Retirement Targets
- Thread starter yowza
- Start date
I understand that fact, do you understand that the investment class, pays very little in taxes compared to that white collar worker. Its how you make the money, if its through salary, you are paying a high percent of that income in taxes, if its through investments, stock options, you are paying little or none in taxes until you sell. They are gaming the system into getting away with paying little or no taxes, the white collar guy is not afforded that opportunity, because of the tax code.
Example, a man and wife, she is a partner in a law firm pulling down a million a year, he is a doctor making 600K, combined income, $1.6 million a year, they are high earners, their tax rate is going to be anywhere from 45 to 50% for state and federal taxes.
CEO of a major company, paid $1 million in salary, and another million in bonus, and gets most of his wage as stock options. Salary and bonus are taxed at most a million, stock options he pays zero. So on $12 million dollars of wealth, the pays a million or so in taxes, or around 8%. Guy then goes to any bank in the country and borrows against those stock options, for everyday cash. Then he turns around and is allowed to deduct the interest on his loan to lower his tax bill even more.
As long as he never sells the stock, which is the whole point of buy, borrow and die, the guy never pays money on the vast majority of this income.
I think you need to continue the math of the income tax rate of $62,000 in wages and $2 million in wages.
The options are another math model. Are they in the money, breakeven, or is the option strike price higher than the current market value. $10 million in stock options that are not in the money are worthless when issued.
Doesn't it have to be an irrevocable trust? And isn't there a preference period, I think 18 months, medicaid can go back to see any asset transfers have occurred to help eliminate such activity?
If that farmer had a 5-10 million net worth and sold everything to pay off land debt he would still have a net worth of 5-10 million. I get that he might want to keep his $10 million worth of land and also get money to pay for retirement but you don't always get what you want and he might have to sell some land. Farming has become a business and the whole mythos around family farms passing from generation to generation, for better or worse, is becoming an anachronism. I grew up on a century farm in the 70s so I have a little bit of experience with selling family farms.
In your example, the ceo is going to be taxed at $2 million in income. It is not a million.
Also, are the options at market (break even), below market (in the money), or above market (worthless)?
I stated he paid at most a million in tax, far less of a percentage than the person making 62K. Unless you are saying he would pay 2 million in taxes on a a salary and bonus with 2 million dollars. So you think his affective tax rate is 100%.
Ok. It was not clear how u stated it. What was his tax rate on the SO's? Do u think they were a $10 million gift with zero basis?
The tax rate in my example was $2000 on $10,000, so 20%. 20% of $180,000 would put the traditional below the $160,000 final balance of the Roth. But lets ignore that, because applying a flat marginal tax on the withdrawals of a traditional isn't fair anyway.
The key difference to me is that I do not and can not adjust my contribution amounts based on whether I am making a traditional or a Roth contribution because I contribute the max allowed by law either way. I don't get to contribute $2000 more just because it is a traditional contribution.
If someone can contribute a bit more if they choose traditional, and they have the discipline to do so, then I do concede that needs to be factored into the decision making.
The game plan I practice in real life is to make traditional 401k contributions to get me out of the 22% tax bracket. My IRA contribution is legally obligated to be Roth, so not much thought goes into it.
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Irrevocable makes it impossible for a care center to touch. The clawback is 5 years last I knew. That is what 5 year long term care policies are the most popular.
If NVDA keeps posting quarters like this, I get to accelerate my retirement planning!
