PLEASE READ!!!

***** ALL users will have to request a password reset BEFORE you will be able to log into the forum. See the thread in the forum issues section for further instructions. If you have issues with this, email us at admin@urbanohio.com. *****

Author Topic: Tax Reform  (Read 9314 times)

0 Members and 1 Guest are viewing this topic.

Offline bfwissel

  • Key Tower 947'
  • ****
  • Posts: 806
Re: Tax Reform
« Reply #390 on: December 06, 2017, 03:16:18 PM »
Also, the best thing about holding both pre-tax and post-tax accounts is the flexibility.  Let's say you want to withdraw $80k one year.  Depending on where the tax bracket percentage starts to jump to a high level (let's say at $50k) you can withdraw up to that amount in pre-tax and then the rest in post-tax ($50k Trad / $30k Roth).
"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett

Offline freefourur

  • Kettering Tower 408'
  • **
  • Posts: 355
Re: Tax Reform
« Reply #391 on: December 06, 2017, 03:18:02 PM »
^ the tax is not based on how much you draw though it is based on the gain, but I get your overall point.

Offline bfwissel

  • Key Tower 947'
  • ****
  • Posts: 806
Re: Tax Reform
« Reply #392 on: December 06, 2017, 03:27:44 PM »
Unless I'm missing something, all the traditional IRA/401k money is taxable and none for the Roth.  That is because, most of the time, money put into a traditional IRA/401k was never taxed while the money put into a Roth had already been taxed as income.  The only time traditional pre-tax money is taxed is at withdraw (or as a penalty due to untimely late or early withdraws).  Roth money is never taxed even when withdrawn or passed on to heirs.  Am I wrong here?
"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett

Offline mu2010

  • Key Tower 947'
  • ****
  • Posts: 810
Re: Tax Reform
« Reply #393 on: December 06, 2017, 03:45:09 PM »
Everything you said looks right to me.

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #394 on: December 06, 2017, 03:54:31 PM »
The benefit of the ROth is your money grows tax free until retirement. It is why so many people invest in this vehicle. The issue that is going to happen is that 30 years from now there is a huge untapped source of untaxed income from the gains associated with the Roth IRA that the government will want to tax. There is a risk of it being taxed and it is very disingenuous to proposed to tax it because people invested this vehicle as a way to save for retirement. Without it, people would have invested in traditional IRA's instead of going the Roth avenue or they would spend the money instead of deferring it for retirement.

A traditional IRA or 401k grows tax free, too.  That's not unique to Roth.

Roth investment contributions were already taxed (at the beginning).  It's the tIRA/401ks that were contributed tax-free.

Offline freefourur

  • Kettering Tower 408'
  • **
  • Posts: 355
Re: Tax Reform
« Reply #395 on: December 06, 2017, 03:55:46 PM »
Doesn't any brokerage account technically grow tax free (other than dividends)?

Offline bfwissel

  • Key Tower 947'
  • ****
  • Posts: 806
Re: Tax Reform
« Reply #396 on: December 06, 2017, 04:00:01 PM »
"Money deposited in a traditional IRA is treated differently from money in a Roth. That's because the money you deposit is pre-tax income; each dollar you deposit reduces your taxable income by that amount. When you take out the money, both the initial investment and the gains it earned are taxed at your income tax rate in the year you withdraw it."
https://www.investopedia.com/articles/personal-finance/021015/how-much-are-taxes-ira-withdrawal.asp

So, basically the initial investment and subsequent growth in a traditional IRA/401k is tax free until all of it is taxed at withdraw.  Just making sure we're all on the same page here.
"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #397 on: December 06, 2017, 04:00:52 PM »
Yeah, but those extra after-tax dollars to invest will grow to more taxable money upon withdrawal, and then after that withdrawal it will equal the same amount withdrawn tax-free from a Roth. (Assuming identical investments and the same tax rate at all points)

This goes back to the points I've made previously - if I'm retiring then why would I assume my tax bracket/rate will be the same (or higher?? LOL) than my working years.  It makes no sense.  Unless you are in the 10% bracket now or have some rental properties that you don't plan to sell when you retire, you're almost assured of being in a lower tax bracket when you retire because...spoiler...you won't be earning any income (or perhaps a little with part-time work).

