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Old 09-20-2017, 05:24 AM
 
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Quote:
Originally Posted by ohio_peasant View Post
My apologies - I misread the Obamacare table. The subsidy in question would be $800 per YEAR, not per month.



Of course. But wealth, invested soundly, generates income. My assertion is that intentionally forgoing this income is a greater cost, than the benefit of the subsidy.
Not wanting to take the discussion off course but I am and have been pondering that question for awhile now. If post retirement because of pensions, after tax savings and SS you aren't touching your tax sheltered accounts other than RMD's are the profits above your RMD rates pure profit or income not taxed? What is it?

At points this thread is attempting to offer narrow definitions of assets that might not meet reality. As has been noted the ACA is income based and not wealth based.

One of the flaws of the ACA is that for many the premiums are income determined but many need wealth to be able to actually use the insurance.

Last edited by TuborgP; 09-20-2017 at 05:36 AM..
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Old 09-20-2017, 05:28 AM
 
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all money that comes out of deferred tax retirement accounts is taxed . not just profit. it is money that was never taxed
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Old 09-20-2017, 05:31 AM
 
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Originally Posted by mathjak107 View Post
all money that comes out of deferred tax retirement accounts is taxed . not just profit. it is money that was never taxed
I am referring to the profit current and previous that doesn't come out and may never in that persons lifetime. If you remain 70/30 in retirement and only have required RMD's come out depending on longevity much of your profit will never come out. So when you pass was it ever income?
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Old 09-20-2017, 05:55 AM
 
Location: RVA
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Not if it is in tax deferred accounts which are what makes RMDs required. It becomes tax deferred earnings, not income until it is removed for actual use. Your net worth increases, but not your income. Similar to owning physical gold; as the value of the gold increases so does your net worth, but you would still starve until you sold it, making it income. Gold is unregulated so purchase and profitable sale of it, up to a certain level, are tax free. Once unused portions of tax deferred accounts pass on to heirs as inherited accounts, then the IRS levels RMDs on them immediately if they prefer to keep it tax deferred. Or taxes them all at once if they cash it in. The taxes become due, eventually.

Some people speculate on physical gold this way, as a way to pass wealth (and the appreciation or "earnings") to heirs, (or even to increase after tax income) tax and RMD free, as sales of gold are rarely reported as income. Unlike taxed equities, which in the 25% bracket, still have 15% on LTCGs, gold carries an instant 15 to 25% increase in net profit.
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Old 09-20-2017, 06:17 AM
 
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Quote:
Originally Posted by Perryinva View Post
Not if it is in tax deferred accounts which are what makes RMDs required. It becomes tax deferred earnings, not income until it is removed for actual use. Your net worth increases, but not your income. Similar to owning physical gold; as the value of the gold increases so does your net worth, but you would still starve until you sold it, making it income. Gold is unregulated so purchase and profitable sale of it, up to a certain level, are tax free. Once unused portions of tax deferred accounts pass on to heirs as inherited accounts, then the IRS levels RMDs on them immediately if they prefer to keep it tax deferred. Or taxes them all at once if they cash it in. The taxes become due, eventually.

Some people speculate on physical gold this way, as a way to pass wealth (and the appreciation or "earnings") to heirs, (or even to increase after tax income) tax and RMD free, as sales of gold are rarely reported as income. Unlike taxed equities, which in the 25% bracket, still have 15% on LTCGs, gold carries an instant 15 to 25% increase in net profit.
No it is not taxable income if not withdrawn but should you personally consider it income? This if I remember right is a question that might become personal to you in a few years. It is something I am now pondering.
We rarely in this forum discuss the fourth leg of retirement which can be the most important and that is your after tax portfolio. Or your taxable accounts which for some is there main stream of retirement income.

I mentioned in a thread one time that I thought a goal of a minimum six figures was desirable in your after tax account. I got jumped on and reminded most don't have that in their 401 etc. End of that conversation.

There are a good number of posters in the forum who have that leg for their retirement. If I take all the return on investments in tax sheltered accounts this year in put them in a money market account I have locked in those gains. Sure over time inflation would erode but isn't it still income? I mean what is our income this year spent or not spent , taxed or not taxed?

Remember people have muni bonds for a reason.

Last edited by TuborgP; 09-20-2017 at 06:32 AM..
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Old 09-20-2017, 06:19 AM
 
Location: RVA
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As to the OPs question, the law is the law. Follow it and take advantage of it is neither morally or ethically, wrong or questionable. It still cracks me up when the "workers" with middle income cry "we are paying for the millionaires to have subsidies, its not fair, they are profiting off our taxes". What a total load of horse $hit!!! Get off your high Socialist horse and drink some Real World Koolaid and learn the facts. Most of these workers pay near Nothing in taxes as part of the whole.

High-income Americans pay most income taxes, but enough to be 'fair'? | Pew Research Center

The $250k/yr income people, which account for 2.7% of returns filed pay 51.6% of all taxes. Even at $100k/yr and up, which account for 16% of all returns pay a whopping 79.4% of all taxes. So the cry baby 84% get to skate by paying only 20% of the tax burden. So the "millionaires" that saved and built their portfolio, and live on a $50k income are WAY more entitled to take advantage of the subsidies than the $25/yr people that saved nothing and have paid nothing in to the system. No one that lives on a $50k income is considered REAL wealthy. And the real wealthy have no time or care the least about subsidies. They are too busy earning money and paying more in taxes a year than most people earn.
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Old 09-20-2017, 06:36 AM
 
29,775 posts, read 34,863,854 times
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Quote:
Originally Posted by Perryinva View Post
As to the OPs question, the law is the law. Follow it and take advantage of it is neither morally or ethically, wrong or questionable. It still cracks me up when the "workers" with middle income cry "we are paying for the millionaires to have subsidies, its not fair, they are profiting off our taxes". What a total load of horse $hit!!! Get off your high Socialist horse and drink some Real World Koolaid and learn the facts. Most of these workers pay near Nothing in taxes as part of the whole.

