So when the repubs take the Oval office back..

[SMEGMA STENCH]

Yeah but things change once you start making more money. I want to give as little to the parasite as possible. I guess I need to be thinking about itemized deductions.

[slow99]

Ok so my next question would have to be this.

Using all the "avoidance" methods that you can, how much can you lower that ghastly percentage? I mean all the "rich people" have to pay what... something like 35% income tax? On top of that, you got like 10% for social security. So right there uncle sam is raping your ass for half your fucking pay. Its wrong. So all in all, what can you get that percentage down to? If you have a good accountant lol

That's a marginal tax rate. My total tax bill isn't 35% of AGI. Hell AGI is way lower than actual gross. Regardless, I still pay a lot, I'd have to check what the actual percentage is.

[slow99]

Yeah but things change once you start making more money. I want to give as little to the parasite as possible. I guess I need to be thinking about itemized deductions.

401k contributions lower your AGI. IRA contributions can, but it depends on your 401k contributions as to whether those are deductible. I can't contribute to a ROTH anymore, so I'm not up to speed on those rules. Contributing significant amounts to a 401k plan is the easiest way to lower your tax bill, imo.

[SMEGMA STENCH]

That's a marginal tax rate. My total tax bill isn't 35% of AGI. Hell AGI is way lower than actual gross. Regardless, I still pay a lot, I'd have to check what the actual percentage is.

Ok but do you make $250K or more? IIRC, that's what it takes to be "rich" by the parasite's standards. Also, can't a 401K end up screwing you in the end as well? When you take the money out one day, you still have to pay taxes on that. So it doesn't really help you. In the long run.

[slow99]

Ok but do you make $250K or more? IIRC, that's what it takes to be "rich" by the parasite's standards. Also, can't a 401K end up screwing you in the end as well? When you take the money out one day, you still have to pay taxes on that. So it doesn't really help you. In the long run.

Yes, our income is more than that. 401k contributions accrue tax deferred, that's one of the main advantages.

[slow99]

Advantage of tax deferral - I've posted this several times, and don't remember the exact math... but it's something pretty close to this:

If you started with $1 and doubled it every year, at the end of 20 years you'd have $1,048,00. Pay taxes at 30%, you'd have $733,600.

Same exact scenario (start with $1, double every year for 20 years), but pay 30% taxes every year instead of at the end one time... you'd have about $40k. That's the advantage of tax deferral... $733,600 vs $40,000.

It's one of Buffett's main ideologies.

[SMEGMA STENCH]

Yes, our income is more than that. 401k contributions accrue tax deferred, that's one of the main advantages.

Sweet thanks. I'm pretty ignorant when it comes to all this but I'm trying to learn. However, I've heard something that I'm sure you can help me with:

I've heard that when you put money into a 401K, there is a risk. If the company does badly then your 401K can suffer and there is a possibility that you can actually end up with less than you even paid in. Nevermind what they matched. Is this true?

[slow99]

Sweet thanks. I'm pretty ignorant when it comes to all this but I'm trying to learn. However, I've heard something that I'm sure you can help me with:

I've heard that when you put money into a 401K, there is a risk. If the company does badly then your 401K can suffer and there is a possibility that you can actually end up with less than you even paid in. Nevermind what they matched. Is this true?

Sounds more like DB (defined benefit) risk... pensions in a nutshell. Or, if you load up your 401k with company stock (bad idea). 401k is a defined contribution (DC) plan.

[jw33]

You can put your 401K contributions in many different funds including ones that own a small or major portion made up of your own company stock. Like everything, if you're halfway smart, you spread it around arccording to your age/retirement timeline and hope you make it that long. Some companies stopped matching employee contributions, but they are starting to match again. Either way you pile in at least what your company matches unless you don't like free money. The best practice is to max it out right at the end of the year.......

[slow99]

The best practice is to max it out right at the end of the year.......

Why is that...time value of money?

[jw33]

Well for me my company matches around 6% each pay period. I'd rather dial back my part in order for them continue to chip in the 6% every pay check year round until the last pay period in December instead of maxing out in Sept/Oct and losing their free money for a couple of months.

[slow99]

Well for me my company matches around 6% each pay period. I'd rather dial back my part in order for them continue to chip in the 6% every pay check year round until the last pay period in December instead of maxing out in Sept/Oct and losing their free money for a couple of months.

I can certainly see that. Counter to that would be that I'd rather have money in the market - via the 401k - working for me tax deferred year round. Most people won't put the money to work year around unless it's in the 401k. Fair point though.