Offline Brutus_buckeye

  • Burj Khalifa 2,722'
  • *****
  • Posts: 1831
Re: Tax Reform
« Reply #398 on: December 06, 2017, 04:03:45 PM »
^ yeah, but you could equally say that if we think tax rates will go up, it's disingenuous to those who opted for traditional IRAs who probably could have done better with Roths. And there were also proposals to more or less make all retirement accounts Roths in the recent tax bill so
 I would not put either one as more likely than the other. Basically holding both types is the best hedge against future tax policy change.

There is a difference between investing in traditional IRA's and gambling on tax rates staying stable, there is always that risk vs relying on the government's promise that as long as your money is in a Roth it will be tax fee and can be withdrawn tax free. It is more than just risk, it would be extremely disingenuous for that to happen.

Offline smith

  • One World Trade Center 1,776'
  • ****
  • Posts: 1213
Re: Tax Reform
« Reply #399 on: December 06, 2017, 04:08:29 PM »
Doesn't any brokerage account technically grow tax free (other than dividends)?

I'd say no.  For my brokerage account that isn't a retirement account, I owe taxes the year of when I sell a security (if I sell for a profit).  Sometimes I'll sell something for a loss at the end of a year to offset a gain. 

Offline bfwissel

  • Key Tower 947'
  • ****
  • Posts: 806
Re: Tax Reform
« Reply #400 on: December 06, 2017, 04:08:40 PM »
When you retire you're getting Social Security (taxable), if you're very lucky some pension money, money from your savings that was tax deferred, and taxable dividends/interest from other accounts.  Given a decent salary over your lifetime and some disciplined savings, it is hardly difficult to save enough to earn more in retirement.  I appreciate though that many people in this country aren't so lucky to be getting a decent salary or are just terrible savers.  It basically means that those that did save are going to have to protect some of their money in the future due to this tax "reform" which is going to put the US in a giant debt laden hole that will need to be addressed sooner or later with greatly increased tax rates.
"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #401 on: December 06, 2017, 04:19:02 PM »
If you make $100k/year (and increase for inflation) but are putting away 20+% for retirement, you're effectively living off $80k minus taxes. 

So it only costs $60k/year (roughly) for your annual expenses.

Just target a withdrawal rate that allows you to safely take out $60k/year (whatever combination that is of S.S., pension, IRAs, etc.).  This of course needs adjusted for inflation each year.  But at $60k...you're going to be paying less tax than you were at $100k unless Congress implements some severely harsh tax increases.

Offline bfwissel

  • Key Tower 947'
  • ****
  • Posts: 806
Re: Tax Reform
« Reply #402 on: December 06, 2017, 04:29:46 PM »
I guess it all goes down to future tax assumptions and individual situations/priorities.  Per this topic, I'm making a bold prediction that taxes have no where to go but up when you greatly increase deficits in a time of economic strength under the largely debunked theory of "Trickle Down Economics".  I can't imagine Americans in the future are going to go after the lower and middle income households when upper-middle and wealthy households have been getting so much from the government for so long.
"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett

Online Gramarye

  • Global Moderator
  • Jeddah Tower 3,281'
  • *****
  • Posts: 5363
Re: Tax Reform
« Reply #403 on: December 06, 2017, 06:18:46 PM »
Traditional 401(k) or IRA

Tax on contributions: Individual rate at time of withdrawal.
Tax on gains: Individual rate at at time of withdrawal.

Roth 401(k) or IRA

Tax on contributions: Individual rate at time of contribution.
Tax on gains: Zero.

