Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Zillions
Posts: 391
Joined: Sun May 24, 2020 12:58 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Starfish wrote: Sat Apr 03, 2021 2:12 am
Zillions wrote: Fri Mar 26, 2021 4:59 pm
It's not deserted because of the 400K dual income tech workers, foreign money etc, pricing natives out of their neighborhoods. Many middle income earners live with their parents or in-laws or have inherited homes or received assistance with housing purchase.

I am not sure I understand this correctly.
So there is a problem that the natives inherit homes now worth millions while many times they pay very little property tax? or that the local school improved?
Or it's not a good thing that they are born in an area where people go through tremendous difficulties to get to?
And the comparison are people who sometimes barely speak English sometimes and own a duffel bag with clothes when they step out of an airplane?
How much luckier than this can one be?
So 100% of the 400K dual earners are exclusively those who moved to a country whose language they don't speak with only a duffel bag of clothes or "go through enormous difficulties to get to? Interesting, because the numerous Indians in tech usually tend to be highly educated, and speak perfect English, hardly "duffel bagging" it. Many have also gone to school (Masters & beyond) in the United States.

The folks who don't speak English tend to not work in IT, with some exceptions, of course. But maybe you've done in-depth research that proves / shows otherwise?

Technically, the natives could ALL choose to work for FAANG and yes, I see how it's their fault they chose to be essential services workers, teachers, paramedics, social workers, county employees, whose pay simply hasn't kept up with the COL in the area.

I mean, who needs EMTs, cops, teachers, social workers etc when we could all jump into a FAANG company and make 400K p.a? :sharebeer

The point is that extreme incomes have bumped prices up to the point that many non-IT folks - esp families with children - cannot afford housing & child care.

BTW, you assert that ALL "natives" get to inherit "million dollar homes" and then pay very little taxes, adversely affecting local districts' ability to offer excellent services to their students?

I live in a neighborhood that is full of first generation immigrants who have purchased homes between the last 5 to 12 years. The crash of 2008/09 helped some of them buy a home at excellent prices, locking them into the lower property taxes. But many purchased brand new homes in the last 5/6 years when our town saw a major burst in construction activity, with the median selling price of a home being $1,250,000.

By your logic, the local district should have "improved" drastically, right? Oh, how I wish that was the case! Instead, our district cannot retain staff, class sizes have doubled, and SDC students esp suffer because they cannot seem to hire and retain OTs or SLPs, services that are written into the IEPs. Aides stop showing up because they pay $16/hr, and restrict hours to 19.5/ week, to avoid offering any "benefits".

So, sorry, but the argument that natives inheriting homes have contributed to the lowering standards of public school districts is not borne out by the facts in many Bay Area neighborhoods. And the assertion that people should all choose to work in IT would result in cities / towns with huge incomes but no essential services, unless these services paid just as much as IT -- in which case, all will be well and we wouldn't be having this discussion in the first place.
Last edited by Zillions on Sat Apr 03, 2021 6:26 pm, edited 2 times in total.
Zillions
Posts: 391
Joined: Sun May 24, 2020 12:58 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Zillions »

Prahasaurus wrote: Sat Apr 03, 2021 1:56 am
Zillions wrote: Thu Apr 01, 2021 3:58 pm
Ron Ronnerson wrote: Thu Apr 01, 2021 2:28 pm Since the topic of preschool has been raised, I thought I'd share our experience with that. Preschool was relatively expensive for us but we did find ways to mitigate the cost. My daughter attended Stratford School for two years. At age 3, she attended a full day program but only 3 days a week. At age 4 she attended half days for five days a week (we picked her up by the time most of the kids were about to take their two hour naps).This set up of not attending five long days per week along with the fact that we only have one child, helped with the cost of tuition. We also used a flexible spending account and that softened the blow a little bit as well.

Living next to family also helped as my mother-in-law could pick our daughter up while my wife was at work. Also, having a teacher’s schedule came in handy at times as I needed to pick her up by 3:45 p.m. and could make it since I get out of work by 3:00. As a result, no after-care was needed. Still, a year of preschool cost about as much as my car. That shows that preschool is expensive but also that my car is not. It’s about priorities and about working every angle that you can.

We did not have to enroll our daughter into preschool but we value education so it was a priority for us. Basically, you make room in your budget for things that are important to you. We are extremely glad that she got to have the experience and education that preschool provided. At age 5, she attended transitional kindergarten at the local public school, and is in kindergarten now at age 6. We live in an area with outstanding public schools and our kid is doing well thus far.

During summers, she attends “daddy-school.” I use the time to get her in good shape for the upcoming year by teaching her five days a week. I don’t ever work during the summer because the time with my daughter is more important than additional money.

Anyhow, people do often have choices they can make to reduce the pain of preschool expenses. They can enroll their kid part time, live near relatives, use an FSA, figure out creative arrangements when it comes to work schedules, and can usually decide how many kids to have. Additionally, money not spent on other things (like expensive cars) allow for more to be directed toward preschool if all else is held constant. We used each of these strategies to attack preschool costs. If you examine an expense carefully and try to find creative solutions, it can often be fruitful. This can be done for just about everything and that does include daycare/preschool as well.
Just to add: Many "low income" families have access to subsidized preschool arrangements for their kids, usually through the local county or the school district. What constitutes "low income" depends on the county. Preschool is usually free through the local school district if a child is developmentally delayed or disabled.

I think living next to family is probably the best option when it comes to reducing preschool costs, esp. if both spouses HAVE to work, or if they're single parents. Also, some churches (you don't have to be a member) offer free preschool, as long as you volunteer one day a week in the preschool, and if you're ok with kids "being exposed to religion" (an actual gripe I heard from an atheist mom).

Then, there's the "parent participation" or "coop" preschool when Mom / Dad / Aunt / Uncle / Cousin / Grandma / Grandpa / anyone representing the child's family volunteers in the program whenever the child is in attendance. I did this for my daughter. Don't recall what I paid or even if I paid anything, but it certainly did not cost me anywhere near 2K/month.
I think a parent being concerned about their children "being exposed to religion" is a very valid concern for an atheist mom. Not sure why you find that so astonishing? If the local Muslim mosque or Jewish temple offered free preschool for all kids, with the condition the children would be educated in those specific religions, do you think a Christian parent would be concerned? You can say that they don't have to accept the offer, and fair enough. But for a poor parent it's difficult if your only option is to place your kids somewhere where they will be indoctrinated in a way that is inconsistent with your beliefs.
If you're "poor" then you will income qualify for county funded preschool or "HeadStart".
There will be no reason for you to send your child to a program whose beliefs you disagree with. If you're "moderate income" or otherwise priced out of free preschool, then find something else that works for your family - like a co-op preschool, move closer to family or send your child to a a religious program whose beliefs & teaching is in line with your own. There's no such thing as a completely "free lunch". Strings are attached. But you have options, as I pointed out above.
Prahasaurus wrote: Sat Apr 03, 2021 1:48 am
Zillions wrote: Sun Mar 28, 2021 1:14 am
Ron Ronnerson wrote: Sun Mar 28, 2021 12:36 am
elle wrote: Sat Mar 27, 2021 1:17 pm Congrats on making it work. There will be naysayers and those who make excuses for how you have made it work.

Regardless, you should be proud of the progress you made and your diligence to living below your means. This thread was an enjoyable read.
Thanks! I appreciate the kindness and encouragement. I’m sort of glad this thread got revived recently as it was interesting to see how things have progressed since I started it back in 2019. I’m glad you enjoyed reading it. Maybe I will update it once in a while. Until then...
I think you should post regularly. It's heart warming to know that one CAN beat the odds, and succeed, IF one is patient and prepared to seize opportunities. I personally learned a lot from this thread, so please don't limit yourself to merely "once in a while". Thanks!
I'm happy for the OP, and wish him nothing but the best. But just because someone can "beat the odds" doesn't mean the odds aren't stacked against people in a very significant way. You can say he "seized opportunities," but if "nobody knows nothing" (a core Boglehead mantra), then we should admit the OP got lucky with his home purchase. Nothing wrong with that! But don't expect this to be repeated often. You are definitely right to say he beat the odds.

With housing prices where they are today, and with health care and child care costs what they are in the USA (not a huge issue in the rest of the developed world, but definitely a major problem in America), the average young couple with children will have little chance to purchase a home and have one spouse stay at home to take care of the children. It's out of reach for the vast majority of Americans. In HCOL areas, it's incredibly rare. I'm not talking trust fund kids or Billy whose parents funded his university and then dad hired him at his consulting company making 300k USD right out of college. I'm talking about normal Americans. It's out of reach.
Yes, I agree. Ron may have gotten lucky but he also was prepared to seize it when an opportunity presented itself. He has been very open and generous in sharing his path to financial freedom even in very expensive coastal California. This thread is an informative read that if you can get housing taken care of, and creatively solve childcare costs, the Bay Area is just like any other place in the country.
Starfish
Posts: 2996
Joined: Wed Aug 15, 2018 6:33 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Starfish »

Zillions wrote: Sat Apr 03, 2021 5:22 pm
Starfish wrote: Sat Apr 03, 2021 2:12 am
Zillions wrote: Fri Mar 26, 2021 4:59 pm
It's not deserted because of the 400K dual income tech workers, foreign money etc, pricing natives out of their neighborhoods. Many middle income earners live with their parents or in-laws or have inherited homes or received assistance with housing purchase.

I am not sure I understand this correctly.
So there is a problem that the natives inherit homes now worth millions while many times they pay very little property tax? or that the local school improved?
Or it's not a good thing that they are born in an area where people go through tremendous difficulties to get to?
And the comparison are people who sometimes barely speak English sometimes and own a duffel bag with clothes when they step out of an airplane?
How much luckier than this can one be?
So 100% of the 400K dual earners are exclusively those who moved to a country whose language they don't speak with only a duffel bag of clothes or "go through enormous difficulties to get to? Interesting, because the numerous Indians in tech usually tend to be highly educated, and speak perfect English, hardly "duffel bagging" it. Many have also gone to school (Masters & beyond) in the United States.

The folks who don't speak English tend to not work in IT, with some exceptions, of course. But maybe you've done in-depth research that proves / shows otherwise?

Technically, the natives could ALL choose to work for FAANG and yes, I see how it's their fault they chose to be essential services workers, teachers, paramedics, social workers, county employees, whose pay simply hasn't kept up with the COL in the area.

I mean, who needs EMTs, cops, teachers, social workers etc when we could all jump into a FAANG company and make 400K p.a? :sharebeer

The point is that extreme incomes have bumped prices up to the point that many non-IT folks - esp families with children - cannot afford housing & child care.

BTW, you assert that ALL "natives" get to inherit "million dollar homes" and then pay very little taxes, adversely affecting local districts' ability to offer excellent services to their students?

I live in a neighborhood that is full of first generation immigrants who have purchased homes between the last 5 to 12 years. The crash of 2008/09 helped some of them buy a home at excellent prices, locking them into the lower property taxes. But many purchased brand new homes in the last 5/6 years when our town saw a major burst in construction activity, with the median selling price of a home being $1,250,000.

By your logic, the local district should have "improved" drastically, right? Oh, how I wish that was the case! Instead, our district cannot retain staff, class sizes have doubled, and SDC students esp suffer because they cannot seem to hire and retain OTs or SLPs, services that are written into the IEPs. Aides stop showing up because they pay $16/hr, and restrict hours to 19.5/ week, to avoid offering any "benefits".

So, sorry, but the argument that natives inheriting homes have contributed to the lowering standards of public school districts is not borne out by the facts in many Bay Area neighborhoods. And the assertion that people should all choose to work in IT would result in cities / towns with huge incomes but no essential services, unless these services paid just as much as IT -- in which case, all will be well and we wouldn't be having this discussion in the first place.
I think you are misunderstanding my words.
My point was that the effervescent economy in expensive areas advantages locals (not "all" locals) the most. And it's not only about the opportunities in tech industry, a lot of other people benefit from the local economy. Services, constructions, you name it.
A primary school teacher where I live makes 100k$ (salaries are public). Until recently with 1 million they could acquire a 3bd/2bath house (lately it went up). It's within commute distance from the heart of Bay Area. A family of two would pay ~75k$ on the house, about 40% of income, which is not at all that bad for an area where the house prices go up like crazy, with several months of vacation and no corporate stress and deadlines. If anything I think it's a great job.

Zillions wrote: Thu Apr 01, 2021 3:58 pm I think living next to family is probably the best option when it comes to reducing preschool costs, esp. if both spouses HAVE to work, or if they're single parents. Also, some churches (you don't have to be a member) offer free preschool, as long as you volunteer one day a week in the preschool, and if you're ok with kids "being exposed to religion" (an actual gripe I heard from an atheist mom).

