Search found 2323 matches

by teen persuasion
Sun Mar 24, 2024 11:31 am
Forum: Personal Finance (Not Investing)
Topic: What are your "hidden" tax tips?
Replies: 56
Views: 4789

Re: What are your "hidden" tax tips?

2) I think most people overestimate their retirement tax rate. A couple can have $40K in Social Security and $20K in taxable income and pay no federal income taxes. With a paid off house and no more child raising expenses that is enough for an above average middle class lifestyle where I live. True for some, definitely, but I have lots of experiences dealing with longtime VITA clients who are new retirees shocked by how high their effective marginal tax rates are, especially single filers with pensions and/or RMDs that put them in the SS-tax torpedo zone. Could also endanger their eligibility for senior real estate tax breaks or other benefits. The generous child-related tax breaks for working folks with modest income also mean that there ...
by teen persuasion
Sun Mar 24, 2024 6:22 am
Forum: Personal Finance (Not Investing)
Topic: 12 months before retirement what do you wish you had done
Replies: 71
Views: 8625

Re: 12 months from retirement what do you wish you had done

Not to hijack this thread too much, but I currently have over 1,100 hours of sick leave. There's no limit on sick leave at my employer (vacation is separate). I'm not retired, but when I do leave, I get paid for one-third of the balance. Where do you people work and are there any openings..... Worked at a school for 20 years. Get 15 sick days a year. Once you hit 165, that’s the limit. In order to take the days, they can require a doctors note after I believe three days out. You could never just say I’m taking the next six months off without a medical note. I always used it as a long-term disability policy. Like I said, it’s not like you get paid for it when you leave. I got $1500. Similar for DH - when he quit after 14 years he had someth...
by teen persuasion
Sat Mar 23, 2024 8:23 pm
Forum: Personal Finance (Not Investing)
Topic: 12 months before retirement what do you wish you had done
Replies: 71
Views: 8625

Re: 12 months from retirement what do you wish you had done

Not to hijack this thread too much, but I currently have over 1,100 hours of sick leave. There's no limit on sick leave at my employer (vacation is separate). I'm not retired, but when I do leave, I get paid for one-third of the balance. Where do you people work and are there any openings..... Worked at a school for 20 years. Get 15 sick days a year. Once you hit 165, that’s the limit. In order to take the days, they can require a doctors note after I believe three days out. You could never just say I’m taking the next six months off without a medical note. I always used it as a long-term disability policy. Like I said, it’s not like you get paid for it when you leave. I got $1500. Similar for DH - when he quit after 14 years he had someth...
by teen persuasion
Fri Mar 22, 2024 10:10 am
Forum: Personal Finance (Not Investing)
Topic: Is Scholarship Income Taxable?
Replies: 5
Views: 392

Re: Is Scholarship Income Taxable?

It is reported on schedule 1 line 8r. They could have other college expenses that wouldn't be included on the 1098 T, like books, that would adjust the difference. Also, 1098 T numbers are notoriously suspect - my son's 1098 T this year had box 1 tuition for both fall 2023 and spring 2024 (not billed until 2024), but scholarships/grants for only fall 2023! Not remotely correct accounting. Finding where to report it in tax software can be challenging. We used OLT, it was in the w2 income section not with other/misc income. Trying to report the 1098 T info, he was told he wasn't eligible for AOTC (yes, he's not because he's a dependent) - making it obvious the algorithm views the 1098 T as directed toward qualifying for the credit, not for re...
by teen persuasion
Fri Mar 22, 2024 8:55 am
Forum: Personal Finance (Not Investing)
Topic: ACA / Cobra timelines?
Replies: 7
Views: 722

Re: ACA / Cobra timelines?

Given it is already past the 15th of March, the earliest ACA coverage could begin is May 1 (if he is approved before April 15).

Medicaid coverage might be made retroactive, if coverage is needed. Medicaid looks at monthly income (not annual), so after a job loss one might have no/low immediate income and be eligible. Depends on your state, if it opted to expand Medicaid, and your details.
by teen persuasion
Wed Mar 20, 2024 9:23 pm
Forum: Personal Finance (Not Investing)
Topic: a question regarding deductions or credits
Replies: 8
Views: 669

Re: a question regarding deductions or credits

EITC tests on both your w2 income and your AGI. Both need to be in the eligible range, and your investment income must not be above $11k. Walk thru the EITC pages in the 1040 instruction booklet to see how it all works.

Contributing to a traditional IRA will reduce your AGI, but not your w2 income. Contributing traditional to your 401k, and/or to an HSA thru payroll, will reduce both w2 income and AGI.

It's too late to contribute to your 401k for 2023, but you can take steps now to make yourself eligible for 2024.

As @FiveK alluded, if your w2 income is in range but AGI is too high (due to other income like interest or dividends), making a deductible tIRA contribution could compensate to reduce AGI.
by teen persuasion
Wed Mar 20, 2024 11:52 am
Forum: Personal Finance (Not Investing)
Topic: Retirement accounts can be better than 529s to save for college?
Replies: 69
Views: 4652

Re: Retirement accounts can be better than 529s to save for college?

