Ramping up 401k contributions to 15k

[Nords]

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Originally Posted by Martha The problem is that it is a bit demoralizing getting $0 paychecks.

I guess you could always deposit them and see what the bank will do with them...

[Martha]

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Originally Posted by Nords I guess you could always deposit them and see what the bank will do with them...

The weird thing is that I actually do get a check for $0. I think it is so that they can generate a paystub with all the withholdings.

[saluki9]

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Originally Posted by Martha The weird thing is that I actually do get a check for $0. I think it is so that they can generate a paystub with all the withholdings.

It is a little hard to see just the stub. I always devote my first couple checks every year 100% to my 401(k) (after medical, FSA, and SS of course) which leaves me with a couple checkless stubs

To counterbalance the emptyness I just leave some of my bonus in from December to make things even out.

[REWahoo]

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Originally Posted by saluki9 It is a little hard to see just the stub.

DW tells me the exact same thing.

[Nords]

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Originally Posted by Martha The weird thing is that I actually do get a check for $0.

Well, maybe you could frame it and display it in the client conference room...

[LOL!]

I have to report that DW would not go for it. Most likely because of the demoralizing effect mentioned above.

I also received a $0 paycheck in 2005. The payroll folks missed a decimal place when they changed at my request my tax withholding. It was quite amusing to me. I will keep that paycheck/stub for as long as I live.

[SteveR]

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Originally Posted by LOL! I have to report that DW would not go for it.* Most likely because of the demoralizing effect mentioned above. I also received a $0 paycheck in 2005.* The payroll folks missed a decimal place when they changed at my request my tax withholding.* It was quite amusing to me.* I will keep that paycheck/stub for as long as I live.

My DW would smack me for even thinking about this one.
She works very hard with long hours and under a huge amount of stress. No matter how I sugar-coat it, a paycheck of "0" would not be a good thing. She is OK with 23% going into her 401(k) but she also wants to see the fruits of her labors in more or less "real time".

Maybe next year. 8)

[Outtahere]

I almost ended up with a 0 paycheck last week, the girl doing the payroll forgot to take off the extra contribution I made with the last paycheck and they deducted it again. Thankfully I don't live paycheck to paycheck.

[azanon]

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Have people increased their contribution rate for 2006?

Not quite.* 15% of gross of what i my family brings in is still is a tad less than the legal maximums for my overall IRA options (TSP at work, plus 2 roths).* *

I am very suspicious of the government allowing us to save so much money today.* Its as if maybe they plan on taxing wealth someday.

[justin]

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Originally Posted by azanon I am very suspicious of the government allowing us to save so much money today. Its as if maybe they plan on taxing wealth someday.

The state of Florida already does. I believe it is called the Intangible Personal Property Tax, assessed on stocks, bonds, mutual funds, etc held in taxable accounts. It was .05% of wealth, and had a pretty generous exemption for the first quarter or half million, depending on marital status.

[73ss454]

Justin,

That tax was 1% and was just reduced to 1/2% January 1st.

[justin]

The webpages I'm getting from google say it is currently $.50 per thousand dollars in assets, or 0.05%. Dunno for sure though, just going by what the internet tells me!

[darelian]

Nords:

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Originally Posted by Nords If all of her Reserve pay goes to the TSP before it becomes "taxable income", then is there still a deduction for FICA/Medicare?* And if there is a deduction for that, is there any way that we mere mortals can calculate the percentage we should select?

I believe only medical premiums and flexible spending account contributions are exempt from FICA/Medicare.* At least, that is what I've seen in my pay stubs.* 401K contributions are only exempt from income tax, not FICA/Medicare.

[FlowGirl]

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Originally Posted by Nords Has anyone figured out the financial answer?* I jacked spouse's TSP contribution up to 100% and I'm eagerly awaiting contact from our servicing finance office (I know, oxymoronic).* Spouse has no debts or allotments.* The only deductions from her Reserve pay are FICA/Medicare, federal income tax witholding, and state income tax witholding.* If all of her Reserve pay goes to the TSP before it becomes "taxable income", then is there still a deduction for FICA/Medicare?* And if there is a deduction for that, is there any way that we mere mortals can calculate the percentage we should select?

No idea, but I can't wait to see the answer to this one. I wonder how long it will take them to get back to you?

On a similar note - since finding out that the husband will spend part of the second half of 2006 back in a combat zone, we decided to make his $15K TSP contribution all within the first 6 months to make sure it comes out of taxable pay. The second half of the year we will drop TSP contribution to zero which has the additional advantage of freeing up cash flow to throw into the combat tax savings account where it will earn 10% interest. Since you can only contribute the amount of your pay minus deductions (up to $10K total), making his yearly TSP contributions before he deploys allows us to put more money into the 10% account sooner. Once he gets back we'll start up TSP contributions again.

Any potential problems that you can see with this Nords?

[Nords]

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Originally Posted by FlowGirl Any potential problems that you can see with this Nords?

No, looks excellent, especially the 10% savings account that not too many seem to know about.