And here you go, just another great advantage locals have and other people do not.
I don't understand the religion remark. Of course she meant "indoctrinated" instead of "exposed". It sounds to me like a very legitimate concern.
TeacherInCa
Posts: 24
Joined: Thu Jun 22, 2017 9:15 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by TeacherInCa »

Ron,
We have similar stats. I am in SoCal and expect to retire in 12-13 years with 100K pension. The main difference is I am single, no children, have district-paid healthcare, and my salary is lower at 108K. I only contribute to Roth retirement accounts. Without significant deductions and credits, I pay a lot in taxes. With your contributions in traditional accounts, income from pension, wife's SS, fewer deductions/child tax credits, what are your plans for minimizing taxes during retirement?
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

TeacherInCa wrote: Wed Jun 23, 2021 6:13 pm Ron,
We have similar stats. I am in SoCal and expect to retire in 12-13 years with 100K pension. The main difference is I am single, no children, have district-paid healthcare, and my salary is lower at 108K. I only contribute to Roth retirement accounts. Without significant deductions and credits, I pay a lot in taxes. With your contributions in traditional accounts, income from pension, wife's SS, fewer deductions/child tax credits, what are your plans for minimizing taxes during retirement?
Hi Fellow Teacher,

I am going to try to respond as fully as I can to this question as it's something I do give thought to and I think your question is a great one. Please bear with me as this will be a little bit long but I want to address the different types of taxes we might have to face down the road.

It seems like our salary is pretty close as I only make slightly more than you. The fact that you have healthcare covered through your employer is great. I wish that were the case with me. Since we currently need to keep our AGI fairly low or else lose out on the premium tax credit for 3 family members, I feel like I really must continue to use tax-deferred accounts. Otherwise, my marginal tax rate is very high.

My plan is basically to work full time until age 55, which is in 8 years. After 55, I may go down to working 3 or 4 days per week. I’m aiming for 3 days just so that I have that option available but may also continue to work full time if I’m still really enjoying the work like I am currently. I plan to work at least part time until I’m at least 59 but will more likely than not work until 60 or 61. After age 55, I can continue to earn full time retirement credit toward the pension so long as I work more than 50%. If I do go part time, my salary would drop and I may reduce (or possibly even completely stop) making contributions to retirement accounts at that time. Also, those years between 55 and 61 may be a good time to do some Roth conversions.

About half of our investments are currently already in Roth accounts even though we are putting a fair bit into traditional accounts these days. There are a couple of reasons for this. When my wife and I first got married, we only saved in Roth IRA accounts and started other accounts (457b, 403b, and taxable) at later dates. Those earlier-invested dollars have had more time to grow. Also, my wife used to work until just 3 years ago. Her employer contributed 15% of her salary to a SEP-IRA (my wife didn’t have to contribute anything). We have already converted much of that to Roth (while in the 15% tax bracket, which used to exist until a few years ago).

We do not plan to live in our current home during retirement. It’s 4 bedrooms and 4 bathrooms and on 3 floors. It's not ideal for empty nesters so we will likely move after our kid finishes high school (she is about to start 1st grade). Due to the recently passed Prop 19, if we move after age 55 within the state of California, we can take our property tax base with us. This makes it more likely than not that we will stay in the state and move after age 55 (most likely it will be closer to age 60, when our daughter finishes high school). This should keep our property taxes reasonable in retirement if we stay in California.

We purchased our home in 2010 for $500k. It is valued today at somewhere between $1.1-$1.2m. We will need to pay capital gains tax on the portion above the $500k home sale exclusion. This tax might be rather unpleasant. Perhaps we’ll continue to own the property and rent it out. I'm not really interested in being a landlord, though. I guess we’ll see.

If taxes are really pinching us, we are open to the possibility of moving to some place like Hawaii (which doesn’t tax pensions) or Nevada (which doesn’t have an income tax). At the very least, we can avoid California income tax that way.

However, we really like California and the hope is that we are simply in a position to just pay the taxes that are charged. It might be a way to give back to a state that has been so good to us by not charging us any income taxes in the present, providing additional tax credits for health insurance, and offering a generous pension.

My best guess is that around retirement time, we will have around $2m in retirement accounts, a home valued around $2m with a relatively small mortgage balance remaining (perhaps $300k or so), and a $100k/year pension. This is assuming a 4% growth rate and that we contribute $50k/year to our retirement accounts until age 55 and then go down to about $10k/year from 55 to around age 60. Even if we have to pay something like $300k in capital gains tax on the sale of our home, it should leave us with far more money to live on during retirement than we’re currently living on even after factoring in taxes. To minimize the tax hit as much as we can, we would try to figure out the optimal amounts to withdraw from the different types of accounts.

I started a taxable account this year and have already done a small amount of tax loss harvesting. I’ll try to take advantage of such opportunities in the future as well with the taxable account. I will look for opportunistic times to tax gain harvest as well.

Lastly, I have heard that the least expensive health insurance option offered by my employer will be going up in cost significantly next year. This is not good news for most people. However, I’m in the opposite situation because the increase in the cost of this insurance increases the AGI cut-off point I need to get under and that's actually a positive development for my family. The health insurance numbers for next year haven’t been finalized yet but there is a good chance that I will be able to change a substantial portion of my 403b contributions from traditional to Roth next year. That may raise my taxes a bit in the present but I think it would be a good move over the long run.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

I just wanted to add one more thing about increasing the amount of Roth contributions next year (assuming my health insurance situation allows me to). I would make enough in traditional contributions to remain in the 12% bracket and only do Roth after that point.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

UPDATE on 12/31/21:

I posted a response on a thread about California yesterday and received a private message earlier today asking for information about our taxes. Since it’s the end of the year, I thought it might be a good time to post an update here about our numbers for 2021.

Federal Income Tax:
Income from salary as a teacher (wife is a stay-at-home parent): $111.2k (health benefits are not paid for by my employer)
Dividends: $400
Income from interest: $5100 (mostly earned from bonuses for opening bank accounts)
Gross Income: $116.7k
Deductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
Other above-line deductions: $13.8k (traditional IRA: $12k, tax loss harvesting: $1550, educator expenses: $250)
AGI: $49.8k
Below-line deductions: $25.3k (standard deduction and charitable contributions)
Taxable Income: $24.5k
Income Tax Liability Before Credits: $2500
Income Tax Liability After Credits: -$500 (child tax credit of $3k became fully refundable this year)

California Income Tax:
AGI: $49.8k
Itemized Deductions: $22.1k ($10.4k property tax and $11.7k mortgage interest)
Taxable Income: $27.7k
Tax Before Exemptions: $400
Exemptions: $600 (two adults and one child)
Income Tax Liability After Exemptions: $0

Supplemental Income (tax-free):
Credit card bonuses (cash back, miles, points): $6k
Brokerage bonuses: $1500 (much of it in IRA accounts)
Gifts: $3k
Stimulus Checks: $7.1k (stimulus check 2: $1800, stimulus check 3: $4200, Golden State Stimulus: $1100)
Misc. (selling items, etc.): $500

Due to the American Rescue Plan, the child tax credit became fully refundable this year and resulted in a negative income tax liability for 2021. Also, it lowered health insurance premiums so we switched from a silver plan on the exchange to a gold plan early in the year and our share of the premiums was $0 for a family of three (ages 47, 47, and 7). The amount of the premium tax credit was $1667/month (or $20k for the year).

We refinanced (at no cost) in January of this year and took out $150k in equity from the house for increased liquidity. The loan is for 30-years at 2.375% (we’ve restarted the 30-year clock and borrowed a total of $500k). This is what we’ve done with the cash we took out:
-Increased our spending
-Purchased I Bonds (bought $20k worth so far with plans to purchase another $20k next week) – earning 3.54% currently and will soon be earning 7.12%
-Put $21.5k into various bank accounts that are earning a weighted average of 3.7%
-Invested $40k in a taxable brokerage account. Tax loss harvested twice before the account started going up in value. It’s currently worth $45k (100% invested in ITOT at the moment)
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
-Used some of the money to churn bank and brokerage accounts for bonuses
-Beefed-up our emergency fund

My wife is thinking she is likely already retired (as of age 43) but the option to return back to work remains on the table. I’m thinking I might semi-retire at age 55 and then fully retire at 61. If I semi-retire at 55, due to the CalSTRS Reduced Workload Program (aka “The Willie Brown Act”), I can continue to earn full time credit toward my pension as long as I work at least 50% of full time. I currently work 180 days per year at a job I continue to love. If I’m feeling the same way in 8 years, I may not reduce my hours; I just like keeping the option open.

Due to Prop 13 and Prop 19, we plan to stay in our current home (2150 sq ft. townhouse built in 2010 in a great neighborhood in the Bay Area where the median home price is around $2m) until at least age 55 so that we can take our property tax base with us when we do move. Over the past decade, our home has more than doubled in value while the property tax has risen only 10%. Also, around the time that we turn 55, our Mello Roos tax will expire, lowering our property tax bill by $2k-$3k/year. We will likely be paying less in property tax for a home that is worth $2m in the future than we did when we bought it for $500k in 2010. That’s California for you.

A highlight this year for us was a 15-day vacation to Hawaii (Oahu and Maui) in July. We stayed at resorts that were paid for by my in-laws (we traveled with them). The flights were fully covered by miles we had earned on United Airlines and Southwest from opening credit card accounts.

Net worth on 1/1/21: $1,240,000
Net worth on 12/31/21: $1,690,000 ($90k in cash, $935k in investments, $665k in home equity)

Our retirement expenses should be fully covered by my pension. We also expect some social security.

Happy New Year, all!
Normchad
Posts: 5648
Joined: Thu Mar 03, 2011 6:20 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Normchad »

Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pm UPDATE on 12/31/21:

I posted a response on a thread about California yesterday and received a private message earlier today asking for information about our taxes. Since it’s the end of the year, I thought it might be a good time to post an update here about our numbers for 2021.

Federal Income Tax:
Income from salary as a teacher (wife is a stay-at-home parent): $111.2k (health benefits are not paid for by my employer)
Dividends: $400
Income from interest: $5100 (mostly earned from bonuses for opening bank accounts)
Gross Income: $116.7k
Deductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
Other above-line deductions: $13.8k (traditional IRA: $12k, tax loss harvesting: $1550, educator expenses: $250)
AGI: $49.8k
Below-line deductions: $25.3k (standard deduction and charitable contributions)
Taxable Income: $24.5k
Income Tax Liability Before Credits: $2500
Income Tax Liability After Credits: -$500 (child tax credit of $3k became fully refundable this year)

California Income Tax:
AGI: $49.8k
Itemized Deductions: $22.1k ($10.4k property tax and $11.7k mortgage interest)
Taxable Income: $27.7k
Tax Before Exemptions: $400
Exemptions: $600 (two adults and one child)
Income Tax Liability After Exemptions: $0

Supplemental Income (tax-free):
Credit card bonuses (cash back, miles, points): $6k
Brokerage bonuses: $1500 (much of it in IRA accounts)
Gifts: $3k
Stimulus Checks: $7.1k (stimulus check 2: $1800, stimulus check 3: $4200, Golden State Stimulus: $1100)
Misc. (selling items, etc.): $500

Due to the American Rescue Plan, the child tax credit became fully refundable this year and resulted in a negative income tax liability for 2021. Also, it lowered health insurance premiums so we switched from a silver plan on the exchange to a gold plan early in the year and our share of the premiums was $0 for a family of three (ages 47, 47, and 7). The amount of the premium tax credit was $1667/month (or $20k for the year).

We refinanced (at no cost) in January of this year and took out $150k in equity from the house for increased liquidity. The loan is for 30-years at 2.375% (we’ve restarted the 30-year clock and borrowed a total of $500k). This is what we’ve done with the cash we took out:
-Increased our spending
-Purchased I Bonds (bought $20k worth so far with plans to purchase another $20k next week) – earning 3.54% currently and will soon be earning 7.12%
-Put $21.5k into various bank accounts that are earning a weighted average of 3.7%
-Invested $40k in a taxable brokerage account. Tax loss harvested twice before the account started going up in value. It’s currently worth $45k (100% invested in ITOT at the moment)
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
-Used some of the money to churn bank and brokerage accounts for bonuses
-Beefed-up our emergency fund

My wife is thinking she is likely already retired (as of age 43) but the option to return back to work remains on the table. I’m thinking I might semi-retire at age 55 and then fully retire at 61. If I semi-retire at 55, due to the CalSTRS Reduced Workload Program (aka “The Willie Brown Act”), I can continue to earn full time credit toward my pension as long as I work at least 50% of full time. I currently work 180 days per year at a job I continue to love. If I’m feeling the same way in 8 years, I may not reduce my hours; I just like keeping the option open.

Due to Prop 13 and Prop 19, we plan to stay in our current home (2150 sq ft. townhouse built in 2010 in a great neighborhood in the Bay Area where the median home price is around $2m) until at least age 55 so that we can take our property tax base with us when we do move. Over the past decade, our home has more than doubled in value while the property tax has risen only 10%. Also, around the time that we turn 55, our Mello Roos tax will expire, lowering our property tax bill by $2k-$3k/year. We will likely be paying less in property tax for a home that is worth $2m in the future than we did when we bought it for $500k in 2010. That’s California for you.