I didn't come here to debate all of that My question is to ask if the the 529 and post-tax-mega-back door 401k are functionally equivalent. I appreciate all comments related to that. thanks 2751Z, They are not equivalent. A) Roth has less restriction than 529. B) Roth has no impact on financial aid eligibility like the 529. KlangFool I believe Roth distribution s ARE still included in calculating SAI under the Simplified FAFSA formulas. It would get jumped over if AGI is low enough to qualify for full Pell and auto SAI = 0, but not in the normal calculation. There's a line for Untaxed IRA distributions to get added to AGI (parent income additions). teen persuasion, Let's be very precise here. A) For Roth IRA, it is only counted if you with...
by teen persuasion
Wed Mar 20, 2024 9:48 am
Forum: Personal Finance (Not Investing)
Topic: Retirement accounts can be better than 529s to save for college?
Replies: 69
Views: 4652

Re: Retirement accounts can be better than 529s to save for college?

KlangFool wrote: Wed Mar 20, 2024 9:19 am
2751Z wrote: Wed Mar 20, 2024 7:37 am
I didn't come here to debate all of that

My question is to ask if the the 529 and post-tax-mega-back door 401k are functionally equivalent. I appreciate all comments related to that.

thanks
2751Z,

They are not equivalent.

A) Roth has less restriction than 529.

B) Roth has no impact on financial aid eligibility like the 529.

KlangFool
I believe Roth distributions ARE still included in calculating SAI under the Simplified FAFSA formulas. It would get jumped over if AGI is low enough to qualify for full Pell and auto SAI = 0, but not in the normal calculation. There's a line for Untaxed IRA distributions to get added to AGI (parent income additions).
by teen persuasion
Sat Mar 16, 2024 8:14 am
Forum: Personal Finance (Not Investing)
Topic: The best game-changing financial advice you ever received (or "discovered")
Replies: 219
Views: 25599

Re: The best game-changing financial advice you ever received (or "discovered")

The Shockingly Simple Math behind Early Retirement post on MMM.https://www.mrmoneymustache.com/2012/01 ... tirement/

Length of time to get to your goal REALLY is just a function of your savings rate. We went from < $40k in retirement in our early 40s to $1mm in 15 years.

Next big part of the equation: do your own taxes to learn how the parts interact. Refundable credits become extra income, and increasing pre tax saving reduces AGI which reverses credit phaseouts - ultimately increasing refundable credits! Which gives you more $$ to further increase your saving rate, accelerating FIRE.
by teen persuasion
Tue Mar 12, 2024 12:31 pm
Forum: Personal Finance (Not Investing)
Topic: One spouse retiring earlier than the other?
Replies: 38
Views: 3078

Re: One spouse retiring earlier than the other?

DH retired a few years ago, he was no longer enjoying his job so it was time to exit. I could quit now if I wanted, but after nearly 20 years as SAHM and only returning to part-time work once the kids were old enough, I am still enjoying my job. It also makes sense for a few more years for us - youngest is in college now, so have a few more years with a dependent, but need to keep lower AGI (for FAFSA purposes) - low AGI + dependent + earned income = eligible for EITC (no earned income = no EITC). Might as well stay for just a few more years! DH has been working on getting more fit - running regularly, something that was more difficult while working. Also working on more delayed home projects. But his new free time and lack of daily commitm...
by teen persuasion
Mon Mar 11, 2024 12:22 pm
Forum: Personal Investments
Topic: Career ending, getting fired. Can we FIRE ?
Replies: 161
Views: 26629

Re: Career ending, getting fired. Can we FIRE ?

>>his social security : have not run the numbers, but not likely to be much as he has worked fewer years than I have at low wages. He should be able to claim on your record. Give opensocialsecurity.com a try to understand amount. OK, so we just sat together and look at ssa.gov. If he never worked again, he would get $857/month at age 62, $1217/month at age 67, and $1509 at age 70. If he kept working for $35k/year, he would get $1026 age age 62, $1566 at age 67, and $1992 at age 70. SSDI would be $1403/month for him if he ever became disabled. For me, if I never work again, I would get $2359 at 62, $3350 at 67 and $4154 at 70. I did not make projections on further work. SSDI would be $3870 if I became eligible. I input our birthdates (in 19...
by teen persuasion
Sun Mar 10, 2024 7:02 pm
Forum: Personal Investments
Topic: 401K vs Roth IRA
Replies: 17
Views: 1609

Re: 401K vs Roth IRA

Hi, I saw multiple articles/books stating that once they max out the company match amount in 401K, young investors should prioritize Roth IRA contributions over additional 401K contributions, because with Roth IRA "earnings have more time to grow tax-free". I tried to model the two scenarios in a spreadsheet - investing into 401K (with no match) vs Roth IRA for 10 years, same yearly contribution amount, same investment return, and same tax rate. Surprisingly, I get an equal after-tax return from 401K vs Roth IRA. Am I correct or is my math wrong somewhere? If I am correct then it sounds like the choice between 401K (post company match) and Roth IRA should not be based on age/the number of working years left, but rather on 401K/Ro...
by teen persuasion
Fri Mar 08, 2024 12:40 pm
Forum: Personal Finance (Not Investing)
Topic: Option to elect for 22 vs 26 pay periods: thoguhts?
Replies: 16
Views: 1528

Re: Option to elect for 22 vs 26 pay periods: thoguhts?

