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2014: taxes vs spending vs saving
04-14-2015, 09:25 AM
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#1
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Recycles dryer sheets
Join Date: Mar 2005
Posts: 105
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2014: taxes vs spending vs saving
Just finished my taxes (and feeling slightly sick about how much I have to pay), I wondered if I am giving more to Uncle Sam than I am spending. So I figured out that my 2014 gross income was distributed as follows:
28.6% income-related taxes (Fed/State/FICA/Med)
31.2% spent
40.2% saved
If I switch my real estate taxes from the spending category to the tax category, I paid more in taxes than I spent last year.
Yes, it's great to have such a high gross that I owe so much in taxes, but nonetheless I am really looking forward to next year when that tax % should fall way down (I plan to quit working in August). And the next year, when it should approach 0 as I live off my after-tax stash.
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04-14-2015, 09:29 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 6,023
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Similar figures. Ours, rounded to nearest 5%:
35% taxes (fed, SS, medicare, state, ACA extras)
20% of gross spent
45% saved
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04-14-2015, 09:49 AM
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#3
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Moderator Emeritus
Join Date: May 2007
Posts: 12,901
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We pay about twice as much in income-related taxes as what we spend:
41% income and FICA taxes
20% spent
39% saved
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04-14-2015, 10:48 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,900
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roughly 20% tax, 50% spent, 30% saved
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04-14-2015, 05:17 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Posts: 1,018
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22.5% income and FICA taxes
44.5% spent
33% saved
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04-14-2015, 06:01 PM
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#6
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Recycles dryer sheets
Join Date: Jul 2014
Location: DC 'burbs
Posts: 134
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I decided to check, and came up with the following (single guy here & no mortgage)
24% taxes (fed, SS, medicare, state)
25% of gross spent
51% saved (457 plan, IRA, brokerage, & pension contribution)
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04-15-2015, 05:28 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,410
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...and no one's figured in the local gas, meals, excise, sales taxes etc.
One time, for one day, I tallied all those little incidental $.60 taxes on meals, sales taxes etc and, while I forget the actual number, it was something like $9 a day or about $3000 a year.
Around here, I get whacked $.07 for a dollar coffee at McDonalds.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
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04-15-2015, 06:50 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,695
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Back in my working days, there were some years I paid more in taxes (federal income, state income, local property, and FICA) than I spent on other things. I excluded large, lump-sum paydowns of debt such as paying off the mortgage.
In years where I had large spending such as buying a car, the spending always exceeded taxes. In other years, starting in 1992 after I refinanced the mortgage, the spending and taxes were about the same. Later in the 1990s, my investment income began to rise thanks to the booming stock market. That, along with paying off the mortgage in 1998, sent my tax bill up a lot while reducing my spending below my taxes.
The taxes dropped in 2002, my first year of working part-time, along with the beginning of the Bush tax cuts. Taxes spiked in 2008 when I cashed out my company stock after ERing then dropped a lot but are now only 1/3 of what I spend now that I am ERed. The last time my taxes were this low was in 1986, the year before that year's big Tax Reform Act became effective (and I had a low income in my first year working full-time; also no property taxes because I renting).
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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04-15-2015, 07:26 AM
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#9
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Recycles dryer sheets
Join Date: Apr 2014
Posts: 159
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Interesting to calculate. For me:
23% taxes (income-related)
30% saved
47% spent (18% mortgage pmt, 28% all else including property taxes)
Really looking forward to downsizing and dumping that mortgage payment!
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04-15-2015, 08:50 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Back when I was working, I'd do this calculation every year. Sometimes it was 1/3, 1/3, 1/3.
Then my oldest started college.
(However, I always included charitable contributions in the "taxes and charity" bucket, rather than the "spending".)
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04-15-2015, 10:04 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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We only pay federal income taxes and property taxes. The latter plus sales taxes I count as "spending".
We're retired, so no savings, and no FICA taxes either.