A highlight this year for us was a 15-day vacation to Hawaii (Oahu and Maui) in July. We stayed at resorts that were paid for by my in-laws (we traveled with them). The flights were fully covered by miles we had earned on United Airlines and Southwest from opening credit card accounts.

Net worth on 1/1/21: $1,240,000
Net worth on 12/31/21: $1,690,000 ($90k in cash, $935k in investments, $665k in home equity)

Our retirement expenses should be fully covered by my pension. We also expect some social security.

Happy New Year, all!
RonRonnerson provides Amazing posts. This should be part of a MasterClass series on “Doing Personal Finance Right“!

Appreciate the great posts and actual concrete data and numbers showing you don’t need to be a TechBro or Doctor to be financially successful.
asap
Posts: 56
Joined: Tue Dec 15, 2020 9:51 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by asap »

Thanks for the update. :sharebeer :sharebeer
GuySmiley
Posts: 190
Joined: Fri Aug 10, 2018 6:02 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by GuySmiley »

Bravo! Lots to learn here even for those of us not in CA.
angelescrest
Posts: 1730
Joined: Tue May 27, 2008 10:48 am
Location: West Coast

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by angelescrest »

RR, always enjoy the updates. I’m especially interested to see how you navigate the transition to semi retirement when that day comes. I wish I were in the same boat in terms of housing.
jarjarM
Posts: 2511
Joined: Mon Jul 16, 2018 1:21 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by jarjarM »

Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pm
Always enjoy your post and definitely an inspiration for many who aren't making high tech compensations but still live well in the bayarea. Your ability to navigate CA tax/ACA and maximize the benefit is an amazing feat. Congrats on the financial success, happy new year :beer
boogle_12
Posts: 88
Joined: Mon Apr 26, 2021 1:41 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by boogle_12 »

Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pm UPDATE on 12/31/21:

I posted a response on a thread about California yesterday and received a private message earlier today asking for information about our taxes. Since it’s the end of the year, I thought it might be a good time to post an update here about our numbers for 2021.

Happy New Year, all!
Ron, thank you for sharing. I joined this site rather recently, so did not know you had been kind enough to share some details in the past about your situation. I found this quite illuminating, and I applaud you for being knowledgeable enough to put yourself in a bette position financially. You needed to since your district doesn’t pay anything for health benefits to employees!

That Mello-Roos can be annoying but you’re right, once it’s gone, it’s gone. And then you can take your lower base over to your next home after 55.

I wish you a Happy New Year as well!
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Thanks for the encouraging words, everyone. I really appreciate it. 2021 turned out to be a good year for us, financially speaking.

Things are looking more questionable as we start 2022, though. My HOA dues just went up 17% (after not changing for the past 11 years), the cable bill went up 50% (it’s the first time that the retention rep said there was no deal available), I’m no longer working from home and gas is up to $5/gallon, we’ve switched to a bronze health insurance plan this year instead of having a gold plan like last year in order to keep the premiums the same as before. I could go on but will just say that the effects of inflation are being felt in my household.

I haven’t gotten a raise in a couple of years but am expecting that will change as both my employer and the state have a lot of cash on hand. Meanwhile, I’m being squeezed as expenses have suddenly risen all at once. A lot of the pain is mitigated by the fact that a big chunk of my expenses go toward housing and those costs are fixed. So it could be worse, I suppose.

Staff positions remain unfilled and it’s a bizarre situation as I work at a school where candidates used to line up to interview. The times have changed, it would seem.
boogle_12 wrote: Fri Dec 31, 2021 8:28 pm
Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pm UPDATE on 12/31/21:

I posted a response on a thread about California yesterday and received a private message earlier today asking for information about our taxes. Since it’s the end of the year, I thought it might be a good time to post an update here about our numbers for 2021.

Happy New Year, all!
Ron, thank you for sharing. I joined this site rather recently, so did not know you had been kind enough to share some details in the past about your situation. I found this quite illuminating, and I applaud you for being knowledgeable enough to put yourself in a bette position financially. You needed to since your district doesn’t pay anything for health benefits to employees!

That Mello-Roos can be annoying but you’re right, once it’s gone, it’s gone. And then you can take your lower base over to your next home after 55.

I wish you a Happy New Year as well!
I’m glad it was helpful and thanks for the kind comments. The amount of tax-deferred space I have available has come in handy. My taxes are low at the moment due to deferring them but I do expect to pay more at some point in the future. Due to my health insurance situation, I’m incentivized to set things up this way or else my marginal tax rate in the present would be considerably higher due to the loss of the premium tax credit.
CletusCaddy
Posts: 2678
Joined: Sun Sep 12, 2021 4:23 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by CletusCaddy »

Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
tj
Posts: 9366
Joined: Wed Dec 23, 2009 11:10 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by tj »

Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pm UPDATE on 12/31/21:

I posted a response on a thread about California yesterday and received a private message earlier today asking for information about our taxes. Since it’s the end of the year, I thought it might be a good time to post an update here about our numbers for 2021.

Federal Income Tax:
Income from salary as a teacher (wife is a stay-at-home parent): $111.2k (health benefits are not paid for by my employer)
Dividends: $400
Income from interest: $5100 (mostly earned from bonuses for opening bank accounts)
Gross Income: $116.7k
Deductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
Other above-line deductions: $13.8k (traditional IRA: $12k, tax loss harvesting: $1550, educator expenses: $250)
AGI: $49.8k
Below-line deductions: $25.3k (standard deduction and charitable contributions)
Taxable Income: $24.5k
Income Tax Liability Before Credits: $2500
Income Tax Liability After Credits: -$500 (child tax credit of $3k became fully refundable this year)

California Income Tax:
AGI: $49.8k
Itemized Deductions: $22.1k ($10.4k property tax and $11.7k mortgage interest)
Taxable Income: $27.7k
Tax Before Exemptions: $400
Exemptions: $600 (two adults and one child)
Income Tax Liability After Exemptions: $0

Supplemental Income (tax-free):
Credit card bonuses (cash back, miles, points): $6k
Brokerage bonuses: $1500 (much of it in IRA accounts)
Gifts: $3k
Stimulus Checks: $7.1k (stimulus check 2: $1800, stimulus check 3: $4200, Golden State Stimulus: $1100)
Misc. (selling items, etc.): $500

Due to the American Rescue Plan, the child tax credit became fully refundable this year and resulted in a negative income tax liability for 2021. Also, it lowered health insurance premiums so we switched from a silver plan on the exchange to a gold plan early in the year and our share of the premiums was $0 for a family of three (ages 47, 47, and 7). The amount of the premium tax credit was $1667/month (or $20k for the year).

We refinanced (at no cost) in January of this year and took out $150k in equity from the house for increased liquidity. The loan is for 30-years at 2.375% (we’ve restarted the 30-year clock and borrowed a total of $500k). This is what we’ve done with the cash we took out:
-Increased our spending
-Purchased I Bonds (bought $20k worth so far with plans to purchase another $20k next week) – earning 3.54% currently and will soon be earning 7.12%
-Put $21.5k into various bank accounts that are earning a weighted average of 3.7%
-Invested $40k in a taxable brokerage account. Tax loss harvested twice before the account started going up in value. It’s currently worth $45k (100% invested in ITOT at the moment)
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
-Used some of the money to churn bank and brokerage accounts for bonuses
-Beefed-up our emergency fund

My wife is thinking she is likely already retired (as of age 43) but the option to return back to work remains on the table. I’m thinking I might semi-retire at age 55 and then fully retire at 61. If I semi-retire at 55, due to the CalSTRS Reduced Workload Program (aka “The Willie Brown Act”), I can continue to earn full time credit toward my pension as long as I work at least 50% of full time. I currently work 180 days per year at a job I continue to love. If I’m feeling the same way in 8 years, I may not reduce my hours; I just like keeping the option open.

Due to Prop 13 and Prop 19, we plan to stay in our current home (2150 sq ft. townhouse built in 2010 in a great neighborhood in the Bay Area where the median home price is around $2m) until at least age 55 so that we can take our property tax base with us when we do move. Over the past decade, our home has more than doubled in value while the property tax has risen only 10%. Also, around the time that we turn 55, our Mello Roos tax will expire, lowering our property tax bill by $2k-$3k/year. We will likely be paying less in property tax for a home that is worth $2m in the future than we did when we bought it for $500k in 2010. That’s California for you.

A highlight this year for us was a 15-day vacation to Hawaii (Oahu and Maui) in July. We stayed at resorts that were paid for by my in-laws (we traveled with them). The flights were fully covered by miles we had earned on United Airlines and Southwest from opening credit card accounts.

Net worth on 1/1/21: $1,240,000
Net worth on 12/31/21: $1,690,000 ($90k in cash, $935k in investments, $665k in home equity)

Our retirement expenses should be fully covered by my pension. We also expect some social security.

Happy New Year, all!
Is there a reason that California is not recognizing your charitable contributions for your itemized deductions? I wasn't aware that was one of the differences between federal tax and CA tax.
blastoff
Posts: 402
Joined: Thu Jan 19, 2012 11:04 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by blastoff »

Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
Without discussing potential changes to EV credits, lease?

A car with free charging could be beneficial.
CletusCaddy
Posts: 2678
Joined: Sun Sep 12, 2021 4:23 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by CletusCaddy »

Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
The $750 is taken off at the time of purchase. The $4500 is a check mailed to you a few weeks after you apply.

At second glance, you may not be able to qualify for the full Federal $7500 in any case, because that would put you over the income threshold for the $4500, reducing that benefit to only $2000. If my math is right the maximum discount you'll be able to receive is around $10k. Not to mention the health care subsidy.
CletusCaddy
Posts: 2678
Joined: Sun Sep 12, 2021 4:23 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by CletusCaddy »

blastoff wrote: Sat Jan 01, 2022 1:49 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
Without discussing potential changes to EV credits, lease?

A car with free charging could be beneficial.
Relatively few manufacturers will pass through the full $7500 for the lease, and the CVRP is for purchases only.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

tj wrote: Sat Jan 01, 2022 1:37 pm
Is there a reason that California is not recognizing your charitable contributions for your itemized deductions? I wasn't aware that was one of the differences between federal tax and CA tax.
I didn't bother including small stuff like charitable contributions (which were about $200 for the year for us) and vehicle registration fees (maybe $100 or thereabouts) because our California income tax liability is already $0 even without factoring these in.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

blastoff wrote: Sat Jan 01, 2022 1:49 pm
Without discussing potential changes to EV credits, lease?

A car with free charging could be beneficial.
Sorry, I'm a novice in this area and don't know what you mean. Are leasing and free charging connected somehow?
KRP
Posts: 225
Joined: Thu Aug 27, 2020 11:56 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by KRP »

deleted by user
Last edited by KRP on Sat Jan 01, 2022 2:37 pm, edited 1 time in total.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

CletusCaddy wrote: Sat Jan 01, 2022 1:51 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
The $750 is taken off at the time of purchase. The $4500 is a check mailed to you a few weeks after you apply.

At second glance, you may not be able to qualify for the full Federal $7500 in any case, because that would put you over the income threshold for the $4500, reducing that benefit to only $2000. If my math is right the maximum discount you'll be able to receive is around $10k. Not to mention the health care subsidy.
Okay, that makes sense. So the $4500 would now be $2k while I can't make use of the $7500 because, as things stand at the moment, the federal electric vehicle tax credit is non-refundable. If I were to increase my tax liability to try to get at that $7500, I'd lose out on $15k in premium tax credit. So that won't work. Which leaves me back to having income low enough where I'd qualify for $4500 and $750 for a total of $5250 in electric vehicle rebates from the state along with the premium tax credit for health insurance but no help from federal toward the purchase of an electric car. Am I understanding correctly?
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Duplicate
CletusCaddy
Posts: 2678
Joined: Sun Sep 12, 2021 4:23 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by CletusCaddy »

Ron Ronnerson wrote: Sat Jan 01, 2022 2:12 pm
CletusCaddy wrote: Sat Jan 01, 2022 1:51 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am
Ron Ronnerson wrote: Sat Jan 01, 2022 9:58 am gas is up to $5/gallon
You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
The $750 is taken off at the time of purchase. The $4500 is a check mailed to you a few weeks after you apply.