DH worked for a school that changed from 26 biweekly checks to 21 checks during the school year only, nothing during the 10 weeks of summer break (unless you did summer school, 6 weeks with 2 weeks off at either end, so 3 paychecks). The changeover was a mess - people used to biweekly checks forgot they would end late June, and weren't prepared. Eventually the administration relented and cut one more check, with the caveat it was an advance - one less check after school started in the fall. They forgot about that, too, on top of the wait for checks to restart (work 2 weeks, additional week for payroll processing, you are late September before you get paid in a normal year). And somehow it occasionally falls that your last check comes BEFORE...
by teen persuasion
Thu Mar 07, 2024 2:58 pm
Forum: Investing - Theory, News & General
Topic: What good is tax deferred?
Replies: 122
Views: 15670

Re: What good is tax deferred?

I wrestle with this personally. We have been largely a single income household, average lifetime income 104K/yr, median 79K/yr. Average Fed tax paid 9.8% (fed tax paid/taxable wages). We should have been doing Roths all along, instead we did what we could contributing to trad. 401k, rarely maxing. Today, mid-50s, as we plan retirement to support our current spending, it is clear that we will likely be in a higher bracket than the majority of the years when the contributions were made. ACA/PTC will make conversions difficult/not optimal prior to medicare. Post-medicare, IRMA will stop by for a visit, but there may be a conversion window there. It's a difficult nut to crack. This is the price for not taking advantage of Roths when they becam...
by teen persuasion
Wed Mar 06, 2024 9:21 pm
Forum: Investing - Theory, News & General
Topic: What good is tax deferred?
Replies: 122
Views: 15670

Re: What good is tax deferred?

I wrestle with this personally. We have been largely a single income household, average lifetime income 104K/yr, median 79K/yr. Average Fed tax paid 9.8% (fed tax paid/taxable wages). We should have been doing Roths all along, instead we did what we could contributing to trad. 401k, rarely maxing. Today, mid-50s, as we plan retirement to support our current spending, it is clear that we will likely be in a higher bracket than the majority of the years when the contributions were made. ACA/PTC will make conversions difficult/not optimal prior to medicare. Post-medicare, IRMA will stop by for a visit, but there may be a conversion window there. It's a difficult nut to crack. This is the price for not taking advantage of Roths when they becam...
by teen persuasion
Wed Mar 06, 2024 9:01 am
Forum: Investing - Theory, News & General
Topic: What if you can't access your money?
Replies: 45
Views: 4355

Re: What if you can't access your money?

Interesting discussion. With the upcoming solar eclipse passing directly over our area, there's an expectation that we may have a large influx of tourists on 4/8. But no one knows quite how big, given we are a backwater. Yesterday one of the Sheriff's offices was making recommendations - have plenty of cash, supplies, full gas tank, etc. That county's internet grid is sketchy on a good day, so more traffic could easily overwhelm it, taking down any CC payment access for the duration instead of just a few minutes (as we've regularly dealt with locally). Cash is still much more common here than elsewhere (my library is cash/check only), but younger people especially tend to use only plastic and have zero cash on them - non-locals coming from ...
by teen persuasion
Wed Mar 06, 2024 7:46 am
Forum: Personal Finance (Not Investing)
Topic: When to Actually Use my HSA Funds
Replies: 27
Views: 2588

Re: When to Actually Use my HSA Funds

We saved receipts for years. DH retired a few years ago, I have limited part-time income while it's still fun and DS5 has started college. So we have reasons to limit AGI (EITC and FAFSA), and I'm trying to pad out my SIMPLE IRA with contributions (so even smaller take home pay). Thus last year we finally withdrew our accumulated expenses from our HSA for tax free income. Going forward we will simply use the HSA for medical expenses as they arise, no more keeping receipts. Our next tax free withdrawal will be from past Roth contributions. We only need to do this for a few more years until we are past the FAFSA years, which are offset by the prior-prior year reporting. Should also coincide with 59.5 removing penalties for direct tIRA withdra...
by teen persuasion
Mon Mar 04, 2024 12:42 pm
Forum: Investing - Theory, News & General
Topic: What good is tax deferred?
Replies: 122
Views: 15670

Re: What good is tax deferred?

