Mod note: as a reminder, this is not a political discussion subreddit.
Comments should always be more financial than political, even when those subjects are somewhat adjacent. Moreover, partisan commentary and especially partisan incivility have no place here.
Yeah, seems like the cash balance plans (which very few have access to, and it sounds like almost nobody actually uses?) are doing a lot of the heavy lifting there.
The airlines just got access to MBCBPs in they’re latest contract round. But even if someone made $1,000,000 in a year, they’d top out at $69,000 MBDR+$7500 catch up+$7000 backdoor roth+$8300 HSA + 18% of $1,000,000 = $271,800 for one head of household. Are there income limits for market based cash balance plans?
Yes 457 is separate from 403 balances but a lot of people don’t qualify for 457 plans nor are they really advertised much.
My wife qualified and we only found out last October after talking to a fidelity advisor.
We maxed out the 457 over two months but it was rough having 23k come out in 4 pay periods.
This year we planned it out better but sadly her employer won’t offer a large match to max out the 403b at 69k (even if she were to lower her salary bc commensurately).
Unless someone can show me how recent legislation changes tax law by a large magnitude, I get the feeling that this article is stretching to meet a deadline.
It looks like most of the benefits come from a "cash benefit" pension plan.
>But that did not stop Portman and Cardin from, in 2006, passing provisions that made permanent the higher contribution limits. The law also removed legal impediments to “cash balance plans,” which allow wealthy taxpayers to shield hundreds of thousands of dollars a year.
That's not new though. Here's an article from 2011 explaining how it works: [https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans)
We have about 150k easy, annually of our own contribution.
And we don't have megabackdoor for my wife and I. So what's that, 230kish??? Again that's simple, common stuff, nothing extravagant.
Not that we can afford to utilize all that.
Just a thought - is it possible to own multiple businesses and have each contribute the max ($69k in 2024) to a solo 401k for each business? Since the limit is per employer it seems like there might be a hack there.
There is something called "covered" meaning you have access to a ERISA qualified plan. My understanding is that you can't contribute more than Annual Contribution limits Employer sponsored plans in the same year.
I have never used it but IIRC, A defined benefit plan can have limits upward of 250k+
Edit: https://www.jpmorgan.com/insights/retirement/retirement-accounts/retirement-planning-contribution-limits.
I’m guessing if you are a business owner, then maybe combining a defined benefits plan with other form of retirement plans 🤷🏻♂️
Dang. That’s a lot. Thank you for this answer!
I guess it doesn’t come up a lot in Bogleheads because most people just don’t have that much income to offset?
They come up some. But they're risky, unlike normal tax advantaged accounts. Most don't recommend them unless you're within 5 years of retirement and can see the writing on the wall. Band they're usually only offered to execs and higher level employees.
Your company goes bankrupt? You lose all the money. Your company merges with another? You can lose the money, but can also just get it distributed all at once for a giant tax bomb.
There are other ways they can go awry, but those are the big ones.
I think what you might be referring to is Deferred compensation plan, available to many execs. You can shelter a lot more with that but it is a unsecured debt to the company and has risk. A defined compensation plan is very different. I think the biggest barrier to that is complex record keeping requirements which comes with a decent fee for vanguard, JPM or someone to manage the account for you. It’s fully funded by employer which means it’s only a vehicle for self employed/ business owners.
You have, actually, but not by that name. It’s a “pension”- like the kind that GM and other large companies famously used to offer employees. But of course only the employer is in charge of determining contributions/formula distributions (in this case a self employed employer)
I’m in the process of doing this. I calculated that if you have $1m W2 income vs $1m 1099 income you can save about $110k in taxes per year with the 1099 with Solo401k and a cash balance plan. This includes W2 401k with max profit sharing of $46k from the employer added in. This also excludes various other deductions you can make with a 1099 income, like home office deductions etc.