At second glance, you may not be able to qualify for the full Federal $7500 in any case, because that would put you over the income threshold for the $4500, reducing that benefit to only $2000. If my math is right the maximum discount you'll be able to receive is around $10k. Not to mention the health care subsidy.
Okay, that makes sense. So the $4500 would now be $2k while I can't make use of the $7500 because, as things stand at the moment, the federal electric vehicle tax credit is non-refundable. If I were to increase my tax liability to try to get at that $7500, I'd lose out on $15k in premium tax credit. So that won't work. Which leaves me back to having income low enough where I'd qualify for $4500 and $750 for a total of $5250 in electric vehicle rebates from the state along with the premium tax credit for health insurance but no help from federal toward the purchase of an electric car. Am I understanding correctly?
You will still get the Federal credit to the extent that you have tax liability, so $1-2k as you mentioned above. So up to $7250 in vehicle discount.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

CletusCaddy wrote: Sat Jan 01, 2022 2:17 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 2:12 pm
CletusCaddy wrote: Sat Jan 01, 2022 1:51 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 1:18 pm
CletusCaddy wrote: Sat Jan 01, 2022 10:13 am

You may want to purchase a new electric vehicle. At your income level the CVRP entitles you to $4500, you get $750 from CCFR, and Federal tax credit is $7500 (you will need to generate capital gains to offset).

So that’s $12,750 off the purchase price. Prices are elevated now but your used car is also worth more. In the end you will very likely be able to drive a free car for 2-3 years, reduce maintenance and fuel costs, and do better for the environment.
Okay, you've got me very interested. For the CVRP and CCFR, are the $4500 and $750 taken off the price when you buy the car (meaning it works like a discount rather than a tax credit)? I had not known about these before so this is great information.

The problem with the federal tax credit is that it is not a refundable credit and I had negative income tax liability in 2021. In 2022, I expect my income tax liability to be $1k-$2k. Unfortunately, I'm sort of trapped and can't generate capital gains or reduce retirement savings very much to offset. The issue is that in 2022, I need to keep MAGI under $69k in order to receive the premium tax credit toward health insurance (worth around $15k this year for my family). Otherwise, my share of cost to purchase the least expensive insurance to cover only me (not my wife and daughter) through my employer would not exceed 9.61% (the percentage changes somewhat each year but this is the number for 2022) of MAGI and, therefore, no one in my family would be eligible for the premium tax credit. If I keep income below this threshold, everyone in the family becomes eligible for the premium tax credit.

Anyhow, for the time being, I need the electric vehicle tax credit to be refundable for it to be of use to us. From what I understand, both making it refundable and increasing the amount of the credit have been in discussion. If that were to happen, I would likely move up the timeline to sell our older Corolla (we have two of them) and get an electric vehicle instead. Our older Corolla is worth around $12k. If I were to sell that and apply the tax credits (if the federal one does become refundable) along with the rebates, I could probably get a $30k car for nothing out-of-pocket. I wouldn't be too surprised if automakers end up raising prices on electric vehicles, though, and cut into that number.

Thanks very much for bringing up this topic. $5/gallon is not fun.
The $750 is taken off at the time of purchase. The $4500 is a check mailed to you a few weeks after you apply.

At second glance, you may not be able to qualify for the full Federal $7500 in any case, because that would put you over the income threshold for the $4500, reducing that benefit to only $2000. If my math is right the maximum discount you'll be able to receive is around $10k. Not to mention the health care subsidy.
Okay, that makes sense. So the $4500 would now be $2k while I can't make use of the $7500 because, as things stand at the moment, the federal electric vehicle tax credit is non-refundable. If I were to increase my tax liability to try to get at that $7500, I'd lose out on $15k in premium tax credit. So that won't work. Which leaves me back to having income low enough where I'd qualify for $4500 and $750 for a total of $5250 in electric vehicle rebates from the state along with the premium tax credit for health insurance but no help from federal toward the purchase of an electric car. Am I understanding correctly?
You will still get the Federal credit to the extent that you have tax liability, so $1-2k as you mentioned above. So up to $7250 in vehicle discount.
Got it. Thanks. This is very helpful information.
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by capran »

Ron Ronnerson wrote: Sat Sep 14, 2019 10:26 am There was recently a thread about the cost to live a middle-class lifestyle in a VHCOL area. I posted that I’m a teacher in the Bay Area and my wife is a stay-at-home parent and we’re saving half our income. People began questioning how that could be but the thread was derailed and shut down before I could respond.

Here’s my post on that thread from the other day: viewtopic.php?f=2&t=290304&start=50#p4745967

I thought I’d answer some of the questions that were raised in response to my post and, to keep this actionable, ask for feedback on how to further improve our situation. I owe much gratitude to the people on this forum for providing guidance to us over the years.

These comments were made in response to my post:
-“115K income, live in a VHCOL and you save half your income. Seems VERY suspect. So you can live in San Fran with a family and survive off 4K a month?”

-“The older linked to post states his mortgage is less than $400k on a townhome worth more than $800k. So either bought a while ago, or got family help on the down payment and must live out in an affordable suburb somewhere.”

-“If he’s a teacher and his wife doesn’t work he need only live in a neighborhood with his school to have a reasonable commute. In areas where people are commuting to tech companies the rents and home prices get driven further up. I live in SoCal and the area around my work condos are probably $600k and homes 800 to 1M. And it’s not even the fanciest part of town.”

-“I don’t think many of us find it surprising that you can live in the Bay Area on $115k if you bought your home YEARS or even decades ago and have a stay at home spouse providing free childcare! Childcare and housing are the two largest expenses. Then there is saving for college which you barely have to do if you make $115k.”


So, here are more details about us (in response to the comments above):

We’re mid-40s with a five-year-old. We bought our home in 2010 (new construction) for $500k and did not have family help. We made around $125k at that time and put down 3% (no PMI due to a teacher loan but nor did the loan allow for a larger down payment). We live in the tri-valley in the Bay Area (Pleasanton/Dublin/San Ramon/Danville area). We refinanced in 2012 and have a 30-year fixed-rate mortgage with a payment of $1810. We paid down the mortgage by another $50k or so when refinancing to get the best terms.

Our home is now valued around $825k and we owe $354k. We also pay $10k/year in property taxes (which comes to around $840/month), $290 in HOA dues, and a bit for insurance and repairs. In total, our housing costs around $3100/month. We got lucky with the timing of our house purchase and that shouldn’t be discounted. However, our home would rent for around $3700/month so someone moving here today would only pay a bit more than we are for the same home (though, of course, they’d be renting instead of owning). The median home price in my zip code is $1.2 million.

I live in the East Bay but commute toward Silicon Valley for work. While I do have a commute, it’s not as bad as it could be. A teacher’s schedule helps. I can leave around 3 o’clock and grade papers, plan lessons, and respond to messages from home. I’m also off 180 days a year and have been carpooling the past couple of years too.

Our childcare costs are low because my wife doesn’t work but our household income is a lot less as a result of that too. My wife wanted to spend time with our daughter while she is young so we’re making things work on one income these days.

We actually are saving for our kid’s college but in retirement accounts since we’ll be old enough to tap retirement accounts without penalty when the kid goes to college. My pension, which is expected to be about $100k/year around age 60 (with COLA and 100% survivor benefits) should pretty much cover our retirement expenses. We’ll also get social security and our house should be close to paid off by then.

Annual Contributions/Savings:
I max out my 403b and 457b for a total of $38k (low-cost Vanguard funds). I also contribute $11k/year toward a pension and $11k/year is going toward mortgage principal. We contribute a little bit toward a traditional IRA as well. The total savings are a bit over $60k/year. We do count mortgage principal as savings.

By putting $50k+ into tax-deferred accounts, our MAGI becomes low enough that we qualify for a premium tax credit on the health care exchange that’s worth around $15k/year. My employer, a large school district, provides no health benefits. This is not uncommon in the region (a fact that surprises some). Health insurance is the reason that we are not contributing into Roth accounts at this time.

Our Assets:
•$50k in checking accounts earning 4% at Orion Credit Union
•Mid-six figures in retirement accounts, including $250k in Roth IRAs
•Townhome valued around $825k with a mortgage balance of $354k.
•Two relatively new Toyota Corollas that were purchased with cash

Our Monthly Expenses:
Mortgage Payment: $1810 (half of this goes toward mortgage principal)
Property Taxes: $840
HOA: $290
House Cleaning: $120 – done every 3 weeks
House Repairs/Maintenance: $50 (a good friend helps me with repairs if I buy him lunch)
Cable/Internet: $128 (AT&T U-Verse 200 package with HBO and 100mbps)
Electric/Gas Bill: $140
Cell Phones: $40 (Mint Mobile for two phones)
Water bill: $35
Garbage: $20
Health Insurance: $226 (subsidized)
Auto/Homeowner’s/Umbrella Insurance: $185
Life Insurance: $150 (super preferred rates, 30 year terms for both)
Gas for cars: $160
Car Maintenance/Repairs/Registration: $80
Groceries/Household Items: $800
Vacations: $100 (vacations are mostly paid for by churning credit cards for miles and points)
Restaurants: $250 (we go to inexpensive places like Chinese restaurants or Subway)
Clothing/Shoes/Hair/Nails: $50
Pets: $30
Entertainment: $50 (we tend to do stuff that doesn't cost money like go outside or to the library)
Union Dues: $100
Long Term Disability Taken from Paycheck: $30
Medicare: $130
Federal Income Taxes: $140 (about $1700 for the year)
California State Income Taxes: $0 (we itemize on state taxes and take 3 exemptions for 3 family members and this eliminates all liability)
Misc: $150
TOTAL: about $6100 ($73k a year total but $11k is for mortgage principal so expenses are really $62k)

Our savings plus expenses (including all taxes) are about $125k. My job pays $115k. We make up the $10k difference by churning credit cards & bank accounts for bonuses and through gifts we receive.

We live very comfortably - drive cars that we bought new, have cable TV with lots of channels, have iPhones, go on vacations, go out for meals and coffee sometimes, have a house cleaner, and I wear decent shoes.

My Questions:
1) This forum has always stressed the importance of living below your means. I’ve tried to follow that while still enjoying some of life’s luxuries. My budget is fairly accurate as I monitor expenses closely. Are my numbers so strange that it causes people to not believe them?
2) Should I start saving for appliance/car replacement or is just having an emergency fund adequate?
3) Is there anything that you see which should be changed or could be improved upon? (we're not getting rid of the house cleaner!)

Thanks again, forum.
Ron Ronnerson

EDIT: Thread was revived on 3/24/2021 so I have posted an update on that date (post #517)

I've updated again on 12/31/21.
It was odd that this old thread re-emerged as we start 2022. The only thing actionable I see is based on where you are saving that 50%. We both worked in education and we also saved 50% of the 150k combined income (both worked in education). And we did not live in a HCOL area. (but we own an ocean-going boat, so maybe that bumped us up! LOL). We were quite proud of ourselves for saving so much in tax deferred accounts, but that did come back to bite us in the rear. In all our working years our taxable income ALWAYS kept us in the tax tables section when computing our taxes, and not even high up in the tables. (During our last year of work in 2014, we kept our AGI at 89,000, so taxable after deductions was 69k, which had us paying 9500 in federal taxes!) Gone are those days!!!!

All that saving in deferred accounts gave us 1.6m to figure out how to reduce without going over the IRMAA surcharge levels. This year our tax bill looks like it will be just under 26k. So, a word of caution. Don't over-save in deferred accounts and figure out what your likely Pension+Social security+ RMD's might be, and don't defer too much. As to the rest- yes, the school year was 180 days but we always worked the required startup and closing days, usually adding another 10 days. And we retired before the big pay raises occurred in the field in about 2017ish. Spouse made 73k and I made 83k due to coaching three sports. Our youngest recently started teaching and he's already making more than I was with 26 years of seniority. Our top base salary was 73k when we left and now it's over 100k!
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

capran wrote: Sat Jan 01, 2022 7:05 pm It was odd that this old thread re-emerged as we start 2022. The only thing actionable I see is based on where you are saving that 50%.
Yes, this thread is a couple years old. However, I'm still learning how to continue to optimize our situation as time goes on. I posted an update yesterday for two reasons: 1) It's buried in the thread but some people have said they'd like to see updates from time to time and 2) I received a PM yesterday asking about our tax situation and thought I'd address the topic publicly as it might be interesting/relevant to others as well (for instance, the passage of the American Rescue Plan made traditional retirement accounts more advantageous than usual for us last year in comparison to Roth accounts).

I do think the conversation that occurred on this thread just today has been very helpful to me and I think it is actionable. Specifically, I was describing the effects of inflation on our family and mentioned the price of gas in our area. CletusCaddy brought up the topic of electric cars and I learned about state tax credits for people in my income range that I didn't previously know about. I think the chances of my buying an electric car have risen and the timeframe on when I might do that has moved up after learning what I did today. I was previously planning to drive my Corolla for many more years but I don't know if that's going to remain the plan.
capran wrote: Sat Jan 01, 2022 7:05 pm We both worked in education and we also saved 50% of the 150k combined income (both worked in education). And we did not live in a HCOL area. (but we own an ocean-going boat, so maybe that bumped us up! LOL). We were quite proud of ourselves for saving so much in tax deferred accounts, but that did come back to bite us in the rear. In all our working years our taxable income ALWAYS kept us in the tax tables section when computing our taxes, and not even high up in the tables. (During our last year of work in 2014, we kept our AGI at 89,000, so taxable after deductions was 69k, which had us paying 9500 in federal taxes!) Gone are those days!!!!