I wrestle with this personally. We have been largely a single income household, average lifetime income 104K/yr, median 79K/yr. Average Fed tax paid 9.8% (fed tax paid/taxable wages). We should have been doing Roths all along, instead we did what we could contributing to trad. 401k, rarely maxing. Today, mid-50s, as we plan retirement to support our current spending, it is clear that we will likely be in a higher bracket than the majority of the years when the contributions were made. ACA/PTC will make conversions difficult/not optimal prior to medicare. Post-medicare, IRMA will stop by for a visit, but there may be a conversion window there. It's a difficult nut to crack. This is the price for not taking advantage of Roths when they becam...
by teen persuasion
Sat Mar 02, 2024 8:49 pm
Forum: Investing - Theory, News & General
Topic: "How much should I have in my 401k" article for various ages - thoughts?
Replies: 45
Views: 6375

Re: "How much should I have in my 401k" article for various ages - thoughts?

That said, I think any "salary/income" based recommendations are flawed. What ultimately matters is our expenses (including taxes). This is one of my biggest financial pet peeves. Targeting an accumulated value to a ratio of income. Setting a savings goal per year as a percentage of income for that year makes some sense, but this case is simply a lazy multiplication of “save 20% per year * x years since 25 = target” As a “starting point” for those earning income, they are a helpful guide. How many 25, 30, 35, 40, etc. year olds have a clue as to what their expenses will be come retirement? So the Fidelity, JP Morgan, T. Rowe Price multiples of salary metric are designed to be a useful starting point guide. They all use assumption...
by teen persuasion
Sat Mar 02, 2024 7:43 pm
Forum: Personal Finance (Not Investing)
Topic: Taxes 2022: Better to claim a college kid as a dependent? Or should the kid file their own return?
Replies: 24
Views: 6294

Re: Taxes 2022: Better to claim a college kid as a dependent? Or should the kid file their own return?

I have a question that is related, but doesn't appear to be answered. And, it may help the original poster as well. I'm in a similar situation. I'm filing as MFJ, and our adjusted gross income is somewhere over the maximum $180K. Because it's over the maximum, we aren't able to take any tax breaks, except for $500 for one qualifying child. He's 20, and a full-time college student. From what I see, it would be better for me to NOT claim him as a dependent, and lose that $500. However, he would then be able to take the American Opportunity Tax Credit, meaning he would receive a $1,000 refund. So bottom line is that I would give up a $500 credit, but he would receive a $1000 credit. My question is - how do I NOT claim him as a dependent? It's...
by teen persuasion
Sat Mar 02, 2024 8:13 am
Forum: Personal Finance (Not Investing)
Topic: How to have student claim AOTC?
Replies: 17
Views: 1461

Re: How to have student claim AOTC?

There are 5 potential years a 4 year degree can qualify for AOTC credit but it's only allowed for 4. Skipping a year may be more beneficial than having child take credit. The first semester and last semester are not full years. Be careful on timing payment for last spring semester. Some schools deliberately bill in such a way that there are exactly 4 years of college payments. Fall semester payment is due in August, spring semester is due in early December. Makes AOTC claiming much more straightforward. Only one of my kids' colleges billed in this way, my oldest, but I preferred it. The 1/2 - 1 - 1 - 1 - 1/2 cycle created issues claiming the first year with only one semester of expenses. OP, your student will need to claim a large amount i...
by teen persuasion
Fri Mar 01, 2024 11:25 pm
Forum: Personal Finance (Not Investing)
Topic: Retiree Portfolio Model
Replies: 1809
Views: 547979

Re: Retiree Portfolio Model

Obviously I don't know all your details, but I'd look carefully at what happens when one of you dies and whether the survivor is hit with the tax torpedo. See the colorized charts at the Taxation of Social Security Benefits Boglehead page. Based on that eventuality, you may find yourself well served by doing Roth conversions at least up to the top of the 12% bracket, especially for the next two years until that bracket may sunset. Unfortunately, for the next two years we are limited in how much we can convert - our youngest has started college, and we need to limit AGI for FAFSA purposes. I'm also still working part-time, contributing as much as I can to my SIMPLE IRA, so the combo of some earned income plus a dependent means we are still ...
by teen persuasion
Fri Mar 01, 2024 1:36 pm
Forum: Personal Finance (Not Investing)
Topic: Retiree Portfolio Model
Replies: 1809
Views: 547979

Re: Retiree Portfolio Model

I used RPM to test out whether we could Roth convert a modest amount each year, to about the top of the 10% bracket, up until claiming SS at 70 to reduce future RMDs to no more than the amount we'd want to supplement SS for spending. Also wanted to see how taxes could play out for a survivor - could we reduce the size of the tIRAs enough over time to prevent a tax bomb for the survivor? We have been low income, by bogleheads standards, never saved in taxable for many reasons (counterproductive for EITC and FAFSA purposes, never ran out of tax deferred account space), so tIRA (rollover from 401k/403b) and SIMPLE IRA and Roth IRAs are it for us. We were about 1/3 Roth 2/3 trad, now nearly 40/60% after a few small conversions at zero tax. Most...
by teen persuasion
Fri Mar 01, 2024 10:10 am
Forum: Personal Finance (Not Investing)
Topic: Retiree Portfolio Model
Replies: 1809
Views: 547979

