The Retirement Planning/ Investment/ Savings Thread (3 Viewers)

[CraigT78]

One of these years I won't spend every penny of my HSA on medical expenses.

 

[mike32]

We used 529 plans on all our kids for college. The state of Michigan gives a $10,000 max per year tax deduction on contributions, they also did a $400 initial deposit match. One thing I personally liked about it was that it compartmentalized my savings, and this gives me a psychic benefit. It is probably a quirk with me but I like to have money in accounts that I can't touch (or at least I pretend I can't), I put it there for one use and I can keep track of it in a separate account for each of our 3 kids. Our oldest is graduating next month and he still has a little left over in his account. Maybe not the best investment ever, I chose the moderate growth option and it did ok through the years. Then I switched most over to interest only when I realized the investment life is kinda short when they get in 10th or 11th grade. I would recommend it as an excellent way to add discipline to saving for your kids college. I used to add to them regularly, just like our IRA's using a pay yourself first mentality that I think has served us well.

 

[One Eyed Dollar]

We used 529 plans on all our kids for college. The state of Michigan gives a $10,000 max per year tax deduction on contributions, they also did a $400 initial deposit match. One thing I personally liked about it was that it compartmentalized my savings, and this gives me a psychic benefit. It is probably a quirk with me but I like to have money in accounts that I can't touch (or at least I pretend I can't), I put it there for one use and I can keep track of it in a separate account for each of our 3 kids. Our oldest is graduating next month and he still has a little left over in his account. Maybe not the best investment ever, I chose the moderate growth option and it did ok through the years. Then I switched most over to interest only when I realized the investment life is kinda short when they get in 10th or 11th grade. I would recommend it as an excellent way to add discipline to saving for your kids college. I used to add to them regularly, just like our IRA's using a pay yourself first mentality that I think has served us well.

That's a nice match. Last year Colorado offered a $100 match for the first time. Two of my co-workers had babies last year and I nagged the shit out of them until they both signed up for one. Ha. We get to deduct it from our state taxes too. I'm on pace to have $80-$100k saved for each of my kids for college depending on future returns, and I'm hoping that will help them get a good start without being loaded with student loan debt.

 

[Burke]

529 In VA you can deduct 4K per account up to the favorable gift tax maximum (15k individual, 30k joint). Can open up an account where you are the beneficiary and then roll over to a relative at any time.

Less concerned about a 529 account messing with financial aid, but will look into that.

I am slightly annoyed that I can’t seem to find what exact funds my 529 contributes too...if anyone has some info on that I’m definitely interested.

I am of like mind as @mike32. I’m trying to determine why it wouldn’t be #5 on my list after:

1) 401k to get employer match
2) HSA
3) IRA max (or Roth/Backdoor)
4) Maximize 401k
5) Contribute to 529 up to max tax deduction (within reason)
6) Taxable account
7) Mortgage

I also have a plan for my (unfortunately) sizable student debt that I don’t really know how to place in that order of operations, but pretty high. #6/7 are simultaneous too I suppose

 

[Burke]

Did some more searching. Here is the guide to Virginia’s 529s. I obviously should have looked under the hood previously:

https://www.virginia529.com/uploads/files/va529_invest_program_description.pdf?v=1614267915

I use the “passively managed aggressive growth” With allocation below. Expense ratios from Vanguard in quote. A bit more international then I’d like, but overall fine to me.

48% VSMPX (.02%)
14% VBMPX (.03%)
32% VTPSX (.07%)
6% VTISX (.045%)

Virginia 529 charges a .09% administration fee

 

[RainmanTrail]

401k match
HSA
Bitcoin
Not joking

 

[TheAlchemist]

I ended up putting a chunk into two 529s for my kids after a small inheritance which in hindsight I would not do again. NJ does not provide a tax break for them or really any other advantages and so my overall upside of using them for the kids college savings is pretty minimized. I would honestly prefer to have the additional flexibility of the money just being in a brokerage account so I had more control over both the investments and the usage of the funds but too late now. It does provide some peace of mind that its there and touching it would be a negative impact for anything other than the schooling. Plus the wife eventually wants a PhD so if one kid doesnt end up needing the entire amount it can be re-purposed.

 

[Darson]

I explored 529 plans and they seem to vary wildly state to state. The Texas plan is poor with no low cost funds and limited tax benefits. I'm just buying some Amazon, Facebook and Apple stock and will pay the 15% long term capital gains and hope that they cover the kids college. Worst case scenario, I'll just have to keep working!

One of these years I won't spend every penny of my HSA on medical expenses.

This is an interesting thing - to get the max benefits from a HSA, is it better to use the money now or pay your medical bills with post tax money and refund yourself later?

 

[CraigT78]

This is an interesting thing - to get the max benefits from a HSA, is it better to use the money now or pay your medical bills with post tax money and refund yourself later?

No idea, but with 5 tax deductions running around, we are doing everything possible to minimize our tax liability now. So while I max out the HSA, we have unfortunately tapped it out each year due to unexpected surgeries. As I'm on a high deductible plan, most of the years contribution went to meeting the deductible, medical equipment rental and yearly contacts for 3.

One of these years I won't spend it all. We have gobs of money saved for retirement, so I'm really not concerned over the lack of growth in the HSA, at least not at this time.

