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-   -   2014: taxes vs spending vs saving (http://www.early-retirement.org/forums/f28/2014-taxes-vs-spending-vs-saving-76840.html)

eyeonFI 04-14-2015 09:25 AM

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. :)

Fermion 04-14-2015 09:29 AM

Similar figures. Ours, rounded to nearest 5%:

35% taxes (fed, SS, medicare, state, ACA extras)
20% of gross spent
45% saved

FIREd 04-14-2015 09:49 AM

We pay about twice as much in income-related taxes as what we spend:

41% income and FICA taxes
20% spent
39% saved

GrayHare 04-14-2015 10:48 AM

roughly 20% tax, 50% spent, 30% saved

doneat54 04-14-2015 05:17 PM

22.5% income and FICA taxes
44.5% spent
33% saved

PhrugalPhan 04-14-2015 06:01 PM

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)

marko 04-15-2015 05:28 AM

...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.

scrabbler1 04-15-2015 06:50 AM

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).

ChicagoGal 04-15-2015 07:26 AM

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!

Independent 04-15-2015 08:50 AM

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".)

audreyh1 04-15-2015 10:04 AM

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.

Meadbh 04-15-2015 10:33 AM

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.

RetireAge50 04-15-2015 10:47 AM

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.

W2R 04-15-2015 11:39 AM

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.

SumDay 04-15-2015 01:03 PM

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. :)

Meadbh 04-15-2015 01:10 PM

Quote:

Originally Posted by W2R (Post 1581981)
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.

So you withdrew dividends and income, and invested the excess in cash. I call that reallocation.

LOL! 04-15-2015 01:26 PM

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.

Fermion 04-15-2015 01:55 PM

Quote:

Originally Posted by LOL! (Post 1582007)
I'm thinking people may be using adjusted gross income or taxable income instead of their true gross income in the their calculations.

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.

Alan 04-15-2015 02:01 PM

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%

audreyh1 04-15-2015 02:32 PM

Quote:

Originally Posted by LOL! (Post 1582007)
I'm thinking people may be using adjusted gross income or taxable income instead of their true gross income in the their calculations.

I did not use my income. I used my actual spending versus federal taxes paid for 2014.


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