Re: Retiree Portfolio Model

I don't know if this has been addressed previously. Because a large proportion of my portfolio is in tax-deferred, and also because I will make some moderate Roth conversions until RMD time, in real life my taxable account may grow small or even vanish. At that point, especially because my heirs are not my first priority, I would spend from the Roth rather than take more out of tax-deferred. Does RPM require the taxable account to be funded for computational reasons? Is there a way to allow for it not to, or to select a preferred withdrawal order? At this point I either have to allow it to have negative balances, or allow it to make extra withdrawals from my tax deferred, which then increases my taxes paid, and paints an inaccurate picture...
by teen persuasion
Thu Feb 29, 2024 2:20 pm
Forum: Investing - Theory, News & General
Topic: What good is tax deferred?
Replies: 122
Views: 15670

Re: What good is tax deferred?

Depending on how much they make and if your children plan to have kids of their own, deferring taxes can be quite lucrative when tax credits are figured. With 2 kids and a non working spouse, we have a negative tax rate. +1 Yes, credits (especially refundable) create a situation where your marginal rate can be much higher than your tax bracket. Contributions to the correct tax deferred accounts can make you eligible for greater credit amounts if they counteract phaseouts, or put you in a better % tier. That benefit stacks on the tax deferral benefits. EITC with multiple children has a 21% phaseout rate, so every $1k deferred within the phaseout range increases your credit $210. NYS matches at 30%, so another $63. And you avoid (at the time...
by teen persuasion
Wed Feb 28, 2024 9:13 am
Forum: Investing - Theory, News & General
Topic: "How much should I have in my 401k" article for various ages - thoughts?
Replies: 45
Views: 6375

Re: "How much should I have in my 401k" article for various ages - thoughts?

Despite being updated in December 2023, it's not very current. The article mentioned 401k limits of $19,500. That's either 2020 or 2021.
by teen persuasion
Mon Feb 26, 2024 12:39 pm
Forum: Personal Finance (Not Investing)
Topic: Tax consequenses of Creating a bridge to SS using Roth funds or traditional 401/Ira
Replies: 10
Views: 917

Re: Tax consequenses of Creating a bridge to SS using Roth funds or traditional 401/Ira

What is your current marginal tax rate? It looks like your tax rate in retirement may be zero, unless you have other income that you didn't mention, like pensions. It may make more sense to contribute to pretax instead of Roth for the next 3 years, because you currently have $100k + $60k, and intend to spend them down for 5 years before SS at 70. You could save the additional tax savings. Say you save your projected $15k per year for 3 years, bringing your traditional total to $145k. Then withdraw 1/5 each year, $29k. If you are also getting ~$2k/yr investment income from your taxable account, and spouse's $18k SS, and make up the difference from tax free Roth, your provisional income is $31k + $9k = $40k, so only $4k of SS is taxable. Addi...
by teen persuasion
Mon Feb 26, 2024 7:57 am
Forum: Personal Finance (Not Investing)
Topic: Tax consequenses of Creating a bridge to SS using Roth funds or traditional 401/Ira
Replies: 10
Views: 917

Re: Tax consequenses of Creating a bridge to SS using Roth funds or traditional 401/Ira

Hi all. hoping you can help me with a tax related question regarding how to best utilize my Roth and traditional 401/Ira funds. I am 62 and plan to retire at 65 and create a 5 year bridge to SS and take that at 70. $100k in none tax advantaged account. $240K in Roth. $100k in traditional 401k. I plan to contribute $15K per year to Roth till I retire. Hopefully will have $500-600K at 65. Wife is retired, drawing $18K/year SS. She has approximately $120K Roth, $60k traditional. She isn't currently drawing on her retirement accounts, but probably will begin when I retire at 65. My current plan is to take $200k from my Roth at 65 and buy a 5 year annuity that will pay around what SS will pay me at 70 (using current SS statement, approximately ...
by teen persuasion
Sun Feb 25, 2024 8:25 pm
Forum: Personal Investments
Topic: Roth Conversion: Mine vs. Spouse - Does it Matter?
Replies: 19
Views: 1464

Re: Roth Conversion: Mine vs. Spouse - Does it Matter?

We are doing conversions from DH's much larger tIRA, while contributing to my SIMPLE IRA. NY exempts from state taxes $20k of retirement withdrawals (or conversions) per person after age 59.5. So if we both can do at least $20k of conversions from our respective accounts, we have $20k + $20k + $16k (state standard deduction) = $56k state tax free conversion space. If my balances are too low to sustain $20k conversions annually, we have only $36k space. Thus I'm trying to increase my tiny balance while simultaneously shrinking his down.

When we reach 59.5 (and after FAFSA AGI limitations go away for us) we will increase conversions from both of our IRAs.
by teen persuasion
Thu Feb 22, 2024 9:22 pm
Forum: Personal Finance (Not Investing)
Topic: Am I saving enough for taxes?
Replies: 5
Views: 830

Re: Am I saving enough for taxes?