Over a long period of compounding, that's what makes the Roth such an extraordinary investment vehicle, though of course if capital gains taxes are ever completely zeroed out, essentially any brokerage account will functionally become a Roth.  Of course, if capital gains taxes are increased in the future, which I consider a strong possibility, then having those gains completely sheltered from taxation via a Roth is a major retirement benefit.

When you retire you're getting Social Security (taxable), if you're very lucky some pension money, money from your savings that was tax deferred, and taxable dividends/interest from other accounts.  Given a decent salary over your lifetime and some disciplined savings, it is hardly difficult to save enough to earn more in retirement.  I appreciate though that many people in this country aren't so lucky to be getting a decent salary or are just terrible savers.

Most importantly, though, it's that they don't have a decent salary early in life, and tend to be terrible savers in younger years as well.  Time is more generous than Santa Claus to people who can and do start saving and investing responsibly in their twenties, and crueler than Scrooge to people who don't figure that out until their fifties.  This is one reason I'm so seriously agitated about the student loan crisis in this country.  It isn't about the debt service payments themselves, or about the lost opportunities to consume or buy houses.  It's about millions of young Americans losing the practical ability to start the compound returns clock in their twenties.

I did the math recently, in round figures.  I am now about 10 years out of law school.  I graduated with moderate student loan debt, also fortunately at rock bottom interest rates.  Therefore, I was able to max my Roth IRA contributions every year starting in 2007 and my 401(k) contributions starting in 2009 (prior to 2009, I was at a job with no 401(k) plan).  I lived with roommates when it wasn't strictly financially necessary, in order to free up enough money to put away that kind of money ASAP in my working years.  Ten years later, my net worth is now around 2/3 of my gross career earnings.  And that's with two kids now.  I almost never saved two thirds of my paychecks (there was one stretch of 3-4 months where I did that, the rest was aggressive but not insane).  And I'm only 35, turning 36 later this month.  (Though I already say if I could give up the money and go back to being 25, I'd take it in a heartbeat.  God has not seen fit to accept this trade. I can't even imagine how grumpy I'm going to be at 45, regardless of further compound returns between now and then.  But I digress.)

Quote
It basically means that those that did save are going to have to protect some of their money in the future due to this tax "reform" which is going to put the US in a giant debt laden hole that will need to be addressed sooner or later with greatly increased tax rates.

All too true.  One of the Republican Party's biggest blind spots is near-complete innumeracy on the "starve the beast" dream.  These are the people who say we could slash Social Security and Medicare by 60% or 75% without really affecting anyone's retirement ("just get rid of all the fraud") and Medicaid by 80% (or 100%) without affecting the actual health of poor people because either religious organizations would somehow step into the gap to care for every one, or the health problems of the poor are lifestyle and cultural maladies beyond medical treatment.

Online jmecklenborg

  • Jeddah Tower 3,281'
  • *****
  • Posts: 13407
Re: Tax Reform
« Reply #404 on: December 06, 2017, 06:34:42 PM »
It's not realistic to expect people to start contributing to a stock-based retirement account when they 1. don't understand it 2. don't make enough to contribute 3. if they do contribute, they cash it out when they change jobs. 

People understood pensions.  They had 9% of whatever taken out of their payroll checks, starting with the very first one.  So they were contributing at age 18 or 19, not waiting until 35 or 41.  They couldn't cash them out when they wanted to buy an RV.

It worked until Wall St. starting attacking them.  401k's won't work if we enter a Japan-type multi-decade stock market malaise. 

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #405 on: December 06, 2017, 07:33:04 PM »
You're not taxed on contributions to a tIRA or 401k.

Offline Jimmy Skinner

  • Burj Khalifa 2,722'
  • *****
  • Posts: 1820
Re: Tax Reform
« Reply #406 on: December 06, 2017, 07:50:00 PM »
I'm really bummed about the likely loss and/or severe reduction of the historic tax credit.  I was in the midst of deciding which historic building I'm going to rehab next, and was hoping to use the credit.  It's interesting, because one building I'm looking at is in a historic district and the other is just as old, but is not in a historic district.  Under the current law, I could still get a 10% tax credit on the one not in a historic district.  But it looks like the 10% credit is going to be eliminated for good.

