Thanks for all the answers (and apologies for the delay, was traveling).
With no kids, why would you do a 529? Are you planning to return to school?
My accountant mentioned this as an option for sheltering $ from state income tax. I could use if I decided to go back to school / take classes, or just change the beneficiary to my children (I do plan on having). They seem to vary greatly by state and it still doesn't seem to be a slam dunk. You can use for all sorts of "educational" expenses, like golf lessons / cooking school, etc.
In NY, 529 contributions let you avoid the state income tax on up to $5000 a year. You are probably in the 6.65% bracket (see http://www.tax-brackets.org/newyorktaxtable). So, you could avoid $332 a year in state tax by sending 5k to a 529 plan. Not sure I consider that worth it on its own merits.
As a bonus, NY's 529 gives you access to Vanguard funds at an expense ratio of 0.16%. If you do have kids later, you'd get ~20+ years of stock market growth on your investments, all of which would be available tax free to fund their education.
NY 529 site here: www.nysaves.org
I agree with you, but it's still $300+ saved. I do plan on having kids in the next 2-4 years, so it may be a worthwhile investment. Have you looked into other states' plans as well?
Would mega backdoor Roth be an option for you? If your plan allows after tax contributions and in-service rollovers/withdrawals, then it is something that would be very worthwhile. It would allow you to put up to $35K into Roth accounts per year.
No, this isn't currently an option (this was my first hope). We have a 401k meeting with our plan administrator this week, so I will be inquiring as to whether they offer it at all. Our company's current 401k is fairly top heavy with the high earners maxing out their 401k and most others only saving a few thousand.
At $250K as a single person (your post reads like you're single), you're gonna pay some taxes. On the plus side, you've got a relative shit-load of money, even after taxes.
To shelter much more than you already are, you'll either need to spend a fair amount of money (give it away, get a big mortgage and pay lots of interest, etc.), or change something about your employment arrangement.
Could you get a job that pays as well with a much more generous 401K? Maybe even a 457 on top of the 401K? Switch to being self-employed at your current place or a new one? Just kind of the way it is when you're making a ton of money on your own. The bulk of the tax-sheltering comes from your employment or certain favored expenses.
I am in a bit of a niche business, so my salary would likely be reduced if I left my current role. My boss is open to finding ways to help me take home more money, but I would likely need to start a side hustle for that. Any other reading materials you can recommend on learning more about switching to self-employed while staying in same role?
On the career side, I have looked into other opportunities as well even with the reduction in pay. Living in NYC, your $ can go very far as a high earner but big saver. Staying in current role for a few more years would likely bring about earliest FIRE, but heart wants to try something new.
I am single but engaged. Will get married in 2016. I've been following some of the wedding posts on here, it's crazy the costs and I have slowly been convincing my SO about not spending that $. The low end of weddings in my social circle has been $40k. It's unbelievable to me, especially when I am at near the top of the earners in my group. Most are paid in full by brides' family.
Might as well repost this. ;)
From http://www.bogleheads.org/forum/viewtopic.php?p=677232#677232:
Thanks for this, exact type of list I was hoping for.
Glad to see this is catching on ;)
Honestly OP there is no magic to reducing your taxes. If you really want to know every possibility to reducing your taxes, pull up a 1040 and look at all deductions to AGI, itemized deductions, and credits. We've named the common ones here, but perhaps there are a couple that are more specific to your situation that none of us are aware of.
Understood, good suggestion.
There are a few things you might consider.
Buy a house or condo to live in. Plan to convert it into a rental in the future.
Buying your parents' house for the deduction isn't something I would do. I wouldn't want to be a landlord to my parents.
If you could convert some of your income to self employment
Income then you can shelter up to $53,000 in your 401k. You'll also be able to deduct business expenses such as home office, travel, food, etc.
Buying something ties me down in a way that I don't want. NYC real estate is super expensive and not worth the investment (IMO) if you won't be here more than a few years. Maintenance, additional requirements by Condo / Co-op board, plus tying up such a significant portion of your assets. Even if you can find something affordable, you add a lot of time to your commute / daily work "commitment."
I currently deduct biz expenses, but not yet as a self-employed worker.
Isn't there an income ceiling for rental house deductions? If he is under the ceiling, he could reduce his income with buying rental properties. However, even with property management, he would be adding hours to his work day. It could be a good transition to retirement if he is willing to have 5 years of being really busy with working and doing the rental thing at the same time.
This is definitely something I would like to do, but am apprehensive about rental properties beyond my immediate travel vicinity. I have worked in RE in a few different capacities, so I am pretty familiar with cost benefit, but have a hang up about owning rental property while still paying rent on primary residence.