That's a really hard way to look at it.

If I've got this right, you earn $456/wk.
So 52 weeks at $456 = $ 23712 annual.
Subtract the standard deduction ($14600 for S in 2024) = $9112. That's all in the 10% tax bracket, so $911 tax. Adjust your actual numbers as needed.

You will also owe SE tax on whatever income is not w2 income (1099 income), at 15.3%. Add that to the above.

Subtract whatever is withheld on W2 paychecks from your estimated total. This is how much you need to put aside.

If your SE tax is substantial, you might want to increase your withholding instead, so you don't owe under-payment penalties. You want enough withheld to meet safe harbor amounts.
by teen persuasion
Thu Feb 22, 2024 8:57 pm
Forum: Personal Finance (Not Investing)
Topic: A question about qualified scholarships, W-4s, and "other income"
Replies: 12
Views: 646

Re: A question about qualified scholarships, W-4s, and "other income"

Regarding your refunded financial aid - what was the source of the aid in the first place? Did you take student loans? Excess loan money could be refunded to you to use for other college expenses like room/board/books/etc. That would not be scholarship money that needs to be claimed as taxable income. If your financial aid consisted of only scholarships and grants, then anything over the cost of tuition & fees & books would be claimed as taxable scholarship income. When claiming taxable scholarship income, it is treated *somewhat* like earned income, and *somewhat not* as earned income. It is treated as earned income when figuring the standard deduction for dependents (which might affect where it goes for kiddie tax - I'm not famili...
by teen persuasion
Thu Feb 22, 2024 9:00 am
Forum: Personal Finance (Not Investing)
Topic: Downside of claiming dependents on W4?
Replies: 31
Views: 2165

Re: Downside of claiming dependents on W4?

our accountant holds back a certain amount from the refund to meet safe harbor This seems unrelated to how safe harbors work. Your accountant has... interesting ideas. I probably misunderstand safe harbors! I think what it might be is the first “quarterly estimate” taken out of the refund instead of paid separately. Would that make more sense? Are you making quarterly estimated payments and withholding? We make that single payment upfront (I need to check into this because I might be misunderstanding) and then withhold from my W2 income to cover the rest. No additional quarterly payments. We overpay tax by quite a bit and, as nice as the refund is, throughout the year we could really use the additional cash flow. We are paying off a HELOC ...
by teen persuasion
Wed Feb 21, 2024 9:22 am
Forum: Personal Finance (Not Investing)
Topic: Distribution priority - Roth or 401K
Replies: 23
Views: 1501

Re: Distribution priority - Roth or 401K

Here's what we are doing, and why: I'm Roth converting up to a desired point each year (lower for the next few years due to FAFSA and EITC limits, higher once those end). Any needed withdrawals will come out of Roth, because we are under 59.5 (to bypass penalties). After we reach 59.5, we could just directly withdraw from tIRA for spending, and Roth convert a bit more to my desired max tax point, but I think it will be cleaner for tax purposes to continue Roth converting to my desired AGI and then spending as needed from Roth withdrawals. I plan to convert more each year than our average spending, but lumpy spending items push certain years up and down - spending from Roth smoothes it out. When we begin SS, I will reduce Roth conversions to...
by teen persuasion
Sat Feb 17, 2024 12:10 pm
Forum: Personal Finance (Not Investing)
Topic: How Do I Avoid Filing Sched A-H to Exclude Assets on FAFSA?
Replies: 8
Views: 899

Re: How Do I Avoid Filing Sched A-H to Exclude Assets on FAFSA?

What you're listing as the "current FAFSA provision" is now the "old FAFSA provision". FAFSA was rewritten / modified a few years ago in a section of law called FAFSA simplification which is being implemented for the 2024/2025 school year - i.e., now. From what I've read, the exclusion provision I quoted in the OP is for the new FAFSA changes that start with the 2024/25 school year. See https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-08-04/fafsa-simplification-act-changes-implementation-2024-25 . One way to achieve being exempt from asset reporting, IIRC, is for your AGI to be below a certain percentage of FPL - I believe it is 175% for married parents and 225% for single parents. I'm pre...
by teen persuasion
Sat Feb 17, 2024 9:29 am
Forum: Personal Finance (Not Investing)
Topic: [RESOLVED] Tax Hypothetical for those with no earned income from a job.
Replies: 19
Views: 1577

Re: Tax Hypothetical for those with no earned income from a job.

retired@50 wrote: Fri Feb 16, 2024 6:28 pm From the website I linked earlier...

Image

Regards,
Very nice.