All that saving in deferred accounts gave us 1.6m to figure out how to reduce without going over the IRMAA surcharge levels. This year our tax bill looks like it will be just under 26k. So, a word of caution. Don't over-save in deferred accounts and figure out what your likely Pension+Social security+ RMD's might be, and don't defer too much. As to the rest- yes, the school year was 180 days but we always worked the required startup and closing days, usually adding another 10 days. And we retired before the big pay raises occurred in the field in about 2017ish. Spouse made 73k and I made 83k due to coaching three sports. Our youngest recently started teaching and he's already making more than I was with 26 years of seniority. Our top base salary was 73k when we left and now it's over 100k!
I so wish I didn't have to over-save in deferred accounts! I've already accumulated plenty considering the size of the pension I'm expecting (along with social security for my wife). I'd prefer to save quite a bit less and instead increase our spending. The problem is that since my employer doesn't pay for health insurance, the best option for my family is qualifying for the premium tax credit, which is a substantial sum as a percentage of my salary. To qualify for the credit requires deferring more than I would do if the credit were not a factor. If I pass on that credit, my other option is to pay for health insurance out-of-pocket myself. My employer will let me purchase it for $27k/year. The marginal tax rate as a result of not using deferred accounts would be very high.

So I'm sort of trapped for the time being but am hopeful this won't always be the case. The administration is looking at fixing the "family glitch" (my trap has an official name and 5 million other people are trapped with me, many of them children) administratively. This isn't legislation that has to go through Congress but is more like a change in how a current rule will be interpreted. If that were to happen, and I'm hopeful that it will, I'd be free from my shackles. I'd happily save less and start spending more. I'll post an update here if that were to happen. Some might just be interested to learn of the development. For others, it could be pertinent to their own situation and impact them personally as well.
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by capran »

Ron Ronnerson wrote: Sat Jan 01, 2022 8:02 pm
capran wrote: Sat Jan 01, 2022 7:05 pm It was odd that this old thread re-emerged as we start 2022. The only thing actionable I see is based on where you are saving that 50%.
Yes, this thread is a couple years old. However, I'm still learning how to continue to optimize our situation as time goes on. I posted an update yesterday for two reasons: 1) It's buried in the thread but some people have said they'd like to see updates from time to time and 2) I received a PM yesterday asking about our tax situation and thought I'd address the topic publicly as it might be interesting/relevant to others as well (for instance, the passage of the American Rescue Plan made traditional retirement accounts more advantageous than usual for us last year in comparison to Roth accounts).

I do think the conversation that occurred on this thread just today has been very helpful to me and I think it is actionable. Specifically, I was describing the effects of inflation on our family and mentioned the price of gas in our area. CletusCaddy brought up the topic of electric cars and I learned about state tax credits for people in my income range that I didn't previously know about. I think the chances of my buying an electric car have risen and the timeframe on when I might do that has moved up after learning what I did today. I was previously planning to drive my Corolla for many more years but I don't know if that's going to remain the plan.
capran wrote: Sat Jan 01, 2022 7:05 pm We both worked in education and we also saved 50% of the 150k combined income (both worked in education). And we did not live in a HCOL area. (but we own an ocean-going boat, so maybe that bumped us up! LOL). We were quite proud of ourselves for saving so much in tax deferred accounts, but that did come back to bite us in the rear. In all our working years our taxable income ALWAYS kept us in the tax tables section when computing our taxes, and not even high up in the tables. (During our last year of work in 2014, we kept our AGI at 89,000, so taxable after deductions was 69k, which had us paying 9500 in federal taxes!) Gone are those days!!!!

All that saving in deferred accounts gave us 1.6m to figure out how to reduce without going over the IRMAA surcharge levels. This year our tax bill looks like it will be just under 26k. So, a word of caution. Don't over-save in deferred accounts and figure out what your likely Pension+Social security+ RMD's might be, and don't defer too much. As to the rest- yes, the school year was 180 days but we always worked the required startup and closing days, usually adding another 10 days. And we retired before the big pay raises occurred in the field in about 2017ish. Spouse made 73k and I made 83k due to coaching three sports. Our youngest recently started teaching and he's already making more than I was with 26 years of seniority. Our top base salary was 73k when we left and now it's over 100k!
I so wish I didn't have to over-save in deferred accounts! I've already accumulated plenty considering the size of the pension I'm expecting (along with social security for my wife). I'd prefer to save quite a bit less and instead increase our spending. The problem is that since my employer doesn't pay for health insurance, the best option for my family is qualifying for the premium tax credit, which is a substantial sum as a percentage of my salary. To qualify for the credit requires deferring more than I would do if the credit were not a factor. If I pass on that credit, my other option is to pay for health insurance out-of-pocket myself. My employer will let me purchase it for $27k/year. The marginal tax rate as a result of not using deferred accounts would be very high.

So I'm sort of trapped for the time being but am hopeful this won't always be the case. The administration is looking at fixing the "family glitch" (my trap has an official name and 5 million other people are trapped with me, many of them children) administratively. This isn't legislation that has to go through Congress but is more like a change in how a current rule will be interpreted. If that were to happen, and I'm hopeful that it will, I'd be free from my shackles. I'd happily save less and start spending more. I'll post an update here if that were to happen. Some might just be interested to learn of the development. For others, it could be pertinent to their own situation and impact them personally as well.
Wow. I am surprised health insurance isn't better with your school district. When we were working it was about 600 a month per person, but the district paid much of that, so just had to pay 600 for our child. Now, our son seems to have a better rate, about 150 a month, but there is a much larger deductible. If only one of you is working, you might not end up in the difficult situation we find ourselves in. We had early IRAs and 403b', but also took advantage of some loopholes by contributing 15% of our salary in a self-directed retirement plan as well as an add on 24k per year each into a state deferred compensation program, all of which was legal, but allowed people to save outside the normal tIRA/403b limits. Still, we were lucky to have fulfilling jobs with a decent salary and excellent family friendly schedule. We could keep our incomes lower by not converting as much, but RMD's would put a surviving spouse into the IRMAA surcharge (not to mention higher tax rates in the future). Best of luck in your career.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

capran wrote: Sat Jan 01, 2022 8:47 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 8:02 pm
capran wrote: Sat Jan 01, 2022 7:05 pm It was odd that this old thread re-emerged as we start 2022. The only thing actionable I see is based on where you are saving that 50%.
Yes, this thread is a couple years old. However, I'm still learning how to continue to optimize our situation as time goes on. I posted an update yesterday for two reasons: 1) It's buried in the thread but some people have said they'd like to see updates from time to time and 2) I received a PM yesterday asking about our tax situation and thought I'd address the topic publicly as it might be interesting/relevant to others as well (for instance, the passage of the American Rescue Plan made traditional retirement accounts more advantageous than usual for us last year in comparison to Roth accounts).

I do think the conversation that occurred on this thread just today has been very helpful to me and I think it is actionable. Specifically, I was describing the effects of inflation on our family and mentioned the price of gas in our area. CletusCaddy brought up the topic of electric cars and I learned about state tax credits for people in my income range that I didn't previously know about. I think the chances of my buying an electric car have risen and the timeframe on when I might do that has moved up after learning what I did today. I was previously planning to drive my Corolla for many more years but I don't know if that's going to remain the plan.
capran wrote: Sat Jan 01, 2022 7:05 pm We both worked in education and we also saved 50% of the 150k combined income (both worked in education). And we did not live in a HCOL area. (but we own an ocean-going boat, so maybe that bumped us up! LOL). We were quite proud of ourselves for saving so much in tax deferred accounts, but that did come back to bite us in the rear. In all our working years our taxable income ALWAYS kept us in the tax tables section when computing our taxes, and not even high up in the tables. (During our last year of work in 2014, we kept our AGI at 89,000, so taxable after deductions was 69k, which had us paying 9500 in federal taxes!) Gone are those days!!!!

All that saving in deferred accounts gave us 1.6m to figure out how to reduce without going over the IRMAA surcharge levels. This year our tax bill looks like it will be just under 26k. So, a word of caution. Don't over-save in deferred accounts and figure out what your likely Pension+Social security+ RMD's might be, and don't defer too much. As to the rest- yes, the school year was 180 days but we always worked the required startup and closing days, usually adding another 10 days. And we retired before the big pay raises occurred in the field in about 2017ish. Spouse made 73k and I made 83k due to coaching three sports. Our youngest recently started teaching and he's already making more than I was with 26 years of seniority. Our top base salary was 73k when we left and now it's over 100k!
I so wish I didn't have to over-save in deferred accounts! I've already accumulated plenty considering the size of the pension I'm expecting (along with social security for my wife). I'd prefer to save quite a bit less and instead increase our spending. The problem is that since my employer doesn't pay for health insurance, the best option for my family is qualifying for the premium tax credit, which is a substantial sum as a percentage of my salary. To qualify for the credit requires deferring more than I would do if the credit were not a factor. If I pass on that credit, my other option is to pay for health insurance out-of-pocket myself. My employer will let me purchase it for $27k/year. The marginal tax rate as a result of not using deferred accounts would be very high.

So I'm sort of trapped for the time being but am hopeful this won't always be the case. The administration is looking at fixing the "family glitch" (my trap has an official name and 5 million other people are trapped with me, many of them children) administratively. This isn't legislation that has to go through Congress but is more like a change in how a current rule will be interpreted. If that were to happen, and I'm hopeful that it will, I'd be free from my shackles. I'd happily save less and start spending more. I'll post an update here if that were to happen. Some might just be interested to learn of the development. For others, it could be pertinent to their own situation and impact them personally as well.
Wow. I am surprised health insurance isn't better with your school district. When we were working it was about 600 a month per person, but the district paid much of that, so just had to pay 600 for our child. Now, our son seems to have a better rate, about 150 a month, but there is a much larger deductible. If only one of you is working, you might not end up in the difficult situation we find ourselves in. We had early IRAs and 403b', but also took advantage of some loopholes by contributing 15% of our salary in a self-directed retirement plan as well as an add on 24k per year each into a state deferred compensation program, all of which was legal, but allowed people to save outside the normal tIRA/403b limits. Still, we were lucky to have fulfilling jobs with a decent salary and excellent family friendly schedule. We could keep our incomes lower by not converting as much, but RMD's would put a surviving spouse into the IRMAA surcharge (not to mention higher tax rates in the future). Best of luck in your career.
Thanks for sharing this. I find it very useful to hear about others educators' experiences as all the tax-deferred space we tend to have available along with pensions while earning moderate salaries puts us in a unique category in some ways.

The school district I work for doesn't pay toward health benefits and I'm supporting our entire family at the moment. My wife worked until 2018 and we used to have very good health insurance covered through her employer. She has been a stay-at-home parent for about four years and, ever since, the incentive to use tax-deferred accounts in order to qualify for the premium tax credit has been so strong that you could possibly call it coercion. Basically, I can either pay terribly high marginal taxes in the present and use the money that I have been putting into deferred retirement accounts to instead purchase health insurance out-of-pocket (I honestly don't know why I'd go with that option) or end up with more money than I need in the future by over-saving (and simultaneously getting my health insurance covered) - which is what I'm doing. The issue is that the better option leaves me with a cash-flow problem.

It seems tricky but there are options available. For instance, I did a cash-out refi this year and owe just as much on my home as I did when I purchased it years ago. This probably seems like a bad idea at the surface level. However, I'm not in a typical situation. Not only have I found arbitrage opportunities so that I'm actually making a little bit of money off the loan but, much more importantly, my liquidity problem is solved for a good while. I'm essentially borrowing from the future when I expect to have more than I need so that I can have more cash on hand in the present that doesn't count as income. This will hopefully help me smooth out my spending over the years while optimizing my situation throughout the journey.
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by capran »

Ron Ronnerson wrote: Sat Jan 01, 2022 9:17 pm
capran wrote: Sat Jan 01, 2022 8:47 pm
Ron Ronnerson wrote: Sat Jan 01, 2022 8:02 pm
capran wrote: Sat Jan 01, 2022 7:05 pm It was odd that this old thread re-emerged as we start 2022. The only thing actionable I see is based on where you are saving that 50%.
Yes, this thread is a couple years old. However, I'm still learning how to continue to optimize our situation as time goes on. I posted an update yesterday for two reasons: 1) It's buried in the thread but some people have said they'd like to see updates from time to time and 2) I received a PM yesterday asking about our tax situation and thought I'd address the topic publicly as it might be interesting/relevant to others as well (for instance, the passage of the American Rescue Plan made traditional retirement accounts more advantageous than usual for us last year in comparison to Roth accounts).

