Sensible Money has excellent content and many essential learning points in this discussion. I hope Dana revises her outstanding book in 2026 or 2027 when the upcoming changes or lack of them occur. Her ability to drill into the pertinent details of a financial plan is value-add par excellence.
I had to chuckle about the savy 'cash flow' couple. I am also in a (temporary 3 year) situtation where my cash flow is higher than my taxable income. My cash flow is at 125K, as my adjusted gross income is $66K. It does not get much better than this.
Question - is one better off overstating your income for subsidy and collecting credit at the end of the year when true up occurs? Asking only because I'm trying to understand if a deeply subsidized policy is treated unfavorably by insurance/ providers. Would providers be hesitant to accept subsidized policies? Thanks
at 54:30. Saving taxes may not always be the best way to optimize at these scenarios especially if considering Roth conversions. The best thing to optimize is after tax account values.
Regarding the strategy to pay the tax at the end of the year by taking an IRA distribution equal to the estimated tax due and withholding 100% of it: it is important to note that if you are younger than 59.5yo, the distribution is considered non-qualified and will be subject to a 10% penalty.
The 10% penalty may be avoided as mentioned if you make the IRA back whole by contributing back the withheld amount to the IRA through a 60-day rollover. However, does the 60-day rollover (payback to the IRA) need to be completed in the same calendar year? This would be difficult if the Roth conversion triggering the tax was done in late December....
@@bigtoeknee11 The strategy discussed in the video is using withholding in an IRA to pay the tax, not with a 401k. The rule of 55 does not apply to IRAs. Even if it did, 401k rules are not as flexible as IRAs, and the employer will withhold 20% of your distribution and you cannot put any of it back in. The point of the video was to have enough taxes withheld in the IRA distribution to pay for your full tax liability and not just the distribution. If the 20% withheld by the employer will do the trick of paying your full taxes including the distribution with the rule of 55 then that would work, but not if you did not need the distribution for expenses in the first place. In an IRA you can elect to withhold up to 99% for taxes, and you can put the distribution back in through a 60-day rollover, as long as you don’t do it again for 365 days.
@@J-2024-v8i Understood and very good explanation, my 401k custodian allows up to 100% to be withheld for taxes so this strategy would work out but not all 401ks may allow that.
@@bigtoeknee11 I see. That would provide the withholding you need, for example for a Roth conversion late in the year, to avoid penalties for late tax payments. And if you don’t want the distribution to be added to your MAGI, you can then do a 60-day rollover to an IRA if you happen to have the funds available from an after-tax account. Of course, having funds in an IRA would prevent you from doing Backdoor Roth contributions, in case you are doing those too 🙂
Don’t own mutual funds in taxable brokerage accounts. They are pass thru structured entities. Use ETFs (each investor is more properly assessed the capital gains due to them). Also good are individual stocks.
If Trump gets elected, and Senate / House, Social Security / Tips will not be taxed and expect an nice upward adjustment to the standard deduction, offset by a general 10% tariff on all non taxed internal goods. A tariff is just a value added tax, the most common form of taxation in the world.
Let's hope President Trump gets back in so the tax brackets do not revert back. If they do revert everyone will be affected not just those making 400k or more like the left wants you to believe
Both candidates, Harris and Trump, have pledged to keep the tax rates as they are, and not let them expire. Harris may add some tax changes for people earning over $400k which does not affect most American families
@@J-2024-v8i I do not believe 1 word from Harris she flip flops on alot of issues and copies Trump. No tax on tips, she now wants to build the border wall when 3 years ago she was 100% against it. Etc..
Sensible Money has excellent content and many essential learning points in this discussion. I hope Dana revises her outstanding book in 2026 or 2027 when the upcoming changes or lack of them occur. Her ability to drill into the pertinent details of a financial plan is value-add par excellence.
I had to chuckle about the savy 'cash flow' couple. I am also in a (temporary 3 year) situtation where my cash flow is higher than my taxable income. My cash flow is at 125K, as my adjusted gross income is $66K. It does not get much better than this.
Question - is one better off overstating your income for subsidy and collecting credit at the end of the year when true up occurs? Asking only because I'm trying to understand if a deeply subsidized policy is treated unfavorably by insurance/ providers. Would providers be hesitant to accept subsidized policies? Thanks
at 54:30. Saving taxes may not always be the best way to optimize at these scenarios especially if considering Roth conversions. The best thing to optimize is after tax account values.
Regarding the strategy to pay the tax at the end of the year by taking an IRA distribution equal to the estimated tax due and withholding 100% of it: it is important to note that if you are younger than 59.5yo, the distribution is considered non-qualified and will be subject to a 10% penalty.
The 10% penalty may be avoided as mentioned if you make the IRA back whole by contributing back the withheld amount to the IRA through a 60-day rollover. However, does the 60-day rollover (payback to the IRA) need to be completed in the same calendar year? This would be difficult if the Roth conversion triggering the tax was done in late December....
@@J-2024-v8i The 10% penalty would also be avoided is using the rule of 55 and the funds do not need to be put back in.
@@bigtoeknee11 The strategy discussed in the video is using withholding in an IRA to pay the tax, not with a 401k. The rule of 55 does not apply to IRAs. Even if it did, 401k rules are not as flexible as IRAs, and the employer will withhold 20% of your distribution and you cannot put any of it back in. The point of the video was to have enough taxes withheld in the IRA distribution to pay for your full tax liability and not just the distribution. If the 20% withheld by the employer will do the trick of paying your full taxes including the distribution with the rule of 55 then that would work, but not if you did not need the distribution for expenses in the first place. In an IRA you can elect to withhold up to 99% for taxes, and you can put the distribution back in through a 60-day rollover, as long as you don’t do it again for 365 days.
@@J-2024-v8i Understood and very good explanation, my 401k custodian allows up to 100% to be withheld for taxes so this strategy would work out but not all 401ks may allow that.
@@bigtoeknee11 I see. That would provide the withholding you need, for example for a Roth conversion late in the year, to avoid penalties for late tax payments. And if you don’t want the distribution to be added to your MAGI, you can then do a 60-day rollover to an IRA if you happen to have the funds available from an after-tax account. Of course, having funds in an IRA would prevent you from doing Backdoor Roth contributions, in case you are doing those too 🙂
Don’t own mutual funds in taxable brokerage accounts. They are pass thru structured entities. Use ETFs (each investor is more properly assessed the capital gains due to them). Also good are individual stocks.
If Trump gets elected, and Senate / House, Social Security / Tips will not be taxed and expect an nice upward adjustment to the standard deduction, offset by a general 10% tariff on all non taxed internal goods. A tariff is just a value added tax, the most common form of taxation in the world.
Let's hope President Trump gets back in so the tax brackets do not revert back. If they do revert everyone will be affected not just those making 400k or more like the left wants you to believe
Both candidates, Harris and Trump, have pledged to keep the tax rates as they are, and not let them expire. Harris may add some tax changes for people earning over $400k which does not affect most American families
@@J-2024-v8i I do not believe 1 word from Harris she flip flops on alot of issues and copies Trump. No tax on tips, she now wants to build the border wall when 3 years ago she was 100% against it. Etc..