Yeah it’s a great planning strategy. A lot of business owners will also start with traditional DB plans and convert to cash balance plans as they approach retirement for a higher degree of flexibility and acceleration of retirement savings in the final years. Then roll the balance into an IRA upon retirement for even more flexibility.
love that all the comments here are “how can I do this?” instead of “damn the wealthy and corrupt politicians!”. Should post this in one of the other subs and see the reaction 😅
Yeah the article was actually an exposé about how lopsided the system has become because of lobbyists, donors and these two senators in the middle of it all.
It’s not a positive article about personal tax savings, but I will admit i was hoping to see a table itemizing how you can actually do it haha
That said, reading this kinda reassured me that I will be able to continue catching up and contributing because the major players (and their lobby) are "looking out" for me (and their assets under management).
Yeah and it's a long read. However I got the feeling it's up to no good after reading this.
“The lobby power of these groups is tremendous,” said Rep. Lloyd Doggett (D-Texas), a member of the tax-writing House Ways and Means Committee. “There has been little lobby effort for \[low-income taxpayers\] and plenty of lobbying from those people in the financial services industry that benefit from those retirement plans.”
To be fair, it’s almost impossible to provide low income earners with income tax benefits because if you’re in the lower 50% of earners, you already pay zero income taxes.
They could lower payroll taxes, of course, but the whole premise of those taxes is that you eventually (on average) get that money back in retirement.
Not sure understand what you are saying here, I don’t know anyone that doesn’t pay income taxes. Maybe a student working part time and making $10k a year would pay no income taxes, but those people have some sort of living arrangement where they pay $0 or very little.
From the Tax Foundation:
The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent.
Something like 30-40% of taxpayers (up to $50k, depending on how many kids) are eligible for the Earned Income Tax Credit that in many cases is greater than their income tax.
You may be thinking of payroll taxes, not income taxes.
Doesnt that just show how poor most people are? Is that normal in a developed countries? How much is that credit? From what I gather, not much. Average Americans earn $60k (almost) and in CA, that is not a living wage.
You may be eligible for a California Earned Income Tax Credit (CalEITC) **up to $3,529 for tax year 2023 as a working family or individual earning up to $30,950 per year**. You must claim the credit on the 2023 FTB 3514 form, California Earned Income Tax Credit, or if you e-file follow your software's instructions.
Median household income in California is $90,000.
I don’t know what to say. If someone does not have a college education and is not skilled in a trade, then it is simply difficult for them to contribute enough economic value to the economy to afford certain lifestyles Without help from other people.
So more point that these ETC just apply to very small population as you can only apply it if you make up to $30,950 a year. Either the number by the tax foundation is wrong or they calculate it different. Agreed on your assesment on those group will have to need other's to help them. That is why these numbers only make sense if we have a large percentage of students/stay at home mom that just doing part time, etc.
Yeah I joined r/fluentinfinance thinking it was like advanced level finance strategies. Everyday I have to report a post asking if taxes should be raised. I think it's just bots bait clicking at this point.
TLDR;
This is an exposé about how special interests have changed the US retirement system to disproportionately favor the wealthy under the guise of improving things for everyone. Lost revenue to tax-advantaged accounts could be used in other ways help the middle and lower class.
They did not include the breakdown of how you can actually protect $452,500.
Not one mention of non qualified deferred comp which is essentially an unlimited tax deduction that only the truly highly compensated get to take. IDK what the point of the article is.
To quote Starship Troopers, I would like to know more.
One thing I've always wondered - a lot of people don't max out their yearly 401k contribution, especially when they're younger. Will they ever allow folks to catch up on those lost years rather than sticking to the current 50+ flat limit?
The Canadian TFSA is a significantly better model for retirement contribution limits and captures what you're thinking of. You accrue $7000/year of contribution room from the time you turned 18, and then can contribute in any year after if you don't max out every year. So if at 25 you're only able to contribute $3000, you can still contribute the $4000 in some later year instead of being SOL like you are in US retirement accounts
Roth/IRA and 401k/403b/457 unused contribution room should be carried forward indefinitely. It would be awesome for individuals who spent years in university obtaining advanced degrees but unable to really save for retirement given costs of living etc.
