Author Topic: Optimizing my Federal Tax Situation Take 2  (Read 933 times)

Wanna-Be-FI-Bri

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Optimizing my Federal Tax Situation Take 2
« on: July 05, 2019, 11:28:20 AM »
Base Salary $85,000
I live and work in Michigan
Mandatory Employer 401a contribution - 10% of base salary = $8,500
My employer offers a 401a and 457b.

I am considering maxing my 457b ($19,000) (my employer may soon be offering a ROTH 457b, but doesn't yet).  However, I do not know how much I should contribute to my 401a (max contribution limit is $56,000 including the employer contribution).  I'm tempted to contribute enough to bring me down to the federal tax bracket (22%, $39,475).

I don't really need much of the money I'm making right now.  I am single.

Does anyone have a recommendation on what I should do for 2019?

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2121
Re: Optimizing my Federal Tax Situation Take 2
« Reply #1 on: July 05, 2019, 12:20:13 PM »
My thoughts and YMMV: you’re single. You’re living cheaply. Invest what you can in tax deferred investments. You can always change things in the future if a spouse or kids enter the picture. In the mean time the power of compounding is doing its work. One of my financial regrets is not maxxing out my investments when I was young and single.

fuzzy math

  • Handlebar Stache
  • *****
  • Posts: 1735
  • Age: 42
  • Location: PNW
Re: Optimizing my Federal Tax Situation Take 2
« Reply #2 on: July 05, 2019, 02:05:21 PM »
Are you working for the govt or a private non profit? I worked for a non profit and their rules for a 457 stated that I had to cash it out (or roll it into a new employer's 457 - and remember most employers can't offer this) when I left the place. If you work for the govt, it functions as a general no age limit / no penalty (can withdraw before 59.5) retirement plan. So the choice is really yours as to what you want and where you see yourself going.
You should definitely contribute enough to one or both that you get down to the lowest bracket.