Too bad it only does OI and LTCG, and doesn't incorporate any credits. That's what I think it could be really interesting to visualize. And SS taxation with Roth conversions.
by teen persuasion
Sat Feb 17, 2024 9:11 am
Forum: Personal Finance (Not Investing)
Topic: Social Security -- What’s in Your Retirement Plan?
Replies: 47
Views: 3683

Re: Social Security -- What’s in Your Retirement Plan?

capran wrote: Fri Feb 16, 2024 7:20 pm ... I'm in the camp that they may reduce, but either way, a reduced amount of a larger check will be better than the reduced amount of a smaller check. And if we can continue to convert as much as possible, we'll reach a point where our taxable income will be so low, if they reduce it for the "rich", we might avoid being classified as such, because the bulk of our income will be in Roths.
Thank you - you put into words what I could not (but intuitively saw). Much clearer and simpler.
by teen persuasion
Fri Feb 16, 2024 3:51 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security -- What’s in Your Retirement Plan?
Replies: 47
Views: 3683

Re: Social Security -- What’s in Your Retirement Plan?

Plan to delay SS until 70 to have more space for Roth conversions.

Use only the higher SS benefit in planning, not combined with my spousal one; 1) I don't know how long we will both live, so can't predict how long we'd get the extra benefit (plan for either one or two of us is based on minimum), and 2) it's a good proxy if benefits are reduced.
by teen persuasion
Thu Feb 15, 2024 8:41 pm
Forum: Personal Finance (Not Investing)
Topic: Keeping SS at lower taxable level
Replies: 17
Views: 2131

Re: Keeping SS at lower taxable level

Provisional income (50% of SS benefit + AGI + non-taxable interest income) below $25K results in none of your SS is taxed; the amount between $25K and $34K results in half of your SS being subject to income tax; and the amount above $34K results in 85% of SS income is subject to tax. You then add the appropriate amount of SS income to your other income to get your taxable income. Here is a post by Teen Persuasion explaining it to me (any errors above are mine not theirs). I was able to check out Social Security Made Simple by Mike Piper from my local library which does a good job of explaining SS. I'm sure there's other books as well. I find it much easier to understand/explain if you provide details including your mom's ordinary income, q...
by teen persuasion
Wed Feb 14, 2024 11:04 pm
Forum: Personal Investments
Topic: Draw down IRA
Replies: 19
Views: 2311

Re: Draw down IRA

I wonder of the OP's question is whether to draw down a pre-tax IRA even if not required to take RMDs or in excess of RMDs. I've wondered this myself. I have large taxable accounts and a large IRA and smaller Roth. I've assumed I should use the taxable and let the TIRA ride until mandatory RMDs. It would obviously better for my heirs if I took IRA distributions and left them the Taxable and Roth. I wouldn't do it to benefit my heirs, but I have wondered for myself if spreading out the TIRA distributions over a longer period would reduce the ultimate tax burden. If that were to make sense, then wouldn't Roth conversions be better? I think the OP is thinking of something like a Roth conversion, or perhaps part withdrawal for living expenses ...
by teen persuasion
Tue Feb 13, 2024 7:51 am
Forum: Personal Finance (Not Investing)
Topic: Simple ira tax form ?
Replies: 4
Views: 497

Re: Simple ira tax form ?

Is she contributing? It will be on her w2.
by teen persuasion
Mon Feb 12, 2024 8:21 pm
Forum: Investing - Theory, News & General
Topic: Tax Deferred : Taxable : Tax Free
Replies: 260
Views: 23330

Re: Tax Deferred : Taxable : Tax Free

teen persuasion wrote: Sun Dec 01, 2019 11:28 am Dec 2019 65% : 0 : 35%
Feb 2024 60.6% : 0 : 39.4% after 2 small Roth conversions, no withdrawals yet. Most of the effect was probably bond fund tanking.
by teen persuasion
Sun Feb 11, 2024 1:30 pm
Forum: Personal Finance (Not Investing)
Topic: Mechanics of Social Security Bridge?
Replies: 22
Views: 1847

Re: Mechanics of Social Security Bridge?

This is a very popular thread about a Social Security bridge https://www.bogleheads.org/forum/viewtopic.php?t=102609 For anyone who hasn't read it (it's one thread I'll never forget) This is exactly how I plan to delay SS to 70. We just have another period before 62 to complicate things, while I have part time income and youngest is in college (FAFSA and EITC income limitations to plan around). Also, I'm not using our combined SS at age 70, I'm using only the higher earner's SS benefit. At some point in the future one of us will pass away, and the survivor will have only the one SS payment. I'd rather budget based on the lower income and treat the extra SS payment as bonus, than budget based on the max combined and have the survivor facing...
by teen persuasion
Sun Feb 11, 2024 10:36 am
Forum: Personal Finance (Not Investing)
Topic: Is my company doing something illegal?
Replies: 19
Views: 2290

Re: Is my company doing something illegal?

