Author Topic: Question about Taxes and Roth/401k  (Read 4710 times)

MrsCoolCat

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Question about Taxes and Roth/401k
« on: December 30, 2014, 08:00:23 PM »
Hi! Still new to this so if there are links to existing posts please link me.
I was chatting with a coworker today and I am starting to change my mind and want to pay taxes now rather than later. I remember reading that I will probably be in a lower tax bracket when I retire early or what not, and have to use those funds. But I am starting to think twice about what my coworker said about if the US goes towards standardized health care similar to that of Canada and Europe, then taxes will inevitably go up. What do you think about the taxes and can I get more knowledge about which ROTH or 401K takes taxes out now? Thank you in advance everyone!

Cheddar Stacker

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Re: Question about Taxes and Roth/401k
« Reply #1 on: December 30, 2014, 09:02:53 PM »
Put your trust in this guy

http://www.madfientist.com/retire-even-earlier/

rather than a speculative co-worker. Without more details on your exact situation it's hard to give advice, but read and understand that link before making any changes.

MrsCoolCat

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Re: Question about Taxes and Roth/401k
« Reply #2 on: December 30, 2014, 09:31:00 PM »
Put your trust in this guy

http://www.madfientist.com/retire-even-earlier/

rather than a speculative co-worker. Without more details on your exact situation it's hard to give advice, but read and understand that link before making any changes.

Thanks. I'll check it out, but with the way things are going I wouldn't be too surprised if they raised our taxes in the near future to fulfill Obamacare... Just a bit of speculation I guess.

Eric

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Re: Question about Taxes and Roth/401k
« Reply #3 on: December 30, 2014, 09:59:24 PM »
Put your trust in this guy

http://www.madfientist.com/retire-even-earlier/

rather than a speculative co-worker. Without more details on your exact situation it's hard to give advice, but read and understand that link before making any changes.

Thanks. I'll check it out, but with the way things are going I wouldn't be too surprised if they raised our taxes in the near future to fulfill Obamacare... Just a bit of speculation I guess.

If that's the case, and judging from the declining deficit I'd disagree, but that would be even more of a reason to go the Traditional IRA/401k route.  When you stop working, you'll probably drop tax brackets, plural, so even a large percentage point across the board tax increase would still leave you in a better position by deferring taxes until later.

MrsCoolCat

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Re: Question about Taxes and Roth/401k
« Reply #4 on: December 30, 2014, 10:17:21 PM »

If that's the case, and judging from the declining deficit I'd disagree, but that would be even more of a reason to go the Traditional IRA/401k route.  When you stop working, you'll probably drop tax brackets, plural, so even a large percentage point across the board tax increase would still leave you in a better position by deferring taxes until later.

Cool. I really need to do more research because I just feel like I'm in a relatively "low" tax bracket because I'm not making "a lot". Idk because I also don't do my taxes so I haven't quite sat down and looked at how it is or will effect me. Maybe I'd actually look more into it if I ever made more money that put me in that higher tax bracket... I am doing fine either way and am not chasing after the money atm.
« Last Edit: December 30, 2014, 10:19:07 PM by ChinaChao »

astvilla

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Re: Question about Taxes and Roth/401k
« Reply #5 on: December 31, 2014, 04:30:18 AM »
well in regards to your coworker i would have disagree. working in healthcare, IMO we will probably never go to a universal health care system model in the US. too many industries and jobs (mine included) are dependent on the current healthcare model. taxes won't go up but you will have to buy your own insurance (which i guess can be thought of as an increase in tax if one was previously uninsured or employer dropped and moved you). the decline in healthcare spending is probably because we are shifting more costs to people and providing a gateway for people to do that through the exchanges. reimbursement will stay flat or decline as patient volume goes up making it more efficient (terrible for doctors, healthcare workers and me ironically but great for the people). 

though a universal health care system IMO is great and what I desire personally since i find it to be more moral, it would probably put me out of work and delay my FIRE another 10-20 years. there's just no way we would ever have universal health care in the US, so much of the US economy is now dependent on it.

3Mer

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Re: Question about Taxes and Roth/401k
« Reply #6 on: December 31, 2014, 01:24:05 PM »
Great article, thanks for posting this.

Put your trust in this guy

http://www.madfientist.com/retire-even-earlier/

rather than a speculative co-worker. Without more details on your exact situation it's hard to give advice, but read and understand that link before making any changes.

Cheddar Stacker

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Re: Question about Taxes and Roth/401k
« Reply #7 on: December 31, 2014, 01:47:44 PM »
Great article, thanks for posting this.

; ) It's plastered all over these forums. I remember the first time I read it. Eye opening.

well in regards to your coworker i would have disagree. working in healthcare, IMO we will probably never go to a universal health care system model in the US. too many industries and jobs (mine included) are dependent on the current healthcare model.

@ fewaopi, I agree with your first sentence, in that I disagree with the co-worker. I think the rest of your post needs more reflection and/or explanation by you.

The tail is wagging the dog here. Justification for an argument should not be "too many people depend on the current model". If a system is broken, it should be fixed. You said yourself it would be more moral. If it's a better way of doing things, let's do it. People will adjust.