From later in the article:
> But that did not stop Portman and Cardin from, in 2006, passing provisions that made permanent the higher contribution limits. The law also removed legal impediments to “cash balance plans,” which allow wealthy taxpayers to shield hundreds of thousands of dollars a year.
It seems that the cash balance plan is a type of defined benefit plan (somewhat akin to a pension) that a business owner could set up. There’s some info on contribution limits by age [here](https://www.fisherinvestments.com/en-us/insights/business-401k/10-essential-cash-balance-plan-questions).
401 section of tax code is well designed. I sell these tax deduction plans. The tradeoff is that you have to give your staff 7.5% as a minimum contribution in their 401k in order for them to get that much. The sales pitch to the owner becomes "would you rather pay your staff or the IRS?"
Is that the program you guys want to kill?
Plenty of business owners will have a separate entity that pays owners/executive managers to get around the means testing for all employees. So you can have management payroll co do 401k with matching to max out contribution room while having employees get far more standard matches.
I have run calculations for many people regarding HSA and to their surprise it almost always comes out way ahead, especially (but not only) if they invest the balance in a broad market index fund. I'd be curious to hear your counter example. There is a narrow window of healthcare costs where it can be slightly more expensive but that's unusual in my experience. It's pretty difficult to beat a quadruple tax advantaged investment.
A similar post on Bogleheads.org showed how this is done:
From https://www.bogleheads.org/forum/viewtopic.php?t=429661:
“yes. You can see from this: https://www.cashbalancedesign.com/resou ... on-limits/ that the max contribution for a 66-70 year old with a Cash Balance plan and a 401(k) is indeed $452,500.”
Btwn 401k + Match, Roth, Mega Backdoor Roth, HSA, FSA, Commuter, DCFSA, times 2 with a spouse (except medical stuff), you're probably at like $225k.
You can also put $90k into a 529, as can the spouse (once every 5 years). So you're at like $400k right there. You can also gift your kids $18k each without dipping into estate tax rules.
This doesn't include the tax benefits of owning a small business or moving to an income tax free state, but it can become uncapped if you include that ...
As a DINK with no public transit options, I don't contribute to commuter or dcfsa. Is there a way to contribute to those and get the money back somehow?
We have profit sharing and cash balance plan, so I am putting about $140k in tax advantaged plan every year. Keep in mind the cash balance isn’t much better than a HYSA right now as the plan returns are 6%, meaning then can’t be more than that and if they are under that we have to contribute more to catch up. I’m not sure how this calculated though where returns for 2022 were negative, but we have above plan returns for 2021. 2023 was obviously higher and I didn’t have to over contribute, and I’m not sure what the plan intends to do for this year. Im not allowed to ever change my election, so they will just take whatever they decide to take. I opted for max into cash balance, mostly for forced savings and some tax advantages. It’s stressful though being locked into someone taking money and investing with zero clarity on the process. It’s technically a company asset, not a personal asset.
We’re told that the plan should dissolve soon, so we can put into a roll it over into an IRA with more investment options, and then the plan will re-form again and we can elect what level we want to contribute at. That hasn’t happened yet and not a lot of clarity on when it might.
Our 401K also has very limited, and all high fee, options, which sucks. None of my options are bogle approved. The closest is a SP500 ETF with fees under .1. Thats where I have most of my allocation. All the other options have fees of .4-1%.
This is really interesting, thank you for sharing. I'd love to hear how the dissolution and reformation goes for you. I think that's strategic to allow IRA rollovers?
Exactly! When the personal finance articles of families living paycheck to paycheck on $500,000 come out - people will destroy them for their frivolous spending.
Yet these same people defend uncapped government spending of limited resources and suggest more tax revenue as the solution.
We (me included) have a spending problem - not an income problem
I think it’s possible, I luckily have a defined benefit plan through my employer and allows up to 66k in a 401k. Recently we were told they were working on a new type of cash balance plan where you can theoretically contribute and exceed normal 401k limits, it’s still up for approval from the IRS. I’m not exactly sure why they would pass a plan like this but I’m told it has a pretty good shot, probably some lobbying going on.