I do think the conversation that occurred on this thread just today has been very helpful to me and I think it is actionable. Specifically, I was describing the effects of inflation on our family and mentioned the price of gas in our area. CletusCaddy brought up the topic of electric cars and I learned about state tax credits for people in my income range that I didn't previously know about. I think the chances of my buying an electric car have risen and the timeframe on when I might do that has moved up after learning what I did today. I was previously planning to drive my Corolla for many more years but I don't know if that's going to remain the plan.
capran wrote: Sat Jan 01, 2022 7:05 pm We both worked in education and we also saved 50% of the 150k combined income (both worked in education). And we did not live in a HCOL area. (but we own an ocean-going boat, so maybe that bumped us up! LOL). We were quite proud of ourselves for saving so much in tax deferred accounts, but that did come back to bite us in the rear. In all our working years our taxable income ALWAYS kept us in the tax tables section when computing our taxes, and not even high up in the tables. (During our last year of work in 2014, we kept our AGI at 89,000, so taxable after deductions was 69k, which had us paying 9500 in federal taxes!) Gone are those days!!!!

All that saving in deferred accounts gave us 1.6m to figure out how to reduce without going over the IRMAA surcharge levels. This year our tax bill looks like it will be just under 26k. So, a word of caution. Don't over-save in deferred accounts and figure out what your likely Pension+Social security+ RMD's might be, and don't defer too much. As to the rest- yes, the school year was 180 days but we always worked the required startup and closing days, usually adding another 10 days. And we retired before the big pay raises occurred in the field in about 2017ish. Spouse made 73k and I made 83k due to coaching three sports. Our youngest recently started teaching and he's already making more than I was with 26 years of seniority. Our top base salary was 73k when we left and now it's over 100k!
I so wish I didn't have to over-save in deferred accounts! I've already accumulated plenty considering the size of the pension I'm expecting (along with social security for my wife). I'd prefer to save quite a bit less and instead increase our spending. The problem is that since my employer doesn't pay for health insurance, the best option for my family is qualifying for the premium tax credit, which is a substantial sum as a percentage of my salary. To qualify for the credit requires deferring more than I would do if the credit were not a factor. If I pass on that credit, my other option is to pay for health insurance out-of-pocket myself. My employer will let me purchase it for $27k/year. The marginal tax rate as a result of not using deferred accounts would be very high.

So I'm sort of trapped for the time being but am hopeful this won't always be the case. The administration is looking at fixing the "family glitch" (my trap has an official name and 5 million other people are trapped with me, many of them children) administratively. This isn't legislation that has to go through Congress but is more like a change in how a current rule will be interpreted. If that were to happen, and I'm hopeful that it will, I'd be free from my shackles. I'd happily save less and start spending more. I'll post an update here if that were to happen. Some might just be interested to learn of the development. For others, it could be pertinent to their own situation and impact them personally as well.
Wow. I am surprised health insurance isn't better with your school district. When we were working it was about 600 a month per person, but the district paid much of that, so just had to pay 600 for our child. Now, our son seems to have a better rate, about 150 a month, but there is a much larger deductible. If only one of you is working, you might not end up in the difficult situation we find ourselves in. We had early IRAs and 403b', but also took advantage of some loopholes by contributing 15% of our salary in a self-directed retirement plan as well as an add on 24k per year each into a state deferred compensation program, all of which was legal, but allowed people to save outside the normal tIRA/403b limits. Still, we were lucky to have fulfilling jobs with a decent salary and excellent family friendly schedule. We could keep our incomes lower by not converting as much, but RMD's would put a surviving spouse into the IRMAA surcharge (not to mention higher tax rates in the future). Best of luck in your career.
Thanks for sharing this. I find it very useful to hear about others educators' experiences as all the tax-deferred space we tend to have available along with pensions while earning moderate salaries puts us in a unique category in some ways.

The school district I work for doesn't pay toward health benefits and I'm supporting our entire family at the moment. My wife worked until 2018 and we used to have very good health insurance covered through her employer. She has been a stay-at-home parent for about four years and, ever since, the incentive to use tax-deferred accounts in order to qualify for the premium tax credit has been so strong that you could possibly call it coercion. Basically, I can either pay terribly high marginal taxes in the present and use the money that I have been putting into deferred retirement accounts to instead purchase health insurance out-of-pocket (I honestly don't know why I'd go with that option) or end up with more money than I need in the future by over-saving (and simultaneously getting my health insurance covered) - which is what I'm doing. The issue is that the better option leaves me with a cash-flow problem.

It seems tricky but there are options available. For instance, I did a cash-out refi this year and owe just as much on my home as I did when I purchased it years ago. This probably seems like a bad idea at the surface level. However, I'm not in a typical situation. Not only have I found arbitrage opportunities so that I'm actually making a little bit of money off the loan but, much more importantly, my liquidity problem is solved for a good while. I'm essentially borrowing from the future when I expect to have more than I need so that I can have more cash on hand in the present that doesn't count as income. This will hopefully help me smooth out my spending over the years while optimizing my situation throughout the journey.
Makes sense. We opted to defer a lot just because we didn't need the cash and it minimized taxes. If it was a medical premium issue like you have, there is no doubt we would have maxed out as we did. You might end up being just fine, especially since only one of you is working, which will reduce both SS and Pension income. In Washington if you worked 30 years you get a full pension (1% times years of service). I only had 26 years, as I entered several years after spouse, so I had to wait till 65 for my pension. She got hers at 59 1/2! And I took SS at 64 and a reduced pension at 65 for full survivor pension of mine going to her if I pass. Our base income with 2 pensions and 1 SS is low, just under 70k. But we're converting almost 118k a year, to keep our MAGI at 188k, hence the high taxes. In 3 years she'll add over 40k for the max SS, so we'll reduce our conversions to keep MAGI level. If I can live another 11 years, to 80, we should be able to have zero IRA balances. Some Bogleheads recommend we keep some IRA balance in case high cost nursing care comes into play (when it might reduce taxes using it's deductibility power). When we get closer, we'll cross that bridge. Sure alot to follow and pay attention to. We found living below our means advantageous. But I never thought we would be in a substantially higher tax bracket in retirement that we achieved using deferred compensation methods while working.
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Ron is in a unique situation though because of how that employer does health insurance. They opt to pay their employees more, which increases the amount pensionable, and have them deduct their health insurance premiums tax free off that higher base. The premium also appears to fluctuate based on family size. Other employers, like mine, pay an allowance based on family size which is not pensionable, and health insurance, dental, AD&D, life, FSA, DCSA, etc. is taken off that allowance and the rest can be cashed out. If you have health care elsewhere you can waive insurance and take a nominal amount, but since you could have gotten that allowance and gotten health care through the plan you are explicitly ineligible for ACA subsidies.

And because the list price for salaries is much higher, likely going anywhere else would be a "pay cut" even though they may either buy down the cost of health insurance, or use the allowance method which could increase net take home pay.

Overall given your savings I hope you aren't deferring things you want to do just for purposes of hitting your ACA subsidy target. Your 403b or 457 probably has a stable income fund which could allow you to adjust your asset allocation to stay in balance if needed. For larger expenses this may be the rare time where a 457 loan might be worthwhile if cash flow is an issue. Best wishes for 2022 and thanks for sharing.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

calwatch wrote: Sun Jan 02, 2022 2:08 am Ron is in a unique situation though because of how that employer does health insurance. They opt to pay their employees more, which increases the amount pensionable, and have them deduct their health insurance premiums tax free off that higher base. The premium also appears to fluctuate based on family size. Other employers, like mine, pay an allowance based on family size which is not pensionable, and health insurance, dental, AD&D, life, FSA, DCSA, etc. is taken off that allowance and the rest can be cashed out. If you have health care elsewhere you can waive insurance and take a nominal amount, but since you could have gotten that allowance and gotten health care through the plan you are explicitly ineligible for ACA subsidies.
Thanks for laying it out like this. I have a question about the part I underlined above from your post and perhaps you might be able to answer it. My union is currently looking into the possibility of advocating to change to a system more like yours. It’s unclear how all that will pan out (member interest is being gauged and whether the district would be open to making the change remains to be seen). Anyhow, let’s say the change does happen and that my district agrees to provide, say, a $300/month allowance to be applied toward the employee's health insurance or some amount in cash could be taken instead if health insurance is turned down.

Let’s also assume that the least expensive health insurance option to cover just me through my employer costs $750/month in total. So once the allowance is applied, my share of the cost would be $450 per month. Let’s say the ACA affordability percentage is 9.61% (this is the percentage for 2022). $450/0.0961 = $4682.62 and $4682.62 x 12 = $56,191. So if I were to keep my MAGI under $56k, could I still qualify for the ACA subsidy for my family (since my portion of the cost would still not meet ACA affordability standards even if I were to accept the allowance) and also take the cash since I turned down the coverage through the district?
calwatch wrote: Sun Jan 02, 2022 2:08 am Overall given your savings I hope you aren't deferring things you want to do just for purposes of hitting your ACA subsidy target. Your 403b or 457 probably has a stable income fund which could allow you to adjust your asset allocation to stay in balance if needed. For larger expenses this may be the rare time where a 457 loan might be worthwhile if cash flow is an issue. Best wishes for 2022 and thanks for sharing.
We’re actually living quite comfortably and have been slowly giving ourselves permission to spend more freely because we seem to be on a good path in terms of savings for the future. Our cash flow issue is gone for at least a few years due to the cash-out refinance we did about a year ago. In the meantime, we're trying to live a balanced lifestyle and are pretty content.

Happy New Year!
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Ron Ronnerson wrote: Sun Jan 02, 2022 3:26 am
calwatch wrote: Sun Jan 02, 2022 2:08 am Ron is in a unique situation though because of how that employer does health insurance. They opt to pay their employees more, which increases the amount pensionable, and have them deduct their health insurance premiums tax free off that higher base. The premium also appears to fluctuate based on family size. Other employers, like mine, pay an allowance based on family size which is not pensionable, and health insurance, dental, AD&D, life, FSA, DCSA, etc. is taken off that allowance and the rest can be cashed out. If you have health care elsewhere you can waive insurance and take a nominal amount, but since you could have gotten that allowance and gotten health care through the plan you are explicitly ineligible for ACA subsidies.
Thanks for laying it out like this. I have a question about the part I underlined above from your post and perhaps you might be able to answer it. My union is currently looking into the possibility of advocating to change to a system more like yours. It’s unclear how all that will pan out (member interest is being gauged and whether the district would be open to making the change remains to be seen). Anyhow, let’s say the change does happen and that my district agrees to provide, say, a $300/month allowance to be applied toward the employee's health insurance or some amount in cash could be taken instead if health insurance is turned down.

Let’s also assume that the least expensive health insurance option to cover just me through my employer costs $750/month in total. So once the allowance is applied, my share of the cost would be $450 per month. Let’s say the ACA affordability percentage is 9.61% (this is the percentage for 2022). $450/0.0961 = $4682.62 and $4682.62 x 12 = $56,191. So if I were to keep my MAGI under $56k, could I still qualify for the ACA subsidy for my family (since my portion of the cost would still not meet ACA affordability standards even if I were to accept the allowance) and also take the cash since I turned down the coverage through the district?
You should have received a "Marketplace disclosure" in your open enrollment material. This discusses the employer's obligations under the ACA. For instance, mine states:

Does Employer Health Coverage Affect Eligibility for Premium Savings Through the Marketplace?
Yes. If you have an offer of health coverage from your employer that meets certain standards, you will not be eligible for
a tax credit through the Marketplace and may wish to enroll in your employer's health plan. However, you may be eligible
for a tax credit that lowers your monthly premium or a reduction in certain cost-sharing if your employer does not offer
coverage to you at all or does not offer coverage that meets certain standards. If the cost of a plan from your employer that
would cover you (and not any other members of your family) is not “affordable” — that is, it costs you more than 9.5%
of your household income for the year — or if the coverage your employer provides does not meet the “minimum value”
standard set by the Affordable Care Act, you may be eligible for a tax credit.
All (jurisdiction)-sponsored health plans meet the
“minimum value” standard and the cost to you of at least one of those plans is intended to be affordable — that is, it is
intended to cost you no more than 9.5% of your income, based on your wages.

(emphasis mine)

Their allowance always exceeds that of the minimum cost plan (a Blue Cross catastrophic PPO plan for non-union or a Cigna Select HMO for union employees). The allowance for people who waived insurance used to be the same as the single person allowance but when the ACA was implemented dropped down to now about a quarter of the amount for people who take insurance.

From a budget standpoint I'm surprised your district doesn't just set the cost of the allowance equal to or slightly less than the cost of the lowest cost health insurance plan. It avoids situations like yours, and requiring them to pay the ACA minimum value penalty. And I'm sure there are instructional aides, library assistants, etc. who are making $69k without all the deductions you are using and finding their health coverage unaffordable. https://www.cigna.com/employers-brokers ... er-mandate

I could see them doing so in lieu of a higher raise, because health insurance allowances are generally not pensionable in California.