Example - I'm a CPA in favor of total tax reform. Our system is overcomplicated, and downright ridiculous. Shit look at the link I posted in this thread as evidence. I will use the code as it's written and create a strategy that works best for me, but the tax code needs simplification even if it means I would receive a smaller paycheck. I would adapt. I would find another way to earn a living.

If your argument is "it won't happen because lobbyist will always control Washington" then I think I agree. But that's not really what you said.

MrsCoolCat

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Re: Question about Taxes and Roth/401k
« Reply #8 on: December 31, 2014, 08:10:44 PM »
Thanks for the links and the insightful opinions on the future of healthcare! I guess we'll never know but after discussion with my husband it probably will just be better taking taxes out now. No matter how much I (and everyone else) hate taxes...

astvilla

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Re: Question about Taxes and Roth/401k
« Reply #9 on: January 01, 2015, 01:40:04 PM »
well in regards to your coworker i would have disagree. working in healthcare, IMO we will probably never go to a universal health care system model in the US. too many industries and jobs (mine included) are dependent on the current healthcare model.

@ fewaopi, I agree with your first sentence, in that I disagree with the co-worker. I think the rest of your post needs more reflection and/or explanation by you.

The tail is wagging the dog here. Justification for an argument should not be "too many people depend on the current model". If a system is broken, it should be fixed. You said yourself it would be more moral. If it's a better way of doing things, let's do it. People will adjust.

Example - I'm a CPA in favor of total tax reform. Our system is overcomplicated, and downright ridiculous. Shit look at the link I posted in this thread as evidence. I will use the code as it's written and create a strategy that works best for me, but the tax code needs simplification even if it means I would receive a smaller paycheck. I would adapt. I would find another way to earn a living.

If your argument is "it won't happen because lobbyist will always control Washington" then I think I agree. But that's not really what you said.
[/quote]

oh when i meant decline in spending i meant decline in government spending in healthcare. healthcare excesses are being trimmed off a bit and reimbursement rates for physicians, dentists, pharmacists are all declining tightening the job markets for those fields a bit but also freezing salaries a bit. healthcare is definitely not as lucrative a field compared to what it was, still good just not like before. the ACA despite many complaints actually makes good provisions like moving to electronic health records (EHR), forcing hospitals to do CPOE and EHR and giving incentives for it, Medicare mandating all diabetics be on ACEI/ARB based on high quality evidence those classes reduce diabetic kidney disease rates and progression, forcing hospitals to pick up the tab if a heart failure patient is readmitted to hospital w/in 30 days after discharge so hospitals cannot give poor quality of care so they can readmit the patient and keep rebilling Medicare/Medicaid/Uncle Sam (yes there's a lot of dirty healthcare admins and HCPs). a doctor on rotation in a big hospital told me that when we treat the patient we have to think 50% of the time actual treatment and 50% about trying to make money off the patient. that's unfortunately the cold hard reality of a private health care system motivated by profit, costs go up to deliver care and so on...it's a clear conflict of interest but Republicans and many people just don't care and vote against their own interests it boggles me...kay rant done.

i agree if a system is broken it should be fixed, only it won't because lobbyists will for the foreseeable future always control washington. many voters are also healthcare employees and depend on the unique one of a kind "privatized" healthcare model we currently have. not just us but many single payer universal health care systems depend on us for drug discovery and price controls and our private healthcare model. i did mean to include that but forgot. sometime inefficiency is good as it creates jobs and doing things w/no goal in sight like going to war can create jobs if a large sector of the economy is reliant on war. i wouldn't mind making less for a better system but the vast majority will not be so generous. i don't mind paying taxes for taxes keep a civilized society that includes giving affordable healthcare to citizens, it's just how it's being spent that bothers me a lot.

Jags4186

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Re: Question about Taxes and Roth/401k
« Reply #10 on: January 01, 2015, 01:48:13 PM »
If you are 10+ years from FI/RE I would recommend doing a traditional 401k and a Roth IRA.  It's not a bad idea to have eggs in both baskets.  Yes if you retire very early and live on low expenses, the madfientist way is the most efficient. However, I feel that many people here in the 20s (and that includes me) don't take into account what will happen when they get married, have kids, etc.  All of a sudden retiring at 35 or 40 may not be the dream anymore.  All traditional accounts are the way to go for a certain subset of people, but I'd rather hedge my bets that in 10 years or so I may not fall into that set.  And if I'm wrong, the worst that happens is that it takes me slightly longer to hit my FI/RE goal.

MrsCoolCat

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Re: Question about Taxes and Roth/401k
« Reply #11 on: January 23, 2015, 08:50:42 PM »
If you are 10+ years from FI/RE I would recommend doing a traditional 401k and a Roth IRA.  It's not a bad idea to have eggs in both baskets.  Yes if you retire very early and live on low expenses, the madfientist way is the most efficient. However, I feel that many people here in the 20s (and that includes me) don't take into account what will happen when they get married, have kids, etc.  All of a sudden retiring at 35 or 40 may not be the dream anymore.  All traditional accounts are the way to go for a certain subset of people, but I'd rather hedge my bets that in 10 years or so I may not fall into that set.  And if I'm wrong, the worst that happens is that it takes me slightly longer to hit my FI/RE goal.

Thanks! I have both IRA and Traditional a few weeks back, and have been making progress since I actually at least did it! :-) Excited!