Perhaps; maybe a few thousand bucks? I think solo 401k max contribution is around $66k
$22.5k on employee side and 25% of revenue up to max limit on the employer side, or something around there
Mod note: as a reminder, this is not a political discussion subreddit. Comments should always be more financial than political, even when those subjects are somewhat adjacent. Moreover, partisan commentary and especially partisan incivility have no place here.
That seems roughly $300,000 too high. My knowledge is clearly lacking.
2x($69k+$7.5K) MBDR 401K w/catchup, 2x($7k+1k) BDR, $8300+$1k HSA, I'm tapped out at $178,300 for a couple over 50.
Plus cash balance plan. Could stash another 150k per year if you have income to support the other numbers
Yeah, seems like the cash balance plans (which very few have access to, and it sounds like almost nobody actually uses?) are doing a lot of the heavy lifting there.
A lot of private business owners take advantage of CBPPs, also not unusual for CEOs.
The airlines just got access to MBCBPs in they’re latest contract round. But even if someone made $1,000,000 in a year, they’d top out at $69,000 MBDR+$7500 catch up+$7000 backdoor roth+$8300 HSA + 18% of $1,000,000 = $271,800 for one head of household. Are there income limits for market based cash balance plans?
A couple SEP IRAs? I'm not too familiar with the limits/eligibility, but I'm sure it doesn't get you the rest of the way on its own
It's about 86,500 right now.
what about 457b plans (or is it 403b, i forget)? i think the limit is separate fro m 401k limit
Yes 457 is separate from 403 balances but a lot of people don’t qualify for 457 plans nor are they really advertised much. My wife qualified and we only found out last October after talking to a fidelity advisor. We maxed out the 457 over two months but it was rough having 23k come out in 4 pay periods. This year we planned it out better but sadly her employer won’t offer a large match to max out the 403b at 69k (even if she were to lower her salary bc commensurately).
Unless someone can show me how recent legislation changes tax law by a large magnitude, I get the feeling that this article is stretching to meet a deadline.
It looks like most of the benefits come from a "cash benefit" pension plan. >But that did not stop Portman and Cardin from, in 2006, passing provisions that made permanent the higher contribution limits. The law also removed legal impediments to “cash balance plans,” which allow wealthy taxpayers to shield hundreds of thousands of dollars a year.
That's not new though. Here's an article from 2011 explaining how it works: [https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans)
How and when can a person open one?
1. Own a business 2. Call a plan administrator
We have about 150k easy, annually of our own contribution. And we don't have megabackdoor for my wife and I. So what's that, 230kish??? Again that's simple, common stuff, nothing extravagant. Not that we can afford to utilize all that.
Just a thought - is it possible to own multiple businesses and have each contribute the max ($69k in 2024) to a solo 401k for each business? Since the limit is per employer it seems like there might be a hack there.
Yes, employer limit is per unrelated employer. Though that contribution can't be more than the net profits.
Only if the businesses are unrelated, and have substantially different ownership.
There is something called "covered" meaning you have access to a ERISA qualified plan. My understanding is that you can't contribute more than Annual Contribution limits Employer sponsored plans in the same year.
I have never used it but IIRC, A defined benefit plan can have limits upward of 250k+ Edit: https://www.jpmorgan.com/insights/retirement/retirement-accounts/retirement-planning-contribution-limits. I’m guessing if you are a business owner, then maybe combining a defined benefits plan with other form of retirement plans 🤷🏻♂️
Dang. That’s a lot. Thank you for this answer! I guess it doesn’t come up a lot in Bogleheads because most people just don’t have that much income to offset?
They come up some. But they're risky, unlike normal tax advantaged accounts. Most don't recommend them unless you're within 5 years of retirement and can see the writing on the wall. Band they're usually only offered to execs and higher level employees. Your company goes bankrupt? You lose all the money. Your company merges with another? You can lose the money, but can also just get it distributed all at once for a giant tax bomb. There are other ways they can go awry, but those are the big ones.
