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Old 05-03-2011, 11:09 PM   #21
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Ok I'll bite on this one. I'm not saying what we exactly what our income was, however in LOL example he was calculating based on 2 adults, 2 kids raising the deductible. Additionally if you make the $200k on one salary there will only be one deduction for the 401k not 2.

Our effective federal tax rate this year was 22.7%, our Ca. state tax was another 7.5%. We have to pay AMT every year, we have tax credits we can not use every year. We are not talking about earning $500k, just simply what happens when you have no kids, no mortgage to deduct. We have a rental property which we make a loss on but can not deduct because our income exceeds $150k. It's very easy to be paying much more than 10% on $200k. We use an accountant so we know that everything we do is legal and there are no additional deductions to be had.
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Old 05-03-2011, 11:16 PM   #22
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Originally Posted by 79protons View Post
Ok, yes I never saw that post and did not reply to it then. I do find it curious that it was not deleted since it questioned the validity of my claim of paying 26% tax on 200K with the word "unbelievable", which would seem to be a personal attack on my statement that that is what we paid. Perhaps when you reach 4000 posts you are allowed some flexibility in attacking others that is not afforded to new posters.
That Ignore Poster feature sure is handy...

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Old 05-03-2011, 11:21 PM   #23
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Originally Posted by DangerMouse View Post
Ok I'll bite on this one. I'm not saying what we exactly what our income was, however in LOL example he was calculating based on 2 adults, 2 kids raising the deductible. Additionally if you make the $200k on one salary there will only be one deduction for the 401k not 2.

Our effective federal tax rate this year was 22.7%, our Ca. state tax was another 7.5%. We have to pay AMT every year, we have tax credits we can not use every year. We are not talking about earning $500k, just simply what happens when you have no kids, no mortgage to deduct. We have a rental property which we make a loss on but can not deduct because our income exceeds $150k. It's very easy to be paying much more than 10% on $200k. We use an accountant so we know that everything we do is legal and there are no additional deductions to be had.
I just looked at ours on a single salary > 200k (but less than 300k) with one kid and it was 18% for the feds. No state as we live in WA. Done with Turbo Tax.

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Old 05-03-2011, 11:40 PM   #24
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Originally Posted by 79protons View Post
Ok, yes I never saw that post and did not reply to it then. I do find it curious that it was not deleted since it questioned the validity of my claim of paying 26% tax on 200K with the word "unbelievable", which would seem to be a personal attack on my statement that that is what we paid. Perhaps when you reach 4000 posts you are allowed some flexibility in attacking others that is not afforded to new posters.
Well, um, you're welcome? Oh, wait, you didn't say thank you.

Were you born with that chip on your shoulder, Proton? I think people here have been giving you suggestions in all good faith.
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Old 05-03-2011, 11:50 PM   #25
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I think after I look for that thread I will drop out of this conversation and this website. The censorship here seems really bad. (this will probably get censored too).
Well, the missing post has been found (for you). Now it's your turn to follow through.
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Old 05-04-2011, 12:31 AM   #26
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For reference: our effective Federal tax rate was 24.65% in 2010 according to Turbotax. Income in the mid 6-figure range, married, no kids. DW was the only one who could contribute to a retirement account (401K). Very few deductions: interests on a small mortgage, low property taxes, low state income taxes and charitable contributions. Deductions totaled less than $30K. The AMT takes away about half of these deductions' tax savings.

According to various tax calculators, a couple making $200K (single salary) who does not contribute to retirement accounts and takes the standard deduction should pay an effective Federal tax rate below 20%.
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Old 05-04-2011, 12:47 AM   #27
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Really, one anonymous guy on a message board shows up claiming to be getting a $100K COLA'd pension and that is enough to assume his claimed situation applies to public workers generally? I don't doubt some folks manage to get that, but I don't think you can use outlier examples to argue for broad based changes in 401(k) rules.