Happy New Year to you as well.
JDave
Posts: 591
Joined: Tue Oct 29, 2019 9:23 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by JDave »

Good for you!
When you succeed, you will always get trolls.
utvolfan
Posts: 131
Joined: Sat Apr 13, 2013 1:08 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by utvolfan »

Thanks for sharing so many details of your financial life!
JackBoglereader21
Posts: 79
Joined: Wed Sep 29, 2021 1:00 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by JackBoglereader21 »

[/b] I do think the conversation that occurred on this thread just today has been very helpful to me and I think it is actionable. Specifically, I was describing the effects of inflation on our family and mentioned the price of gas in our area. CletusCaddy brought up the topic of electric cars and I learned about state tax credits for people in my income range that I didn't previously know about. I think the chances of my buying an electric car have risen and the timeframe on when I might do that has moved up after learning what I did today. I was previously planning to drive my Corolla for many more years but I don't know if that's going to remain the plan.

Ron - Thank you for being so transparent and vulnerable here to share so much of your personal finances. Bravo ! Everything you've done is pretty spot on for your circumstance and needs, that's really all it is, is it ? Making a plan that works for us. You've shared plans/decisions that are well thought out and appears to work best for you.

Look into leasehackr.com, it may be helpful in your situation. For someone who qualifies for all of the EV incentives, credits, purchasing a EV makes sense. That said, the technology on EVs (and price structures) are moving so quickly that the old rule of buying and driving til the wheels fall off don't work for me. In any event, if I were to buy I would want the $7,500, $4,500 (or $2,000), $750 etc etc to justify the lost opportunity to getting another EV in 3 years. I would recommend you look into leasing with Zero-Drive-Off (financing all costs into the lease). Because the manufacturer (their finance arm) owns the car, they can take those credit.

https://cleantechnica.com/2020/09/12/le ... 4-a-month/

In 2020, Chevy partnered with Costco to offer $3,000 off the Bolt for members. Using that discount, along with all available incentives, tax credits, I did a 36 month lease of a Chevy Bolt - MSRP was $36,095. I financed almost all of the upfront cost, wrote a check for $154 to leave the dealership which counted towards the monthly payment. That left me with 35 remaining payments of $188/month. Back in 2020, PG&E offered an $800 rebate so I got that check 2 months later. I also got (which should benefit you) a Carpool sticker that allowed me to drive as a single driver in the Carpool lanes. AND give me discount on bridge tolls and Carpool lane tolls, if any. I never buy gas. There's a lot of news about the battery recall - you can google it. I am very happy with my Bolt and have helped 4 people (2 neighbors/2 friends) lease them, all under $200/month. 3 of the 4 (actually including myself) sold used cars to Carvana, Carmax for 25% or more above their value. We're not in 2020 (thank goodness) - I would recommend you do the math on what monthly payment would make sense for you to offset gas/maintenance/Carpool access. Selling our 6 year old car for over 30% more than it was worth and removing the risk of repairs and maintenance was a good decision for me (I would have paid $300/month for the Bolt). Back then gas was only $3.50 but now at $5.39, no gas is even a bigger deal.

If leasing don't work for you, look into the Honda Clarity PHEV - plug in EV. Just a few months ago you could get one for under $30,000 in Berkeley. Eligible for Carpool sticker and MPG is ridiculously good. I helped a friend who commutes from Pittsburg, CA to San Francisco 5 days a week buy one from Berkeley Honda and she loves her Clarity.

I have owned/leased many cars, as enthusiast, and as the person my small circle of family and friends come to for car buying help. BY FAR, my 2020 Chevy Bolt is my favorite. Incredible driving experience, easy to park in SF, less than $6/day rental, don't need to buy gas, went to San Jose last week and used Carpool lane, I can go on.

Good luck with EV research, lots of information out there but I highly recommend leasehackr.com. Happy New Year.
User avatar
Raraculus
Posts: 339
Joined: Sat Jul 20, 2019 10:43 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Raraculus »

Mr. Ronnerson-

Thank you for sharing your recent update. You are a true inspiration when it comes to managing money, wringing out the most bang for your buck! I am an educator as well, and really have to pay attention to little details surrounding my monies and money management.
Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pmDeductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
I am mid-50's when I learned today that I could maximize both 401(k) and 457(b)! I just want to punch myself for not finding out more ways to invest for my future in a tax-advantaged manner a lot sooner. I will definitely explore contributing to a 457(b) account sometime this year.
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
How did you do it? From what I've read, it appears you can only fully fund a Roth or Traditional IRA, but not both at the same time?
tj
Posts: 9366
Joined: Wed Dec 23, 2009 11:10 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by tj »

Raraculus wrote: Sun Jan 02, 2022 10:22 am Mr. Ronnerson-

Thank you for sharing your recent update. You are a true inspiration when it comes to managing money, wringing out the most bang for your buck! I am an educator as well, and really have to pay attention to little details surrounding my monies and money management.
Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pmDeductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
I am mid-50's when I learned today that I could maximize both 401(k) and 457(b)! I just want to punch myself for not finding out more ways to invest for my future in a tax-advantaged manner a lot sooner. I will definitely explore contributing to a 457(b) account sometime this year.
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
How did you do it? From what I've read, it appears you can only fully fund a Roth or Traditional IRA, but not both at the same time?
You can't double up for the same year, he did for two different years.
User avatar
AnnetteLouisan
Posts: 7261
Joined: Sat Sep 18, 2021 10:16 pm
Location: New York, NY

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by AnnetteLouisan »

I can relate, OP, happy new year!

I didn’t read the whole thread, but I’ve received similar comments to my claim that I spend under 45k a year in NYC with a gross salary of 290. “Surely not in Manhattan!” - oh, but yes. “Surely rent controlled or rent stabilized!” - no. I own and bought about at market. Others asked for my budget, which I’d be happy to share, although this isn’t Good Housekeeping or Budgetstretcher.com (a good website btw). It emerged that while my spend is under 45k, my taxes are 76k, so maybe that destroys the thesis, but I’m still saving over 50 percent of my gross. I don’t think it’s a great lifestyle though. It’s not “Lifestyles of the Rich and Famous on 45k.”

Here are a few basics that make it possible (though not necessarily desirable or even intelligent - I actually want to spend more going forward):

1. My housing costs are low because I own a small place with no mortgage. Just co-op maintenance.
2. I had a spendy period in the past so I’ve been there and done that. Travel, fine dining, living abroad, buying at Bergdorfs. Yeah, I’ve done that. It was fun. I’m older now so I don’t need as much excitement. I have great memories.
3. No kids, no spouse, no relatives in need. So it’s just me.
4. I have fun free hobbies that keep me reasonably content- yoga, tai chi, meditation, reading - and I get satisfaction from my job and it keeps me occupied. I have friends I keep in touch with for free.
5. Pretty decent health overall. It used to be fairly bad so I spent a lot in the past learning how to be healthier (diet, exercise, vitamins).
6. Lower income origin. Never really became accustomed to the high spend lifestyle so my frame of reference is different.
7. No car, no PC, no pet, no cable TV, no coffee maker, no gym memberships anymore, only 2 subscriptions - Netflix and WSJ.
8. It’s OPTIONAL. It’s not emotionally painful to do this when it’s by choice. I can quit any time. But I can also quit my job any time, which makes it less stressful too.
9. I anticipate having a better lifestyle in the future: leaving NYC, having a nicer home, maybe traveling again and retiring early. So it feels temporary and in service of a goal of playing catch up with savings and investing, rather than eternally being my fate. Hopefully not.
10. I’m satisfied (even happy) with who I am and how I look, which saves me a lot of money on magazines, handbags, jewelry, clothes, shoes, salons and perfume.

So it’s possible. It’s unusual. It’s probably not optimal.
Last edited by AnnetteLouisan on Sun Jan 02, 2022 11:15 am, edited 1 time in total.
User avatar
Raraculus
Posts: 339
Joined: Sat Jul 20, 2019 10:43 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Raraculus »

Ron Ronnerson wrote: Sat Jan 01, 2022 9:17 pmIt seems tricky but there are options available. For instance, I did a cash-out refi this year and owe just as much on my home as I did when I purchased it years ago. This probably seems like a bad idea at the surface level. However, I'm not in a typical situation. Not only have I found arbitrage opportunities so that I'm actually making a little bit of money off the loan but, much more importantly, my liquidity problem is solved for a good while. I'm essentially borrowing from the future when I expect to have more than I need so that I can have more cash on hand in the present that doesn't count as income. This will hopefully help me smooth out my spending over the years while optimizing my situation throughout the journey.
This is a great and succinct take on using cash-out refinancing for day to day cash flow issues that crop up throughout the year.

2021 was the first year that I managed to fully max my 401(k) and Roth IRA. (pats on my back) Whew. I made it! It was more difficult that I had anticipated. I actually ran into cash liquidity issues late in the year as I had insufficient take-home pay. Even had to wait on a few paydays just to send out checks. I used margin loans from my brokerage on several occasions just to pay my bills. Also, my brokerage account had stalled - my last DCA contribution was sometime in June 2021.

My main obstacle are the car payments. Without them, my take-home pay would be barely sufficient for my daily living expenses. Now, inflation has reared its ugly head bigly, and even my daily living expenses are going up. My car loan is expected to continue until 2023, sigh.

I am looking into a cash-out refinancing so I can solve these cash flow problems, optimize my finances, and fully fund my retirement.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

calwatch wrote: Sun Jan 02, 2022 3:46 am

You should have received a "Marketplace disclosure" in your open enrollment material. This discusses the employer's obligations under the ACA. For instance, mine states:

Does Employer Health Coverage Affect Eligibility for Premium Savings Through the Marketplace?
Yes. If you have an offer of health coverage from your employer that meets certain standards, you will not be eligible for
a tax credit through the Marketplace and may wish to enroll in your employer's health plan. However, you may be eligible
for a tax credit that lowers your monthly premium or a reduction in certain cost-sharing if your employer does not offer
coverage to you at all or does not offer coverage that meets certain standards. If the cost of a plan from your employer that
would cover you (and not any other members of your family) is not “affordable” — that is, it costs you more than 9.5%
of your household income for the year — or if the coverage your employer provides does not meet the “minimum value”
standard set by the Affordable Care Act, you may be eligible for a tax credit.
All (jurisdiction)-sponsored health plans meet the
“minimum value” standard and the cost to you of at least one of those plans is intended to be affordable — that is, it is
intended to cost you no more than 9.5% of your income, based on your wages.

(emphasis mine)

Thanks, calwatch! Very interesting. I don't recall receiving a marketplace disclosure at open enrollment but would assume the rules are pretty standard so I had a follow up question about the part you highlighted: Are intentions relevant when it comes to qualifying for the premium tax credit? For instance, let’s take a totally plausible situation for me in two years. Let’s say it’s now 2024, the year that both my wife and I turn 50. Let’s also say that the least expensive health insurance options offered by my employer that year are:
Individual: $800
Two People: $1500
Family (3+ People): $2000

EDIT - I revised this paragraph for greater clarity: Let's further assume that the employer will chip in $500 for the individual coverage and nothing toward spouse or dependents. So, my share of the cost would be $300/month. Let’s use an ACA affordability percentage of 9.5%. That means that the insurance that's offered is affordable if AGI is greater than $37,874. The math for that: ($300/0.095) x 12 = $37,874.

Assuming that I have a gross salary of $120k, this coverage seems intended to be affordable, right? But it turns out not to be. Let’s say I have a pile of cash that will cover my expenses for the year (could be from a HELOC, inheritance, gifts, selling a business the previous year, whatever) and it’s sitting at a bank earning no interest. I make use of tax-deferred opportunities such as:
mandatory pension contributions: $12k
2 traditional IRAs: $14k
403b: $27k
457b: $27k
HSA (I’m actually planning to open an HSA account this month): $7k
Total Above-Line Deductions: $87k
AGI: $33k – which is below the threshold of $37,874 but a bit above 138% of the federal poverty level for our family size so we still fall under the ACA and not Medi-cal

Would we still qualify for the subsidy even though the district “intended” to provide affordable insurance? Surely, they could see that someone in their 50s might be trying to put away all they can as retirement approaches. Maybe they thought saving $87k out of $120k year is not likely in a VHCOL area and built their intentions around that assumption. Yet it’s possible to do it.
calwatch wrote: Sun Jan 02, 2022 3:46 am Their allowance always exceeds that of the minimum cost plan (a Blue Cross catastrophic PPO plan for non-union or a Cigna Select HMO for union employees). The allowance for people who waived insurance used to be the same as the single person allowance but when the ACA was implemented dropped down to now about a quarter of the amount for people who take insurance.

From a budget standpoint I'm surprised your district doesn't just set the cost of the allowance equal to or slightly less than the cost of the lowest cost health insurance plan. It avoids situations like yours, and requiring them to pay the ACA minimum value penalty. And I'm sure there are instructional aides, library assistants, etc. who are making $69k without all the deductions you are using and finding their health coverage unaffordable. https://www.cigna.com/employers-brokers ... er-mandate

I could see them doing so in lieu of a higher raise, because health insurance allowances are generally not pensionable in California.

