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You can't fix stoopid...
Old 04-14-2014, 05:10 PM   #1
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You can't fix stoopid...

Amazing to me that someone would make such a big financial move without understanding the ramifications. It is scary that someone like this may be dispensing advice to people and it may be mispercieved as being from a credible source.

How a Roth IRA totally screwed up my taxes - Tax Watch - MarketWatch
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Old 04-14-2014, 05:14 PM   #2
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Sounds like he could use an advisor.
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Old 04-14-2014, 05:16 PM   #3
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ron white said it best.
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Old 04-14-2014, 05:25 PM   #4
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Lots of people want things easy. If it takes more than 4 minutes of reading to learn, too many young people are unwilling to do it.... and then they just take action and go back to playing Call of Duty 8 or whatever.

And I say that being a "young person"... it just amazes me how little people are willing to read and learn on their own. Makes me want to become a financial advisor.
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Old 04-14-2014, 05:37 PM   #5
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many times i feel like i am bringing fire to the indians.
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Old 04-14-2014, 05:48 PM   #6
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Well DUH....

I do remember when I first heard of a Roth IRA and not knowing what it was, though. I guess we sometimes forget how much we have all learned along the way.
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Old 04-14-2014, 05:49 PM   #7
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Near end of article:
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But the broader lesson for me was clear: Millennials live in a world that now requires financial planning acumen.
Let me tell you, it has always been that way; the world has not changed.
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Old 04-14-2014, 05:52 PM   #8
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Originally Posted by LOL! View Post
Near end of article:

Let me tell you, it has always been that way; the world has not changed.
Everything old is new again (as new generations discover it).
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Old 04-14-2014, 05:54 PM   #9
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As a millennial who’s also a journalist
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The problem was quickly diagnosed in a call to the parents.
Mommy!
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Old 04-14-2014, 06:13 PM   #10
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An idiot. But, if others learn the lesson, a useful idiot.
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Old 04-14-2014, 06:21 PM   #11
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Careless, yes. Stupid? Maybe. I reserve "stupid" to those who are not even contributing to 401k, IRA, etc.. Stupid are those who drives new Benz on lease when they can barely pay for their apartment rent, month to month. Stupid are those who are deep under credit card debt while living above their mean. Stupid are ....
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Old 04-14-2014, 06:44 PM   #12
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I think stupid is too strong a word. Yes, young people are ignorant of money matters and the subject of taxes is just one of many. With time, they will learn.

When I was young, I did not know much either, but I knew that I did not know. And I am still learning, as the laws keep changing. Good grief, one almost has to be retired to have time to keep up with all this cr*p.
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Old 04-14-2014, 06:51 PM   #13
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I would say this was bad judgement, or hastiness, but I wouldn't resort to calling him stupid.

However, if you want to see a real example of genuine stupidity, read what this guy did with his money:

A Couple Needs to Overcome Debt - WSJ.com

Now that is what I call STUPID! You can count the number of ridiculous mistakes he has already made, and he is only 37 years old. I can't think of another mistake he could make if he wanted to.
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Old 04-14-2014, 09:06 PM   #14
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IMO, this guy turned a no big deal questionably mistaken tax planning move into an article that is not so deadly dull that no one other than a Boglehead would read it.. The event he describes may even have been fabricated to give a framework for his article/story.

I should be so stupid!

Ha
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Old 04-15-2014, 08:19 AM   #15
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However, if you want to see a real example of genuine stupidity, read what this guy did with his money:

A Couple Needs to Overcome Debt - WSJ.com
Indeed. And then people wonder what happened when the house of cards falls.

Quote:
Today, he and his wife have about $20,000 in credit-card debt spread among six cards with an average interest rate of 17%. The remainder of their debt is from paying back taxes and daily living expenses.


Mr. Anthony likes nice things, whether it's good dishes, clothes or the timeshare for which he and his wife pay about $150 a month. The couple spends around $200 a month on dinners out, and about $1,000 on groceries, as Mr. Anthony's diet requires that he eat plenty of protein.
And therein lies his problem. "I want it now!" And at 17% the lenders are happy to give it to him. What a dolt.
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Old 04-15-2014, 10:53 AM   #16
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Regarding people not researching financial matters before executing them...

I have a feeling there are going to be a lot of my coworkers who are shocked when doing their taxes this year, or later when the IRS sends them a big fat tax bill.

A lot of us exercised ISO (incentive stock options) last year, at a pre-IPO company that has since IPO'd, but the lockup hasn't expired yet. That means nobody could sell before year's end, which subjects the ISO spread to AMT tax.

I knew that beforehand, and could roughly calculate my numbers and knew what I'd be facing on April 15 in added AMT tax.

I've talked to a lot of people who didn't do that research. Some just exercised their options blindly, and did it right before IPO, when the fair market value was higher, meaning their spread, and AMT tax owed, is going to be much higher. When I start talking about AMT tax, and how I chose when to exercise mine very carefully (after I was sure the company had a chance at IPO'ing, but before the FMV got too high), they look at me like deer in headlights.

I can only shake my head, walk away, and hope the AMT monster doesn't take too big a bite out of them. I expect a few folks to be in all-out panic mode when they realize what they owe. Even more so when they find out the implications of not filing an 83(b) election, so the taxes go up as their shares vest at higher and higher FMV.
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Old 04-15-2014, 11:22 AM   #17
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Originally Posted by LoneAspen View Post
Regarding people not researching financial matters before executing them...

I have a feeling there are going to be a lot of my coworkers who are shocked when doing their taxes this year, or later when the IRS sends them a big fat tax bill.

A lot of people are surprised at how hard the new taxes are hitting those with high income from exercising stock options. We didn't get hit with AMT, but the new higher tax rate combined with the elimination of deductions and the additional Medicare tax increased our taxable income significantly. We were about to sign with a contractor to get some landscaping done on our house, but the additional taxes we owed forced us to hold off on the expense. It sucked that money right out of the economy.
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Old 04-15-2014, 11:55 AM   #18
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A lot of people are surprised at how hard the new taxes are hitting those with high income from exercising stock options. We didn't get hit with AMT, but the new higher tax rate combined with the elimination of deductions and the additional Medicare tax increased our taxable income significantly. We were about to sign with a contractor to get some landscaping done on our house, but the additional taxes we owed forced us to hold off on the expense. It sucked that money right out of the economy.
I'm sure the feds will spend it much more wisely! Uncle Sam can afford to buy several more thousand-dollar toilet seats with the check I mailed them this year
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Old 04-15-2014, 12:19 PM   #19
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I read the credit article in WSJ last night.

My diet requires a lot (a LOT) of protein as well, but I get by on $650/month feeding my wife as well. Now, he's got a baby, but $1000/month means to me he's buying an awful lot of grass-fed Ribeye and not caring about when it's on sale. And I'm betting $200 on dinners out is an underestimate if he "likes nice things", especially in NYC.

The annuity and life insurance policies made me shudder as well. Just a lot of "financial train wreck" going on there at 37, and at a fairly advanced level. No savings? High credit card debt? THAT'S "average" at that age. Paying too much for Life Insurance? Having an annuity? That's graduate level!
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Old 04-15-2014, 12:55 PM   #20
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The tax code has become so complicated that I overlooked a major tax reduction opportunity for DD for last year - she caught it herself by doing her taxes in TT and answering every single question it asks. Turns out that low income taxpayers (for singles, under about $30K) get a tax *credit* for part of their Roth IRA contributions. I had never heard of that! She may go back and file an amended return for 2012 to capture the credit for last year as well. So no wonder the millennial author also had issues knowing what to do.
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