And to the WSJ article, I have a number of prison guards in my family. Any time you want to spend a week on the job with them and see how much better off they are then Harvard grads let me know and I can have it arranged. (And no, none of them are looking to get $100K pensions . . . more like 50% of salary, not fully COLAd)
How many of your family members are California Prison guards?

California Prison guards get the same type of pensions that cops and firefighter (i.e. public safety). While there are many different variations of benefits that I've looked at in CalPERS, the most common is 3%*years of service with full retirement after 30 years regardless of age. In many cases you are allowed to include OT, vacation, and unused sick days for your final year(s) salary. I see no reason for Senin to lie about his pension. 100K pension in states like IL, NY, CA, NJ are far from unusual.
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Old 05-04-2011, 06:18 AM   #28
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401K limit needs to be immediately adjusted up to 30K a year. Then I will quit having my pension envy.
Heck, I felt the same way when the IRA limit was at $2k, from 1982 (when I/DW started our respective IRA's) and kept at that level through 2001, a period of 20 years, which is a bit more than a familial generation...
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Some data
Old 05-04-2011, 06:19 AM   #29
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Some data

The IRS limits on retirement accounts from 1996 to 2011 are in the table at:
Maximum Benefits and Contributions Limits for 1996 - 2011

Prior to that the IRS limits for 401Ks were:
1995 $ 9,240
1994 $ 9,240
1993 $ 8,994
1992 $ 8,728
1991 $ 8,475
1990 $ 7,979
1989 $ 7,627
1988 $ 7,313
1987 $ 7,000

I'm not sure about non-FERs but, for FERs, the percentage limits ended in 2006 so all people could defer the entire IRS limit. The percent limits (1987-2005) were:


If there were no limits the taxman would have to wait for too many dollars.
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Old 05-04-2011, 06:46 AM   #30
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I really would like to know how to have a wage income of 200K and only pay 20K in taxes, being married with no kids, unless you are talking about making a 100K charity donation or something.
Maybe a bigger question is why a single individual with no dependents making $200K should expect to pay only 10% of his income in taxes?
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Old 05-04-2011, 06:53 AM   #31
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Originally Posted by clifp View Post
How many of your family members are California Prison guards?

California Prison guards get the same type of pensions that cops and firefighter (i.e. public safety). While there are many different variations of benefits that I've looked at in CalPERS, the most common is 3%*years of service with full retirement after 30 years regardless of age. In many cases you are allowed to include OT, vacation, and unused sick days for your final year(s) salary. I see no reason for Senin to lie about his pension. 100K pension in states like IL, NY, CA, NJ are far from unusual.
None in California, several in New York.

And I never said Senin was a liar. But I still wouldn't use the claim of a single anonymous member of an internet forum about his very specific situation to make very broad assumptions about the population as a whole. I don't even think you can use one group of workers, in one field, in one state (say California prison guards) to do that either.

This is the Economist's take, which seems to reflect my thoughts above . . .
Quote:
. . . in California, over 9,000 such pensioners are getting more than $100,000 a year. . . . To be fair, fat-cat pensions in the public sector are far from typical. According to Alicia Munnell of the Centre for Retirement Research in Boston, the mean public-sector pension is just $20,000 a year
So yes, some do, but the vast majority do not. (and remember, the fat cat pensions inflate the mean. The median is lower.)

Oh, and Individual 401(k)'s do allow contributions of up to $54,500. I'm sure some affluent married couples are using two to sock away $100K per year. So maybe I should claim that it's 'far from unusual' for fat-cat private sector workers to shelter $100K per year tax free for retirement in 401(k)s whereas the poor public sector worker gets a miserly pension of less than $20K.

See how this works?
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Old 05-04-2011, 10:01 AM   #32
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I believe that public sector employees can contribute to 403(b) plans with the same limits as company provided 401(k) plans.

I'm no fan of taxes, but I don't think that huge amounts of tax deferred investment options are necessarily the best way to save. Tax efficient savings in non-tax deferred accounts provides some substantial flexibility.

