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Old 04-19-2012, 10:53 AM   #41
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I agree ... At least in part. My current household taxation is fairly low though due to the current tax code. If that changes, I will dramatically increase our Roth holdings to the max and lower the pre-tax withholdings to compensate.
Did you say that properly? You want to make Roth contributions when your taxes are low or you have maxed out other tax deductible accounts, which sounds like now for you. If your taxes go up, you should be moving more towards contributing to tax-deductible accounts.
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Old 04-25-2012, 05:49 PM   #42
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Originally Posted by Animorph View Post
Did you say that properly? You want to make Roth contributions when your taxes are low or you have maxed out other tax deductible accounts, which sounds like now for you. If your taxes go up, you should be moving more towards contributing to tax-deductible accounts.
On the contrary, I did say that correctly.

You see, one of the things that holds my income tax down is pre-tax investments (along with property taxes which are high in NJ, and mortgage interest, and the biggest is by far our child tax credit).

As an example: When the legislation was signed into law reducing SS by 2%, I immediately increased my 401k by that amount so that I wouldn't be responsible for paying taxes on the extra 2% of my pay, which would have gone into SS anyway. I didn't "miss it" before, and it was fundamentally going toward a "retirement fund", which is effectively what SS is.

Likewise, I have estimated that my deductions/exemptions will be changing in about 7-8 years, when I will only be able to utilize the standard deduction which will undoubtedly rise by then as it usually does. At that point, I will lower my 401k to company match (at a minimum), and increase my Roth savings, since I would be paying tax on the larger income anyway.

I however was mispoken regarding what I said about "14% of my income is taxed". In fact my total tax for my income (SS, medicare, fed, state) is slightly less than 14% of my gross income.

PS: Sorry for the late reply.

And as always, remember YMMV.
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Old 04-25-2012, 06:12 PM   #43
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As an perfect example, when I increased my withholdings toward my 401k from 7% up to 10%, I found that the percentage which was taken out for taxes went from 26.3%, down to 24%. DOH!

That is due to a combination of W-4 withholdings (13 currently) to keep more money coming into the house throughout the year, but still getting back some money when taxes are filed in April. And for anyone wondering, according to the instructions to fill out the W-4 for my income and number of dependents in the household, 13 is a valid number on that form.

Again YMMV, since not everyone's circumstances are identical to mine.

As usual, I will examine our tax situation at a few points throughout the year to ensure that we are not underpaying our taxes.
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Old 04-25-2012, 10:09 PM   #44
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$25? Wait until around retirement, when you can watch it jump by your entire yearly budget in a week or less!
Very true...my 401k has made more so far this year than I have in salary....and I don't work for minimum wage.
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Old 04-27-2012, 03:37 AM   #45
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I am a bit late on this thread but agree with below. Congrats.
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The important thing is that you did it. Good job!
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