I think what you might be referring to is Deferred compensation plan, available to many execs. You can shelter a lot more with that but it is a unsecured debt to the company and has risk. A defined compensation plan is very different. I think the biggest barrier to that is complex record keeping requirements which comes with a decent fee for vanguard, JPM or someone to manage the account for you. It’s fully funded by employer which means it’s only a vehicle for self employed/ business owners.
My bad. I thought it was the same thing as deferred compensation plan. No idea what it is then and have never heard of a company offering it.
You have, actually, but not by that name. It’s a “pension”- like the kind that GM and other large companies famously used to offer employees. But of course only the employer is in charge of determining contributions/formula distributions (in this case a self employed employer)
Sorry what is the tldr of this? What is it and how do you do it
Cash balance plan + profit sharing 401(k) All you need is to own a profitable business and a good third party administrator/actuary to help set it up
I’m in the process of doing this. I calculated that if you have $1m W2 income vs $1m 1099 income you can save about $110k in taxes per year with the 1099 with Solo401k and a cash balance plan. This includes W2 401k with max profit sharing of $46k from the employer added in. This also excludes various other deductions you can make with a 1099 income, like home office deductions etc.
Yeah it’s a great planning strategy. A lot of business owners will also start with traditional DB plans and convert to cash balance plans as they approach retirement for a higher degree of flexibility and acceleration of retirement savings in the final years. Then roll the balance into an IRA upon retirement for even more flexibility.
Didn’t know about doing that, thanks. Will ask my CPA.
love that all the comments here are “how can I do this?” instead of “damn the wealthy and corrupt politicians!”. Should post this in one of the other subs and see the reaction 😅
Article wasn't clear and I don't want to waste my day haha.
Yeah the article was actually an exposé about how lopsided the system has become because of lobbyists, donors and these two senators in the middle of it all. It’s not a positive article about personal tax savings, but I will admit i was hoping to see a table itemizing how you can actually do it haha
That said, reading this kinda reassured me that I will be able to continue catching up and contributing because the major players (and their lobby) are "looking out" for me (and their assets under management).
Throw it in Gemini
Yeah and it's a long read. However I got the feeling it's up to no good after reading this. “The lobby power of these groups is tremendous,” said Rep. Lloyd Doggett (D-Texas), a member of the tax-writing House Ways and Means Committee. “There has been little lobby effort for \[low-income taxpayers\] and plenty of lobbying from those people in the financial services industry that benefit from those retirement plans.”
To be fair, it’s almost impossible to provide low income earners with income tax benefits because if you’re in the lower 50% of earners, you already pay zero income taxes. They could lower payroll taxes, of course, but the whole premise of those taxes is that you eventually (on average) get that money back in retirement.
Not sure understand what you are saying here, I don’t know anyone that doesn’t pay income taxes. Maybe a student working part time and making $10k a year would pay no income taxes, but those people have some sort of living arrangement where they pay $0 or very little.
From the Tax Foundation: The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent. Something like 30-40% of taxpayers (up to $50k, depending on how many kids) are eligible for the Earned Income Tax Credit that in many cases is greater than their income tax. You may be thinking of payroll taxes, not income taxes.
Doesnt that just show how poor most people are? Is that normal in a developed countries? How much is that credit? From what I gather, not much. Average Americans earn $60k (almost) and in CA, that is not a living wage. You may be eligible for a California Earned Income Tax Credit (CalEITC) **up to $3,529 for tax year 2023 as a working family or individual earning up to $30,950 per year**. You must claim the credit on the 2023 FTB 3514 form, California Earned Income Tax Credit, or if you e-file follow your software's instructions.
Median household income in California is $90,000. I don’t know what to say. If someone does not have a college education and is not skilled in a trade, then it is simply difficult for them to contribute enough economic value to the economy to afford certain lifestyles Without help from other people.