Also, I think that someone mentioned saving FICA taxes with 401(k)s. All 401(k) contributions are fully subject to FICA tax up to the cap for the SS portion and all contributions are subject to medicare without limit - you only defer the income portion of the tax.
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Old 05-04-2011, 10:55 AM   #33
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Oh, and Individual 401(k)'s do allow contributions of up to $54,500. I'm sure some affluent married couples are using two to sock away $100K per year. So maybe I should claim that it's 'far from unusual' for fat-cat private sector workers to shelter $100K per year tax free for retirement in 401(k)s whereas the poor public sector worker gets a miserly pension of less than $20K.

See how this works?
Sigh. I wish. That only works for the self employed. For those of us with employers (in my case a hospital) we are restricted by the HCE rules 401(k) - Wikipedia, the free encyclopedia.

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Old 05-04-2011, 11:50 AM   #34
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Who gets $100K COLA'd pensions?
Not unheard of for public safety employees where spiking is permitted. Not the norm, but not as rare as I wish it was.

As for the 401K/403B limits, I think they should be higher -- especially for those without a DB pension plan.
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Old 05-04-2011, 12:09 PM   #35
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I contribute the maximum $16,500 each year to my 401k and would love to be able to contribute more. However, I bet there is a very small percentage of americans who contribute up to the max each year. I am guessing less than 5%. So it would just be viewed as another "perk for the rich". Plus, what is the win for the government? You just shield additional income from taxation.
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Old 05-04-2011, 12:15 PM   #36
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Proposals for a higher 401(k) limit will conflict with current efforts to reduce loopholes/leakage/exemptions, simplify the tax code, and lower rates.

I'd rather have less "targeted government help" in exchange for some lower tax rates overall. Then we're helping folks who can't contribute up to the present limit of $16.5K per year and reducing government interference.
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Old 05-04-2011, 12:20 PM   #37
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I contribute the maximum $16,500 each year to my 401k and would love to be able to contribute more. However, I bet there is a very small percentage of americans who contribute up to the max each year. I am guessing less than 5%. So it would just be viewed as another "perk for the rich". Plus, what is the win for the government? You just shield additional income from taxation.

+1 Keep it as is and keep taxes the same for the next 20 years
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Old 05-04-2011, 01:13 PM   #38
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Sure, raise them. As a public employee, I can (and do!) contribute to a 401k AND a 457 plan to the maximum, which equals $33000 a year that comes off my w-2 income. If I were over 50 and could do catch up contributions, then I could put a total of $44k into my 401k+457. On top of that, between my employer and I, my DB pension contributions are around $11-12k a year. So currently I am deferring about $45,000 a year from income tax. Compare this to a privately employed person who gets less than half this level of tax deferral. Not sure why the disparity exists between public and private employees.
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Old 05-04-2011, 01:56 PM   #39
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I don't think it would be right to increase 401K limits because the private sector employees get social security while the public employees don't (I think). I don't think you need such a large 401K balance if you are going to have a nice cost of living adjusted social security check waiting for you in retirement. Wouldn't this be similar to the pension that the public employees get? Besides, if more retirement money is allowed to be sheltered by 401K contributions then where will the tax money come to bail out the public pension funds?
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Old 05-04-2011, 01:59 PM   #40
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I contribute the maximum $16,500 each year to my 401k and would love to be able to contribute more. However, I bet there is a very small percentage of americans who contribute up to the max each year. I am guessing less than 5%. So it would just be viewed as another "perk for the rich". Plus, what is the win for the government? You just shield additional income from taxation.
I would agree that it would just be a perk for the rich. The average person would have to contribute 30% of their pay to max out the 401K at it's current limit. Not many can put that high of a percentage towards retirement therefore it would be favoring the rich or at least the "richer". I am currently contributing 33% and still not reaching the limit.
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