For 2014 it was 40% Federal income taxes and 60% other spending.
Any charitable contributions as well as gifts to family are counted as part of that "other" spending.
__________________
Retired since summer 1999.
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04-15-2015, 10:33 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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I am retired without a pension, so I do not have "savings" as such. If I have money left over from withdrawals, I reallocate it. But I saved it previously.
In 2014 the breakdown was
Taxes: 18%
Spending: 82%, including debt repayment
In 2015 the breakdown will be more like
Taxes: 5-10%
Spending: 90-95%
In 2016 the percentage of taxes will increase again as I draw down on some tax sheltered savings while in a low tax bracket.
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04-15-2015, 10:47 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,660
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Ours has been about the same the last few years:
Taxes: 21%
Savings: 20%
Spending: 59%
Taxes is about 18% Federal 3% State
Spending includes mortgage repayment, college tuition, and charitable.
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04-15-2015, 11:39 AM
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#14
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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I'm retired. The percentages of my AGI spent in these three categories for 2014 were:
52%: Spending, other than state/federal income tax. This does not include amortization of replacement expenses - - it just includes what I actually spent.
11%: Income tax, both state and federal. My income tax was intentionally a higher percentage than in prior years of retirement, for strategic purposes.
37%: Savings. What I am calling "savings", will simply apply to the cash purchase price of my dream house if/when I find it, and/or other big purchases and big replacements in the future. Being retired, "savings" is hard to define so I defined it as the part of my 2014 AGI that I didn't actually spend in 2014.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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04-15-2015, 01:03 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Aug 2012
Posts: 1,862
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Good exercise. I love benchmarking.
25% taxes (includes state & property)
23% saved
52% spent
We're debt free and kid free, so I know we spend too much. But there's no one here to stop us, so we keep on.
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04-15-2015, 01:10 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
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Quote:
Originally Posted by W2R
I'm retired.
37%: Savings. What I am calling "savings", will simply apply to the cash purchase price of my dream house if/when I find it, and/or other big purchases and big replacements in the future. Being retired, "savings" is hard to define so I defined it as the part of my 2014 AGI that I didn't actually spend in 2014.
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So you withdrew dividends and income, and invested the excess in cash. I call that reallocation.
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04-15-2015, 01:26 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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If one counts taxable severance pay, we had two full-time jobs in 2014 and had more income than in 2013. If one counts all our income including all earned wages, 401(k) matches, and taxable dividends (no net cap gains in 2014) we paid:
06.4% in Federal income tax
12.5% in Federal, State, SS, Medicare taxes
15.6% in Federal,State, SS, Medicare, Property taxes
I'm thinking people may be using adjusted gross income or taxable income instead of their true gross income in the their calculations. I took a deduction for sales taxes of about $4,000, too on Schedule A since we do not pay much in the way of state income tax, so I did not deduct state income tax.
If I use TurboTax and add $100 of interest income, then our taxes go up by $33, so we are in the 33% marginal income tax bracket.
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04-15-2015, 01:55 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 6,023
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Quote:
Originally Posted by LOL!
I'm thinking people may be using adjusted gross income or taxable income instead of their true gross income in the their calculations.
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Just our effective tax on federal alone, not counting medicare or SS was 22%. Real estate and state sales taxes bump it up even more.
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04-15-2015, 02:01 PM
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#19
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,124
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I paid taxes on an IRA to ROTH conversion so I just re-ran my taxes and deleted that 1099-R. So using all income as being pensions + dividends + interest + cap gains distributions + cap gains from sale of shares, the breakdown from that true gross income was:
Taxes 8.3% (I have no State, FICA or Medicare taxes).
Spending 91.7%
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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04-15-2015, 02:32 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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Quote:
Originally Posted by LOL!
I'm thinking people may be using adjusted gross income or taxable income instead of their true gross income in the their calculations.
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I did not use my income. I used my actual spending versus federal taxes paid for 2014.
__________________
Retired since summer 1999.
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