I got the tax credit once before and it is such a good incentive.  If it is eliminated, I probably won't take on either of these buildings.  Taking-on one of these endangered buildings can take a lot of time, money and heartache, and the tax benefit was the thing that put me over the edge of deciding to do it again.

Offline GCrites80s

  • Jeddah Tower 3,281'
  • *****
  • Posts: 7869
  • 1492 or 4,192?
Re: Tax Reform
« Reply #407 on: December 06, 2017, 08:58:47 PM »
The R's hate that a bunch of Democrat urban dwellers are fixing up historic buildings. They want that money shifted to greenfield sprawl.

Online Cleburger

  • Jeddah Tower 3,281'
  • *****
  • Posts: 3926
Re: Tax Reform
« Reply #408 on: December 06, 2017, 09:38:41 PM »
The R's hate that a bunch of Democrat urban dwellers are fixing up historic buildings. They want that money shifted to greenfield sprawl.

Meanwhile, their teenage and departing-the-nest children all want to live in those historic buildings in urban centers.   We need them to get politically active.

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #409 on: December 07, 2017, 09:12:09 AM »
The R's hate that a bunch of Democrat urban dwellers are fixing up historic buildings. They want that money shifted to greenfield sprawl.

Meanwhile, their teenage and departing-the-nest children all want to live in those historic buildings in urban centers.   We need them to get politically active.

Can confirm.  Am said millennial living in a house built pre-1900.  We have several friends in the neighborhood (pre-1910 houses).

While none of us would meet the standard of "income-producing" to qualify for the credit, these homes were much better options for us than living out in the 'burbs in a house from 1980.

Offline DarkandStormy

  • One World Trade Center 1,776'
  • ****
  • Posts: 1247
Re: Tax Reform
« Reply #410 on: December 07, 2017, 02:14:16 PM »
From Robert Reich

Quote
Make no mistake. The oligarchs (Koch brothers, Mercers, Wilks, Waltons, Deasons, Schwabs, Neugebauers, Murdochs, Griffins, Ricketts, etc.) are now in charge of the U.S. government. The views of most Americans (75 percent of whom are against the tax cut, for example) no longer matter.

This was the oligarch’s deal with the devil (Trump) from the start: Get us a huge tax cut, use the resulting deficit to justify cutting Medicare and Social Security, and get rid of environmental and financial regulations. In return, we’ll finance you, we’ll back your allies in the GOP, and we’ll mount PR campaigns on your behalf that magnify your lies. Hell, we’ll even make you look like a populist.

Over half the money contributed in the 2016 came from just 158 families, along with the companies they own or control. More than 50 of these people are on the Forbes list of America’s richest billionaires. 64 of them made their fortunes in finance (hedge fund and private equity). 17 in energy, mostly oil and gas. 15 in real estate and construction (the Trumps, for example). 10 in technology.

These American oligarchs don’t have to worry about whether Social Security or Medicare will be there for them in their retirement because they’ve put away huge fortunes. They don’t worry about climate change because they don’t live in homes that might succumb to hurricanes or wildfires. They don't care about public schools because their families don't attend them. They don't care about public transportation because they don't use it. Truth to tell, they don't even care that much about America, because their personal and financial interests are global.

They are living in their own separate society, and they want people who will represent them, not the rest of us.

The Republican Party is their vehicle. Fox News is their voice. Trump is their champion.

Offline Brutus_buckeye

  • Burj Khalifa 2,722'
  • *****
  • Posts: 1831
Re: Tax Reform
« Reply #411 on: December 07, 2017, 02:49:49 PM »
^ Robert Reich is a clown and has a lot of lemmings who follow him.