High-income Americans pay most income taxes, but enough to be 'fair'? | Pew Research Center

The $250k/yr income people, which account for 2.7% of returns filed pay 51.6% of all taxes. Even at $100k/yr and up, which account for 16% of all returns pay a whopping 79.4% of all taxes. So the cry baby 84% get to skate by paying only 20% of the tax burden. So the "millionaires" that saved and built their portfolio, and live on a $50k income are WAY more entitled to take advantage of the subsidies than the $25/yr people that saved nothing and have paid nothing in to the system. No one that lives on a $50k income is considered REAL wealthy. And the real wealthy have no time or care the least about subsidies. They are too busy earning money and paying more in taxes a year than most people earn.
And there in lies the basis for resentment that can shape future tax and entitlement reform. Exactly what might be included for means testing. Approaching age 70 it is very relevant. You now there are those who would love to count gains in all accounts, taxable or not.
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Old 09-20-2017, 06:39 AM
 
Location: RVA
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@Tuborg: If you mean morally is it income, then the answer is still no. If the investment tanks in thise tax deferred accounts, can you subtract it as a loss against income? Of course not. You can harvest tax losses to put against taxable gains, but the key is TAXABLE gains which is income. The IRS uses the calendar year as an income averaging vehicle. But people don't live different means based on their income each year. They live on the cumulative income from the past and expected in the future. They use savings as the buffer to smooth out the income. Spend less than they take in, the buffer grows. Spend more, and there is no buffer and they live paycheck to paycheck. Realistically, tax averaging over a longer period of time makes more FAIR sense than any other. Do well in one year, but poorly the next few, then pay net taxes on that average over time. Always high income, always high taxes.

I get criticized for the same discussions all the time, one reason I am on here less and on early-retirement. Org more, where I am an almost ignorant small fish learning from normal people that are financial independent through various means. Many there live entirely on after tax earnings with multi million portfolios, typically earned by LWBTM, so they can retire in their 40s and early 50s. None are uneducated in a financial sense. They made that a priority. And that's the difference.

Building long term wealth in order to generate income vs passing to heirs is what is a source of resentment here more often. Peole that live check to check, for whatever reason, resent those that save and accumulate and then have the audacity to actually live on that money. Similar to the pension resentment we see here all the time. How dare you get something for nothing when I don't get it too!!! Life's not fair, never has been, never will be. If you don't like your way of life, then do something about it.Thank goodness we are not all low income people with zero chance of getting ahead due to our own intelligent and efforts, as it is in so many other countries.

Of course, I have to add the usual obvious to everyone except the high horsers, disclaimer that I know not everyone is physically, mentally, or socially able to take advantage of and get ahead like someone that is perfectly healthy, physically fit, mentally capable and came from a socially advantageous background that allowed them to get ahead, yada hada yada. My father has a 4th grade education and immigrated to the US at 16, speaking almost no english. I was raised from that background, so I know what it can take. He loves the US and loves where he is in life now at 79. Been there, seen that, bought the T-shirt.

Last edited by Perryinva; 09-20-2017 at 06:56 AM..
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Old 09-20-2017, 06:51 AM
 
29,775 posts, read 34,863,854 times
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Quote:
Originally Posted by Perryinva View Post
@Tuborg: If you mean morally is it income, then the answer is still no. If the investment tanks in thise tax deferred accounts, can you subtract it as a loss against income? Of course not. You can harvest tax losses to put against taxable gains, but the key is TAXABLE gains which is income. The IRS uses the calendar year as an income averaging vehicle. But people don't live different means based on their income each year. They live on the cumulative income from the past and expected in the future. They use savings as the buffer to smooth out the income. Spend less than they take in, the buffer grows. Spend more, and there is no buffer and they live paycheck to paycheck. Realistically, tax averaging over a longer period of time makes more FAIR sense than any other. Do well in one year, but poorly the next few, then pay net taxes on that average over time. Always high income, always high taxes.

I get criticized for the same discussions all the time, one reason I am on here less and on early-retirement. Org more, where I am an almost ignorant small fish learning from normal people that are financial independent through various means. Many there live entirely on after tax earnings with multi million portfolios, typically earned by LWBTM, so they can retire in their 40s and early 50s. None are uneducated in a financial sense. They made that a priority. And that's the difference.
Yes and no. I understand what you are saying in principle and would have fully agreed a year or so ago. However at this point spending can vary based on a lot of things. We are the children of having retired into a bear market followed by a raging bull with income streams that have now kicked in. There is a mindset getting there and another one that can develop years into. The Early Retirement forum participants tend to have travelled a common path. Others not as much so. I found myself a tad out of the norm.
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Old 09-20-2017, 06:54 AM
 
Location: -"`-._,-'"`-._, ☀ Sunny Florida ☀ ,-"`-._,-'"`-.
1,352 posts, read 731,339 times
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Just imagine how the 1% are "gaming" the system, and year after year, decade after decade. I don't see people as mad at that group. Those who are retired and with "limited" income may end up finding they need the millions stashed away just to pay for LTC while the 1% have little to nothing to worry about other than finding another way to shelter their income.
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