Happy New Year to you as well.
Years ago, when the ACA was new, the district was concerned about potential penalties. Over time, they came to realize that the actual penalties were very small (I believe it’s some fraction of 1% of the district’s annual budget). So I think they accept the cost of those penalties because the alternative of paying for a portion of all the employees’ cost of coverage would be far, far greater. I am not sure why the fees are not more but factors probably include that it’s a VHCOL area so salaries tend to be high, many employees are married to people in other professions and get coverage through a spouse, some are covered through their parents or on Medicare, some go without health insurance (I had a friend in this category but he has fortunately switched to another district now and has coverage), and about 1/3 of employees actually buy insurance through the district.
Last edited by Ron Ronnerson on Sun Jan 02, 2022 1:19 pm, edited 1 time in total.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

JackBoglereader21 wrote: Sun Jan 02, 2022 10:00 am
Good luck with EV research, lots of information out there but I highly recommend leasehackr.com. Happy New Year.
I've got a lot of learning to do when it comes to electric vehicles so appreciate the info and the link! I think I may hold off for a short while as I think there is a pretty good chance that waiting could be advantageous in my situation since I currently have no income tax liability (the tax credit isn't refundable and I also can't increase my liability as I would lose out on the premium tax credit if I did so). I don't think I will always be in this situation and would like to get at least a decent chunk of the $7500 federal credit. I'm hoping they end up making it a refundable credit and increasing the amount of the credit at some point. Even if that doesn't happen, if the ACA's family glitch is addressed administratively (something that's in the works from what I gather), I may be able to increase my tax liability at some point and be able to qualify for both the premium tax credit as well as much (if not all) of the electric vehicle tax credit.

In the meantime, I've got to begin learning about this stuff. Luckily, I have a reliable 7-year-old Corolla that is chugging along fine for the time being.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Raraculus wrote: Sun Jan 02, 2022 10:22 am Mr. Ronnerson-

Thank you for sharing your recent update. You are a true inspiration when it comes to managing money, wringing out the most bang for your buck! I am an educator as well, and really have to pay attention to little details surrounding my monies and money management.
Ron Ronnerson wrote: Fri Dec 31, 2021 6:05 pmDeductions from paycheck: $53.1k (pension contributions: $11.4k, dental premiums: $2k, FSA: $700, 403b: $19.5k, 457b: 19.5k)
I am mid-50's when I learned today that I could maximize both 401(k) and 457(b)! I just want to punch myself for not finding out more ways to invest for my future in a tax-advantaged manner a lot sooner. I will definitely explore contributing to a 457(b) account sometime this year.
-Fully funded two Roth IRA accounts for 2020 and two traditional IRA accounts for 2021
How did you do it? From what I've read, it appears you can only fully fund a Roth or Traditional IRA, but not both at the same time?
Thanks for the kind words. Educators in their 50s tend to have a lot of tax-deferred space available. Don't forget catch-up contributions in the various retirement accounts. They can increase your contribution limits further and definitely help if you're trying to "catch up."

My wife and I funded Roth IRAs in 2020 and traditional IRAs in 2021 (so it's two different years). We will wait until 2023 to fund our IRA accounts for 2022 even though we have the money available to do it right now. The reason is that, in my case, I like to control our AGI for health insurance purposes and can decide whether to make contributions into a traditional or Roth IRA account (or some amount in each type) until April of the following year. This extra time to decide where to put the money until it's tax season comes in handy for us.
AnEngineer
Posts: 2414
Joined: Sat Jun 27, 2020 4:05 pm

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by AnEngineer »

Ron Ronnerson wrote: Sun Jan 02, 2022 12:23 pm
My wife and I funded Roth IRAs in 2020 and traditional IRAs in 2021 (so it's two different years). We will wait until 2023 to fund our IRA accounts for 2022 even though we have the money available to do it right now. The reason is that, in my case, I like to control our AGI for health insurance purposes and can decide whether to make contributions into a traditional or Roth IRA account (or some amount in each type) until April of the following year. This extra time to decide where to put the money until it's tax season comes in handy for us.
If the cash flow isn't a problem you can also contribute now and recharacterize later.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

AnnetteLouisan wrote: Sun Jan 02, 2022 10:46 am I can relate, OP, happy new year!

I didn’t read the whole thread, but I’ve received similar comments to my claim that I spend under 45k a year in NYC with a gross salary of 290. “Surely not in Manhattan!” - oh, but yes. “Surely rent controlled or rent stabilized!” - no. I own and bought about at market. Others asked for my budget, which I’d be happy to share, although this isn’t Good Housekeeping or Budgetstretcher.com (a good website btw). It emerged that while my spend is under 45k, my taxes are 76k, so maybe that destroys the thesis, but I’m still saving over 50 percent of my gross. I don’t think it’s a great lifestyle though. It’s not “Lifestyles of the Rich and Famous on 45k.”

Here are a few basics that make it possible (though not necessarily desirable or even intelligent - I actually want to spend more going forward):

1. My housing costs are low because I own a small place with no mortgage. Just co-op maintenance.
2. I had a spendy period in the past so I’ve been there and done that. Travel, fine dining, living abroad, buying at Bergdorfs. Yeah, I’ve done that. It was fun. I’m older now so I don’t need as much excitement. I have great memories.
3. No kids, no spouse, no relatives in need. So it’s just me.
4. I have fun free hobbies that keep me reasonably content- yoga, tai chi, meditation, reading - and I get satisfaction from my job and it keeps me occupied. I have friends I keep in touch with for free.
5. Pretty decent health overall. It used to be fairly bad so I spent a lot in the past learning how to be healthier (diet, exercise, vitamins).
6. Lower income origin. Never really became accustomed to the high spend lifestyle so my frame of reference is different.
7. No car, no PC, no pet, no cable TV, no coffee maker, no gym memberships anymore, only 2 subscriptions - Netflix and WSJ.
8. It’s OPTIONAL. It’s not emotionally painful to do this when it’s by choice. I can quit any time. But I can also quit my job any time, which makes it less stressful too.
9. I anticipate having a better lifestyle in the future: leaving NYC, having a nicer home, maybe traveling again and retiring early. So it feels temporary and in service of a goal of playing catch up with savings and investing, rather than eternally being my fate. Hopefully not.
10. I’m satisfied (even happy) with who I am and how I look, which saves me a lot of money on magazines, handbags, jewelry, clothes, shoes, salons and perfume.

So it’s possible. It’s unusual. It’s probably not optimal.
Thanks, AnnetteLouisan! I enjoy reading your posts, by the way. Thanks for sharing your details.

By the way, I wouldn't fret the taxes. You make a great salary and it sounds like you still have a lot of money left over each month. In fact, I think you could certainly allow for a little bit of lifestyle creep if you'd like. It's all about balance, in my humble opinion. I know you said you're trying to do some catching up but don't forget to smell the flowers. NYC is one of my favorite places and there is a lot to enjoy there. Wish you the very best in the new year.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

AnEngineer wrote: Sun Jan 02, 2022 12:35 pm
Ron Ronnerson wrote: Sun Jan 02, 2022 12:23 pm
My wife and I funded Roth IRAs in 2020 and traditional IRAs in 2021 (so it's two different years). We will wait until 2023 to fund our IRA accounts for 2022 even though we have the money available to do it right now. The reason is that, in my case, I like to control our AGI for health insurance purposes and can decide whether to make contributions into a traditional or Roth IRA account (or some amount in each type) until April of the following year. This extra time to decide where to put the money until it's tax season comes in handy for us.
If the cash flow isn't a problem you can also contribute now and recharacterize later.
Yes, you sure can. In fact, that's what I did in 2021. But never again. It was sort of a pain to deal with it. Here's my post about recharacterizing from last week: viewtopic.php?p=6406314

A big thank you to Duckie for the help with recharacterizing.
Topic Author
Ron Ronnerson
Posts: 3563
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by Ron Ronnerson »

Raraculus wrote: Sun Jan 02, 2022 11:14 am

2021 was the first year that I managed to fully max my 401(k) and Roth IRA. (pats on my back) Whew. I made it! It was more difficult that I had anticipated. I actually ran into cash liquidity issues late in the year as I had insufficient take-home pay. Even had to wait on a few paydays just to send out checks. I used margin loans from my brokerage on several occasions just to pay my bills. Also, my brokerage account had stalled - my last DCA contribution was sometime in June 2021.

My main obstacle are the car payments. Without them, my take-home pay would be barely sufficient for my daily living expenses. Now, inflation has reared its ugly head bigly, and even my daily living expenses are going up. My car loan is expected to continue until 2023, sigh.

I am looking into a cash-out refinancing so I can solve these cash flow problems, optimize my finances, and fully fund my retirement.
My sympathies about the inflation! As I posted recently, all of a sudden, I'm feeling its effects too.

To be totally honest, I'm not sure why maxing out retirement space is your goal. If you're expecting a pension and/or social security, that would be a factor in how much you need to save as well. I'm not trying to discourage you from saving what you can but if you're having cash-flow issues, could you just scale back on the amount you're saving?

In my case, I feel almost forced to save due to the health insurance situation. If that weren't the case, I likely would just reduce what I'm saving (for me, that would likely mean reducing or possibly even eliminating contributions into a 403b and sticking with only the IRA accounts, 457b, and making mandatory pension contributions).

That being said, if you have a long time horizon and are into leverage, I personally think loading up on low-interest debt is not a bad idea at all. Just proceed carefully with debt as you don't want to get in over your head.
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

Re: Bay Area teacher saving half my income – why the doubt? (and asking more questions)

Post by calwatch »

Ron Ronnerson wrote: Sun Jan 02, 2022 11:55 am
Assuming that I have a gross salary of $120k, this coverage seems intended to be affordable, right? But it turns out not to be. Let’s say I have a pile of cash that will cover my expenses for the year (could be from a HELOC, inheritance, gifts, selling a business the previous year, whatever) and it’s sitting at a bank earning no interest. I make use of tax-deferred opportunities such as:
mandatory pension contributions: $12k
2 traditional IRAs: $14k
403b: $27k
457b: $27k
HSA (I’m actually planning to open an HSA account this month): $7k
Total Above-Line Deductions: $87k
AGI: $33k – which is below the threshold of $37,874 but a bit above 138% of the federal poverty level for our family size so we still fall under the ACA and not Medi-cal

Would we still qualify for the subsidy even though the district “intended” to provide affordable insurance? Surely, they could see that someone in their 50s might be trying to put away all they can as retirement approaches. Maybe they thought saving $87k out of $120k year is not likely in a VHCOL area and built their intentions around that assumption. Yet it’s possible to do it.
I think that you would qualify, but the employer would be notified. Given that they have made the business decision now to pay the penalty, they may look askance if they find they are still penalized after thinking that they had given all employees affordable health insurance. This is especially the case if the gap between the cheapest plan and the subsidy is less than 9.5% of the lowest paid employee on the salary schedule.

The other option is that they could give employees health insurance without providing a waiver opportunity. The above listed employer requires all employees to declare health insurance, and for non-union employees they can only waive coverage if they are on Medicare, a retiree health insurance plan, or another employer's group plan (and not as a dependent). To further sweeten the deal the cost for the "catastrophic" PPO is $100 a month for a single employee. (Looking at the benefit design it is OK, akin to a Silver ACA plan and not a true catastrophic plan, with a $2,000 deductible, 25% co-pay, and $6,600 out of pocket maximum.)
Years ago, when the ACA was new, the district was concerned about potential penalties. Over time, they came to realize that the actual penalties were very small (I believe it’s some fraction of 1% of the district’s annual budget). So I think they accept the cost of those penalties because the alternative of paying for a portion of all the employees’ cost of coverage would be far, far greater. I am not sure why the fees are not more but factors probably include that it’s a VHCOL area so salaries tend to be high, many employees are married to people in other professions and get coverage through a spouse, some are covered through their parents or on Medicare, some go without health insurance (I had a friend in this category but he has fortunately switched to another district now and has coverage), and about 1/3 of employees actually buy insurance through the district.
If I were a number cruncher I would recognize that giving an employee $1 in health insurance subsidy actually costs them 50 cents or less because of the need to pay pension credit, Medicare tax, use it as an overtime calculation base, etc. The average statewide premium for Bronze health insurance in 2022 was $518. https://www.hbex.ca.gov/stakeholders/Fi ... r_2022.pdf If their lowest paid full time employee was paid $50,000, they could pay the PEMHCA minimum of $149 a month, offer a Bronze level plan as the lowest tier available, and mandate that an employee show proof of group health insurance or get automatically enrolled in the Bronze plan (and pay the difference). Being in teaching which traditionally was a female-dominated profession the assumption may have been that they get their health care from their spouses, whereas jurisdictions tend to have more breadwinners who use the gold-plated health insurance plans as the primary insurance for their family.
Post Reply