31–39 of 39 posts
> Not investing enough in 401k up to the IRS max. This is not always a given. If your income in retirement is much higher than your working years income, you will end up losing on taxes. In fact, my employer didn't match at all so all my money is invested post-tax in a brokerage. You should probably max out your Roth IRA, however.
>you could have a large tax bill when you file your taxes the following year. And if it’s too large, the IRS will even impose a penalty It is actually called an "addition to tax", not a penalty, and in fact it is merely an interest charge, just like if you don't pay the full balance on your credit card each billing period (for tax, the "billing periods" are the (roughly) quarterly dates when estimated payments are du…
1. There are penalties for underpayment of estimated taxes. And there are even interest charges on penalties. https://www.irs.gov/payments/underpayment-of-estimated-tax-b... 2. The triple tax advantage is not ridiculous. (1) and (3) are not the same thing. 401k for example is not taxed going in (you fund it with pre-tax dollars) but is taxed when taken out. When you withdraw money from your 401k in retirement, you ow…
[0]https://www.law.cornell.edu/uscode/text/26/6654
2. The HSA is just a holding account. You can either pay for health expenses such as insurance pre-tax each year, or you can put it in a HSA and delay the payment. In either case, you only get one tax deduction, not two. The ridiculous claim is to say for a $1K contribution to HSA, you get a $1K tax deduction, then you get another $1k tax deduction when you take it out - not true.
>you could have a large tax bill when you file your taxes the following year. And if it’s too large, the IRS will even impose a penalty It is actually called an "addition to tax", not a penalty, and in fact it is merely an interest charge, just like if you don't pay the full balance on your credit card each billing period (for tax, the "billing periods" are the (roughly) quarterly dates when estimated payments are du…
Don't #1 and #3 become true when you consider capital gains on an appreciated account? Genuine question, because how I'd thought of it, and your assertion shakes my confidence in my understanding.
Earlier quoted context omitted.
Don't #1 and #3 become true when you consider capital gains on an appreciated account? Genuine question, because how I'd thought of it, and your assertion shakes my confidence in my understanding.
You only get a single tax deduction, not a double deduction. If you put in $1K and also get $0.1K gains in your HSA, for example, you only get a total of $1.1K tax deduction. There is no "triple tax benefit".
Having a single bullet point about using a trust is insufficient, as it is quite complicated to receive a trust. There are other options for managing estate planning that will work well for ordinary families (those with less than ~$28 million in total assets). The marketing around trusts is a classic information asymmetry. Law firms selling the service of setting up a trust know it’s not simple for heirs, but that is…
Trusts are like life insurance. It's not about when you're old and your kids are all grown up and self-reliant. The point of the trust is when you have younger kids and need to plan for you and your significant other both dying unexpectedly. It's no use naming your 8 year old as a beneficiary because they won't be able to use any of the assets without trusted adults.
Earlier quoted context omitted.
You only get a single tax deduction, not a double deduction. If you put in $1K and also get $0.1K gains in your HSA, for example, you only get a total of $1.1K tax deduction. There is no "triple tax benefit".
The point is you never pay tax on that money. 1. Your contribution is pre-tax 2. Your growth is tax free 3. Your withdrawal is tax free as long as you have receipts for qualified expenses. I personally don’t have an HSA because it seems like a hassle and I don’t want a HDHP but I can see the appeal.
Having a single bullet point about using a trust is insufficient, as it is quite complicated to receive a trust. There are other options for managing estate planning that will work well for ordinary families (those with less than ~$28 million in total assets). The marketing around trusts is a classic information asymmetry. Law firms selling the service of setting up a trust know it’s not simple for heirs, but that is…
Why does regular probate cost more than passing the inheritance through a trust?
One more: /r/CreditCards on Reddit is an awesome resource for finding excellent credit card deals. Banks offer amazing sign-ups deals in the hopes that you'll carry a big balance in perpetuity. Taking the bait and paying off your card every month is basically free money! Don't get sucked into churning, though. It's high risk for very low reward.
What’s high risk about churning besides the risk of wasting your time? Forgetting to pay a bill with all the accounts you are juggling then wiping out your gains with one late fee?
For credit card:
- not meeting spending targets to earn signup bonuses
- not utilizing all the cards benefits (For example, discover requires you click a couple buttons to activate 5% reward.
- minimum points redemption (must have > x points to convert to cash)
- Forgetting to redeem points before closing the account.)
For checking/savings rewards:
- not meeting direct deposit targets
- not maintaining an account balance
One more: /r/CreditCards on Reddit is an awesome resource for finding excellent credit card deals. Banks offer amazing sign-ups deals in the hopes that you'll carry a big balance in perpetuity. Taking the bait and paying off your card every month is basically free money! Don't get sucked into churning, though. It's high risk for very low reward.
What’s high risk about churning besides the risk of wasting your time? Forgetting to pay a bill with all the accounts you are juggling then wiping out your gains with one late fee?