You're maxing out the IRAs, too, right?

If your taxable income is low enough you might be able to do a partial IRA conversion to a Roth within the 15%. But that's tweaking things pretty hard and is probably not worth the effort.

I wonder what other tax deductions exist in the combat zone. I know that sailors try to execute re-enlistments for max bonus pay while in the combat zone since the bonus is all non-taxble. However I don't know of any equivalent USMC bonus money. Of course he'll have many tax-deductible expenses of maintaining his uniforms & rank.

You could spend the tax-deductible money for a copy of TurboTax and cruise through the combat-zone deductions. They have a pretty complete list that's already culled from the IRS regulations. Other than that, subscribe to MOAA & Military.com e-mails and you should learn about anything new as soon as it happens.

[bamboogrrrl]

Don't confuse this with whining, but threads like this inspire a little guilt in me ( a good thing?).* DH and I have always been good on defense, but not so great on offense, to refer to the "Millionaire Next Door."* We've been pretty good at LBOM, but not so great at maximizing income.* Several years ago, we managed almost two years of socking away the max (think small mortgage, no outside expensive interests) into my 403(b), but that was probably 30% or more of income and living like church mice.

One larger house later, and money spent regularly on physical well-being...well, it now seems impossible to max out my contributions.* Between what my employer kicks into my 403(b), what I add, and dh's Roth IRA, we're currently saving about 20%* and THAT seems hard.* In the last six years, we've tripled our retirement savings (from $33k to $115K), but it still seems so paltry.

We live in upstate NY in a spot where we make about half of the salary average of our peers (I work in higher ed. and dh is self-employed).* I try to stay the course, but it's hard NOT to get discouraged when I hear what brillant savers you are...*

Okay, pity party over - I'll shut up and attempt to learn from you masters!

[Andre1969]

Heck, I'd say that even saving 20% of your income is still damn good. Especially compared to what the majority of the country probably socks away.

[maddythebeagle]

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One larger house later, and money spent regularly on physical well-being...well, it now seems impossible to max out my contributions.* Between what my employer kicks into my 403(b), what I add, and dh's Roth IRA, we're currently saving about 20%* and THAT seems hard.* In the last six years, we've tripled our retirement savings (from $33k to $115K), but it still seems so paltry.

I think this is pretty common and I wouldnt get discouraged. I find that I periodically have to look at my expenses and make decisions. There is a lot of consumerism out there to pull at your money and being middle class makes us have to make decisions on what is important to us. A 100k nestegg is pretty good and that money will compound and work for you.

[FlowGirl]

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Originally Posted by Nords No, looks excellent, especially the 10% savings account that not too many seem to know about.

Apparently few "over there" know much about it either - last time my husband had a hard time getting someone to accept his checks.* A nice (but really minor) additional bonus to this program is that you can double dip on the interest for a few months since they take forever to cash the checks, but credit you the interest from the day they give you the receipt.* Although maybe they're streamlined things since 2004.

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You're maxing out the IRAs, too, right?

Yes.* I wasn't sure about 2006 with the new higher limits on TSP, but it looks like we'll have no problem stuffing the IRA accounts before April 2007.

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If your taxable income is low enough you might be able to do a partial IRA conversion to a Roth within the 15%.* But that's tweaking things pretty hard and is probably not worth the effort.

Great idea!* That may work out ideally for us since we have a few thousand that we put in a trad IRA a few years ago to lower our AGI enough to qual for the saver's tax credit.* It would be great to convert that to Roth and it looks like 2006 will be the year to do it.

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I wonder what other tax deductions exist in the combat zone.* I know that sailors try to execute re-enlistments for max bonus pay while in the combat zone since the bonus is all non-taxble.* However I don't know of any equivalent USMC bonus money.*

Nothing for officers, but yeah some of the enlisted guys are smart enough to coordinate their re-enlistment with their deployments to take advantage of the tax savings.* Even for basic grunts the bonuses being thrown around are unreal these days.

[Nords]

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Originally Posted by FlowGirl Great idea!* That may work out ideally for us since we have a few thousand that we put in a trad IRA a few years ago to lower our AGI enough to qual for the saver's tax credit.* It would be great to convert that to Roth and it looks like 2006 will be the year to do it.

If you decide to go that route, it's probably best to make the conversion in late Nov/early Dec so that you'll have a good handle on your total 2006 income & deductions and can tweak up to the top of the 15% tax bracket. (It also gives your IRA custodian enough time to complete yours and millions of others' IRA conversions before the end of the year.) But start working on Form 8606 a month earlier than that because you may decide the paperwork & calculations involved with the whole project is too brain-numbingly painful to complete.

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Originally Posted by FlowGirl Even for basic grunts the bonuses being thrown around are unreal these days.

Speaking from personal experience, it's cheaper than finding new basic grunts. So they're sharing in the budget savings...

Hmmm, officer submariners & aviators get continuation bonuses. Even surface warfare officers are getting continuation bonuses. Wonder why the Marines haven't gone this route yet?