That being said, it is the consensus opinion of the mainstream economists that the tax reform is a A-/B+ for corporations and currently sits about a C-/D+ for individuals.

That is not too unexpected as the focus has been on corporate tax reform from the beginning and both parties agreed that corporate tax reform was badly needed.


Offline freefourur

  • Kettering Tower 408'
  • **
  • Posts: 355
Re: Tax Reform
« Reply #412 on: December 07, 2017, 02:58:04 PM »
Just because corporate tax reform was needed doesn't mean this was a good bill. 

Offline Brutus_buckeye

  • Burj Khalifa 2,722'
  • *****
  • Posts: 1831
Re: Tax Reform
« Reply #413 on: December 07, 2017, 03:01:38 PM »
It is a C-/D+ bill for individuals so I think that part is obvious. They did do a decent job on corporate tax reform.

Offline freefourur

  • Kettering Tower 408'
  • **
  • Posts: 355
Re: Tax Reform
« Reply #414 on: December 07, 2017, 03:03:09 PM »
^ what was good about the corporate part?

Offline StapHanger

  • Jeddah Tower 3,281'
  • *****
  • Posts: 8455
Re: Tax Reform
« Reply #415 on: December 07, 2017, 03:13:30 PM »
^ Robert Reich is a clown and has a lot of lemmings who follow him.

That being said, it is the consensus opinion of the mainstream economists that the tax reform is a A-/B+ for corporations and currently sits about a C-/D+ for individuals.

That is not too unexpected as the focus has been on corporate tax reform from the beginning and both parties agreed that corporate tax reform was badly needed.



The purpose of the corporate tax reforms was economic stimulus, and it's the consensus opinion of the mainstream economists that the tax reform plan doesn't do much in that regard: http://www.igmchicago.org/surveys/tax-reform-2

The bill stinks.  Whatever value parts of it have is swamped by the overall ick. It's a boon for the donor class, but there's no consensus it does all that much else.

Offline Brutus_buckeye

  • Burj Khalifa 2,722'
  • *****
  • Posts: 1831
Re: Tax Reform
« Reply #416 on: December 07, 2017, 04:19:42 PM »
^ what was good about the corporate part?

the reduction of rates is what is good for them. In general, while not a home run on the corporate side, most mainstream economists feel the corporate part of the bill is a solid double.

these same economist describe the individual part of the bill as a long fly out.

Offline CBC

  • Global Moderator
  • Jeddah Tower 3,281'
  • *****
  • Posts: 3380
Re: Tax Reform
« Reply #417 on: December 08, 2017, 10:33:30 AM »
I just question how large of a stimulus of the economy this bill will create given that, a lot of the the stimulus is already baked into the current market values based on anticipation of the bill (AKA Trump Bump), and that many corps are already flush with cash but are not spending, except to do buybacks to drive up stock prices.

I am also troubled that the cuts they are taking on Research, etc credits that provide incentives to spend on things that add value down the road to the economy.

Pop quiz: Anybody know why utility and energy companies generally pay some of the highest tax rates?

Offline freefourur

  • Kettering Tower 408'
  • **
  • Posts: 355
Re: Tax Reform
« Reply #418 on: December 08, 2017, 10:36:14 AM »
^ what was good about the corporate part?

the reduction of rates is what is good for them. In general, while not a home run on the corporate side, most mainstream economists feel the corporate part of the bill is a solid double.

these same economist describe the individual part of the bill as a long fly out.

I haven't seen any economist give the corporate part of the deal good marks.  Besides, most corporations have already said that they won't be investing extra money into hiring.  So the benefit that the GOP is claiming is nonsense. 

Offline GCrites80s

  • Jeddah Tower 3,281'
  • *****
  • Posts: 7869
  • 1492 or 4,192?
Re: Tax Reform
« Reply #419 on: December 08, 2017, 10:44:31 AM »
Just think about the carry forward Amazon has from losing all that money for almost 20 years. And lots of other companies started losing money because of them and didn't have to pay taxes either.