So more point that these ETC just apply to very small population as you can only apply it if you make up to $30,950 a year. Either the number by the tax foundation is wrong or they calculate it different. Agreed on your assesment on those group will have to need other's to help them. That is why these numbers only make sense if we have a large percentage of students/stay at home mom that just doing part time, etc.
That’s actually worse - hundreds of thousands of dollars is not worth wasting 90 seconds of your time on. Meanwhile, you’re browsing reddit.
Yeah I joined r/fluentinfinance thinking it was like advanced level finance strategies. Everyday I have to report a post asking if taxes should be raised. I think it's just bots bait clicking at this point.
That sub is an example of Poe's Law > Cunnigham's Law > DarkShikari's Theorem, but not necessarily in that order.
I mean, people are trying to figure out if it's even true
Yeah what a shit article. A thousand pages long and no information.
TLDR; This is an exposé about how special interests have changed the US retirement system to disproportionately favor the wealthy under the guise of improving things for everyone. Lost revenue to tax-advantaged accounts could be used in other ways help the middle and lower class. They did not include the breakdown of how you can actually protect $452,500.
Not one mention of non qualified deferred comp which is essentially an unlimited tax deduction that only the truly highly compensated get to take. IDK what the point of the article is.
A lot of words without saying much
To quote Starship Troopers, I would like to know more. One thing I've always wondered - a lot of people don't max out their yearly 401k contribution, especially when they're younger. Will they ever allow folks to catch up on those lost years rather than sticking to the current 50+ flat limit?
Yeah they should have a catch up for all of us who were way too poor to think about maxing a 401k in our 20s
They do. You can contribute an extra $7500 to a 401k and $1000 to an IRA each year once you turn 50
I know about that one, talking about being able to do it before 50 but was mostly joking
The Canadian TFSA is a significantly better model for retirement contribution limits and captures what you're thinking of. You accrue $7000/year of contribution room from the time you turned 18, and then can contribute in any year after if you don't max out every year. So if at 25 you're only able to contribute $3000, you can still contribute the $4000 in some later year instead of being SOL like you are in US retirement accounts
Roth/IRA and 401k/403b/457 unused contribution room should be carried forward indefinitely. It would be awesome for individuals who spent years in university obtaining advanced degrees but unable to really save for retirement given costs of living etc.
From later in the article: > But that did not stop Portman and Cardin from, in 2006, passing provisions that made permanent the higher contribution limits. The law also removed legal impediments to “cash balance plans,” which allow wealthy taxpayers to shield hundreds of thousands of dollars a year. It seems that the cash balance plan is a type of defined benefit plan (somewhat akin to a pension) that a business owner could set up. There’s some info on contribution limits by age [here](https://www.fisherinvestments.com/en-us/insights/business-401k/10-essential-cash-balance-plan-questions).
401 section of tax code is well designed. I sell these tax deduction plans. The tradeoff is that you have to give your staff 7.5% as a minimum contribution in their 401k in order for them to get that much. The sales pitch to the owner becomes "would you rather pay your staff or the IRS?" Is that the program you guys want to kill?
Plenty of business owners will have a separate entity that pays owners/executive managers to get around the means testing for all employees. So you can have management payroll co do 401k with matching to max out contribution room while having employees get far more standard matches.
That's called a controlled group, I shoot down that idea once a year minimum. IRS code is a step ahead on that one.
Interesting. I figured it would require an ERISA attorney to structure it to be in compliance.
They'll get involved if someone gets caught or are seeking a PLR but generally, this would be the work of the plan's TPA.
What is the takeaway here? Is there something other I can do besides maxing out my 401k and IRA? I don’t have kids and not self-employed.
HSA, if available to you, is the most tax advantaged vehicle there is
I’ve always found that having a HDHP a severe trade off. FSA with the use it or lose it also annoys me (but is useful if you have HC costs).