Decades ago I worked for a craft store and had to clock in. Employer did not want us to clock in more than 2 or 3 minutes early, just enough for everyone to quickly clock in before opening, and it was clear we would not get paid for those minutes. At closing, nearly everyone was expected to clock out as close to closing time as possible, again would not be paid for any extra minutes - except for the day's floor managers and *one* cashier as they rapidly cashed out drawers and ran register reports. Managers would receive pay for that extra 10-15 minutes, and the closing cashier would, too - their time cards got initialed to tell whoever did payroll to not round down, pay actual time. I know this because I was regularly tapped to be the closi...
by teen persuasion
Fri Feb 09, 2024 4:41 pm
Forum: Personal Investments
Topic: Contributing to 2023 Roth IRA with no 2023 income
Replies: 35
Views: 3059

Re: Contributing to 2023 Roth IRA with no 2023 income

There is no 1040EZ, anymore. Hasn't been for a while. No 1040A, either. There is a 1040SR, for seniors, in large print, though. :sharebeer
by teen persuasion
Fri Feb 09, 2024 3:25 pm
Forum: Personal Finance (Not Investing)
Topic: Healthcare exchange for grown children living at home
Replies: 6
Views: 527

Re: Healthcare exchange for grown children living at home

Adults, not your dependents for tax purposes? Yes, they apply based on their own income.
by teen persuasion
Fri Feb 09, 2024 1:17 pm
Forum: Investing - Theory, News & General
Topic: Roth vs 12% Taxable Bracket during FIRE
Replies: 13
Views: 1721

Re: Roth vs 12% Taxable Bracket during FIRE

Pepper11 wrote: Fri Feb 09, 2024 12:57 pm
teen persuasion wrote: Wed Jan 18, 2023 9:45 am
ACA credits are based on AGI, which would include LTCG & divs even if taxed at zero.
This works both ways. You NEED taxable income to qualify for ACA - otherwise you are only eligible for Medicaid. Just not too much taxable income to qualify for subsidies.
Medicaid is not universally a bad thing, depends on your state.

But those who FIRE have years to do Roth conversions before Medicare and SS and RMDs. Conversions would also generate taxable income to qualify for ACA.

LTCG, etc, would displace some conversion space. And/or decrease ACA subsidies.
by teen persuasion
Fri Feb 09, 2024 12:48 pm
Forum: Personal Investments
Topic: Contributing to 2023 Roth IRA with no 2023 income
Replies: 35
Views: 3059

Re: Contributing to 2023 Roth IRA with no 2023 income

There is no reason to use both VTI and VOO, just use one of them. All of the stocks in VOO are in VTI. I would use VTI as it’s more complete. Also, in the event you end up with a tax-advantaged account, like an IRA or 401k, you don’t want to needlessly use up TLH partners, making it harder to avoid wash sales. Sometimes you are stuck with a 401k where the best option is an S&P 500 fund. Make sure your scholarship counts as taxable compensation, if the internship and lab position aren’t sufficient to cover the 2024 contribution amount. A scholarship can be taxable income while not being earned income. So scholarship income is likely NOT eligible for a Roth contribution. It is earned income that qualifies for Roth contribution. It’s actu...
by teen persuasion
Fri Feb 09, 2024 12:16 pm
Forum: Personal Investments
Topic: What to do with SIMPLE IRA and taxable account?
Replies: 4
Views: 532

Re: What to do with SIMPLE IRA and taxable account?

Since future Roth withdrawals will not be taxed, but future 401k/tIRA withdrawals will be taxed, and possibly cause more SS income to become taxable, you generally want to place the assets you expect to have the greatest growth in your Roth IRA, and slower growing assets in pretax accounts. So, bonds usually in pretax, not in Roth.

Will reallocating taxable to VTSAX trigger a tax cost? Reallocating within any of your other accounts is tax free, but selling in taxable could trigger LTCG.
by teen persuasion
Fri Feb 09, 2024 9:30 am
Forum: Personal Investments
Topic: What to do with SIMPLE IRA and taxable account?
Replies: 4
Views: 532

Re: What to do with SIMPLE IRA and taxable account?

If you need to do a backdoor Roth IRA in the future, the SIMPLE IRA will be just as much of a hindrance as a tIRA. Any type of pretax IRA invokes pro rata.

But, yeah, I don't love American Funds in my SIMPLE IRA, either. :annoyed
by teen persuasion
Fri Feb 09, 2024 8:52 am
Forum: Personal Investments
Topic: Contributing to 2023 Roth IRA with no 2023 income
Replies: 35
Views: 3059

Re: Contributing to 2023 Roth IRA with no 2023 income

There is no reason to use both VTI and VOO, just use one of them. All of the stocks in VOO are in VTI. I would use VTI as it’s more complete. Also, in the event you end up with a tax-advantaged account, like an IRA or 401k, you don’t want to needlessly use up TLH partners, making it harder to avoid wash sales. Sometimes you are stuck with a 401k where the best option is an S&P 500 fund. Make sure your scholarship counts as taxable compensation, if the internship and lab position aren’t sufficient to cover the 2024 contribution amount. A scholarship can be taxable income while not being earned income. So scholarship income is likely NOT eligible for a Roth contribution. It is earned income that qualifies for Roth contribution. It’s actu...