you'll actually be taxed on in a calculator and see how much you'll owe. You can hold some additional money back in an account and then use it when you need to pay next April.

We owed this year and I didn't mind it. Better me holding their money than them holding mine (IMO).

 

[Panzerman]

Thanks for all the information. We both bumped our 401ks up to 15%. That will divert 30% of our income away plus what our employer matches.
Definitely retiring at 62. What my social security check would be now, I could live on because I have no debt. Both my parents died young of cancer. Dad at 51 and non at 56. I have a healthier lifestyle but am by far no health nut so I am bailing at 62 definitely.

 

[Alfred_B]

Originally Posted By: Panzerman
Thanks for all the information. We both bumped our 401ks up to 15%. That will divert 30% of our income away plus what our employer matches.


If you want 30% of your gross income to go to 401k, you need to have a more careful calculation. 15% of each spouse's gross income will usually not be 30% of the aggregate gross income.

 

[Brybo86]

Originally Posted By: Alfred_B
Originally Posted By: Panzerman
Thanks for all the information. We both bumped our 401ks up to 15%. That will divert 30% of our income away plus what our employer matches.


If you want 30% of your gross income to go to 401k, you need to have a more careful calculation. 15% of each spouse's gross income will usually not be 30% of the aggregate gross income.

Correct 15% of both husband and wife income is exactly 15% of total household.
Are you going to fund Roth and HSA to get to your desired 30% total?

 

[Panzerman]

Gotcha on the 15% each but really 15% of the gross.
My mistake. Good catch. I ll put mine on 15% for now with a auto increase of 2% a year to Max. 30% only because my employer matches more than my wife's.
Still with the tax cuts and the increased deductions I should be better at tax time. Thanks.

 

[Panzerman]

Are you going to fund Roth and HSA to get to your desired 30% total? [/quote]

No, we have mutual funds we had from a long time ago and HSA would be a total waste for me because I don't go to the doctor unless I am half dead.

 

[Brybo86]

Originally Posted By: Panzerman
HSA would be a total waste for me because I don't go to the doctor unless I am half dead.

Google a little research on HSA.
At retirement age an HSA gets treated just like 401k.
If used for medical expenses zero tax.
If not used for medical in retirement it gets treated just like pretax, you pay your tax rate on whatever you take out.
Also another perk is that FICA/SS tax doesn't come out of HSA funds that are Contributed via paycheck, unlike 401k which have FICA/SS taken out.
Another perk, HSA investments are typically the same as an IRA meaning you can investing any of 12,000 mutual funds, not just to 20 or so an employer typically offers.
Some articles refer to it as the "Ultimate" retirement account.

 

[Wolf359]

Originally Posted By: Brybo86
Originally Posted By: Panzerman
HSA would be a total waste for me because I don't go to the doctor unless I am half dead.

Google a little research on HSA.
At retirement age an HSA gets treated just like 401k.
If used for medical expenses zero tax.
If not used for medical in retirement it gets treated just like pretax, you pay your tax rate on whatever you take out.
Also another perk is that FICA/SS tax doesn't come out of HSA funds that are Contributed via paycheck, unlike 401k which have FICA/SS taken out.
Another perk, HSA investments are typically the same as an IRA meaning you can investing any of 12,000 mutual funds, not just to 20 or so an employer typically offers.
Some articles refer to it as the "Ultimate" retirement account.


Detail wise they're great. I was going to get one, but if you're buying your own policy, the numbers don't really work. There were actually just one or two plans on the exchange that actually qualified, I thought most plans would qualify but it has to hit the exact number in order for a plan to be HSA eligible and many did not. Basically just bronze plans because you basically pay for everything until your deductible is met so any plan that pays for anything doesn't qualify. They're good if you're getting some kind of employer match.

 

[CKN]

Originally Posted By: Wolf359
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.



You also have to think about the quality of your life in later years. Taking it later and (presumably having more disposable income) will you be able to sit on an airplane for hours? Be of good health to be able to travel to foreign countries? In general being able to enjoy the additional monies taking it later.

There are other factors at play other than dollars.......

I'll be of age to take it early the end of the year-and that's exactly what I plan to do.

 

[Wolf359]

Originally Posted By: CKN
Originally Posted By: Wolf359
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.



You also have to think about the quality of your life in later years. Taking it late and (presumably having more disposable income) will you be able to sit on an airplane for hours? Be of good health to be able to travel to foreign countries? In general being able to enjoy the additional monies taking it later.

There are other factors at play other than dollars.......


I believe SS was only designed to provide about 40% of your retirement income. So in theory if you have enough in savings, you won't really need it and it shouldn't be a factor. Of course if people need it, then that's a totally different issue.

 

[Dave Hess]

Take it at 62.

Why wait till you’re walking with a cane to enjoy the money.

 

[CKN]

Originally Posted By: Mr Nice
Take it at 62.

Why wait till you’re walking with a cane to enjoy the money.



THIS^^^^^^^^^^^^^^^^^^^^^^^^^^^^^