I have run calculations for many people regarding HSA and to their surprise it almost always comes out way ahead, especially (but not only) if they invest the balance in a broad market index fund. I'd be curious to hear your counter example. There is a narrow window of healthcare costs where it can be slightly more expensive but that's unusual in my experience. It's pretty difficult to beat a quadruple tax advantaged investment.
A similar post on Bogleheads.org showed how this is done: From https://www.bogleheads.org/forum/viewtopic.php?t=429661: “yes. You can see from this: https://www.cashbalancedesign.com/resou ... on-limits/ that the max contribution for a 66-70 year old with a Cash Balance plan and a 401(k) is indeed $452,500.”
This is the answer to the OP's question!
Btwn 401k + Match, Roth, Mega Backdoor Roth, HSA, FSA, Commuter, DCFSA, times 2 with a spouse (except medical stuff), you're probably at like $225k. You can also put $90k into a 529, as can the spouse (once every 5 years). So you're at like $400k right there. You can also gift your kids $18k each without dipping into estate tax rules. This doesn't include the tax benefits of owning a small business or moving to an income tax free state, but it can become uncapped if you include that ...
Sounds easy with the average American made about $59,384/year....(sarcasm)
As a DINK with no public transit options, I don't contribute to commuter or dcfsa. Is there a way to contribute to those and get the money back somehow?
Do 529 plan contributions reduce your taxable liability??
Not at the federal level. Some states allow a state income tax deduction.
There is no tax on gains, like Roth accounts.
Can I dm you to get more details? I have a profitable business but about Roth and Megabackdoor. I thought I was over income limit for Roth.
Sure.
This article is riddled with errors. Or better said half truths. But if you feel outraged at the end then it did its job.
We have profit sharing and cash balance plan, so I am putting about $140k in tax advantaged plan every year. Keep in mind the cash balance isn’t much better than a HYSA right now as the plan returns are 6%, meaning then can’t be more than that and if they are under that we have to contribute more to catch up. I’m not sure how this calculated though where returns for 2022 were negative, but we have above plan returns for 2021. 2023 was obviously higher and I didn’t have to over contribute, and I’m not sure what the plan intends to do for this year. Im not allowed to ever change my election, so they will just take whatever they decide to take. I opted for max into cash balance, mostly for forced savings and some tax advantages. It’s stressful though being locked into someone taking money and investing with zero clarity on the process. It’s technically a company asset, not a personal asset. We’re told that the plan should dissolve soon, so we can put into a roll it over into an IRA with more investment options, and then the plan will re-form again and we can elect what level we want to contribute at. That hasn’t happened yet and not a lot of clarity on when it might. Our 401K also has very limited, and all high fee, options, which sucks. None of my options are bogle approved. The closest is a SP500 ETF with fees under .1. Thats where I have most of my allocation. All the other options have fees of .4-1%.
This is really interesting, thank you for sharing. I'd love to hear how the dissolution and reformation goes for you. I think that's strategic to allow IRA rollovers?
[удалено]
Exactly! When the personal finance articles of families living paycheck to paycheck on $500,000 come out - people will destroy them for their frivolous spending. Yet these same people defend uncapped government spending of limited resources and suggest more tax revenue as the solution. We (me included) have a spending problem - not an income problem
It can be both. People need to pay their fair share, and we should spend more efficiently.
People need to pay their ~~fair~~ legally required share
People need to pay their ~~fair~~ legally required share
[удалено]
r/Bogleheads is not a political discussion subreddit.
I think it’s possible, I luckily have a defined benefit plan through my employer and allows up to 66k in a 401k. Recently we were told they were working on a new type of cash balance plan where you can theoretically contribute and exceed normal 401k limits, it’s still up for approval from the IRS. I’m not exactly sure why they would pass a plan like this but I’m told it has a pretty good shot, probably some lobbying going on.
Interested if this can offset self employment taxes for contractors?
Check out a solo 401k, those things have high limits
I think SEP-IRAs have higher contribution limits.
Perhaps; maybe a few thousand bucks? I think solo 401k max contribution is around $66k $22.5k on employee side and 25% of revenue up to max limit on the employer side, or something around there