 

[MrCatPants]

We don't have state income taxes. This year's tax bill is 18k. Half to city and half to school district.

4200sqft.

Property taxes in Texas can get high. I'd take 18k in a heart beat.

We just got our appraisal for this year and they wanted to jump it by another 23% (15% effective cap for this year though). It's nuts.

It's why the SALT cap changes during the most recent tax reform still hit people in Texas even though there is no state income tax.

 

[MrCatPants]

I explored 529 plans and they seem to vary wildly state to state. The Texas plan is poor with no low cost funds and limited tax benefits. I'm just buying some Amazon, Facebook and Apple stock and will pay the 15% long term capital gains and hope that they cover the kids college. Worst case scenario, I'll just have to keep working!


This is an interesting thing - to get the max benefits from a HSA, is it better to use the money now or pay your medical bills with post tax money and refund yourself later?

I don't think you are limited to your own state in 529 plans. Our kids are through Nebraska's plan I believe, from when I shopped around.

 

[Indyscammer]

I used my Indiana 529 $$ for U of Pitt.

 

[timinater]

I'm not sure about 529 plans in the US, but in Canada we have what are called RESP's (Registered Education Savings Plans). They are excellent plans for saving and the Federal government provides an additional 20% of your contributions, and some provinces also have additional grant amounts on top of that.

• You can contribute a max of $50,000 per child,
• Government will provide a grant of 20% of contributions (up to a max of $500 in grants per child annually, $7200 lifetime)
• Only gains are taxable upon withdrawal, but most students won't meet the "income" threshold to actually be taxed on that, If they do, the government grants of 20% effectively (more than) cancel out any tax payable.
  • contributions are made with after tax income, so aren't taxed upon withdrawal.
• I can invest in (almost) anything through an RESP.
• Grants need to be paid back if the child decides not to peruse post secondary.

To receive the full grant from the federal gov. you need to contribute $2500 a year, (~$96 biweekly), and right now even the best universities in Canada annual tuition is still under $10k/year and most are around $6-8K, so while they aren't massive numbers generated, in today's dollars plus growth that outpaces inflation, a maxed out plan should be able to cover any Canadian tuition for my kids.

 

[CraigT78]

Property taxes in Texas can get high. I'd take 18k in a heart beat.

We just got our appraisal for this year and they wanted to jump it by another 23% (15% effective cap for this year though). It's nuts.

It's why the SALT cap changes during the most recent tax reform still hit people in Texas even though there is no state income tax.

Ours thankfully stayed flat this year.

 

[Darson]

Ours thankfully stayed flat this year.

Mine went up 19% last year. Due to the pandemic I didn't think an appeal was possible as all the offices were shut. But my neighbors appealed somehow and their values were changed back to 2019.

This year mine has gone up another 9%... and I've booked an appeal slot. I bet they do nothing, just like the last time I tried. So frustrating, especially when neighbors with nice houses have their properties valued so much lower. One of our neighbors is selling their house for for about $200k over the appraisal district's value - we would be lucky if we got $200k less than what ours is valued at.

 

[CraigT78]

Mine went up 19% last year. Due to the pandemic I didn't think an appeal was possible as all the offices were shut. But my neighbors appealed somehow and their values were changed back to 2019.

This year mine has gone up another 9%... and I've booked an appeal slot. I bet they do nothing, just like the last time I tried. So frustrating, especially when neighbors with nice houses have their properties valued so much lower. One of our neighbors is selling their house for for about $200k over the appraisal district's value - we would be lucky if we got $200k less than what ours is valued at.

We had a ~20% increase the last three years. This year, nothing. I figured THAT was due to covid. Screw Texas and their appraisal values.

 

[MrCatPants]

Mine went up 19% last year. Due to the pandemic I didn't think an appeal was possible as all the offices were shut. But my neighbors appealed somehow and their values were changed back to 2019.

This year mine has gone up another 9%... and I've booked an appeal slot. I bet they do nothing, just like the last time I tried. So frustrating, especially when neighbors with nice houses have their properties valued so much lower. One of our neighbors is selling their house for for about $200k over the appraisal district's value - we would be lucky if we got $200k less than what ours is valued at.

In Harris county they have an electronic settlement process, but you are limited to a 1000 character argument (lol!). Last year they attempted a large increase also and I filed for an electronic settlement, gave some stats (per sqft sales history of equivalent properties etc.) and they cut the increase in half with out me ever needing to go in.

 

[CraigT78]

In Harris county they have an electronic settlement process, but you are limited to a 1000 character argument (lol!). Last year they attempted a large increase also and I filed for an electronic settlement, gave some stats (per sqft sales history of equivalent properties etc.) and they cut the increase in half with out me ever needing to go in.

We pull all the local crime reports and try our best to sell our neighborhood as unsafe. Then my wife takes pictures of all the shit I have fixed yet, lol.

 

[moose]

My property taxes are $387 per month.

CANADA CANADA CANADA

 

[CraigT78]

My property taxes are $387 per month.

CANADA CANADA CANADA

Yeah, but who wants to live in an igloo?

 

[David O]

My property taxes are $387 per month.

CANADA CANADA CANADA

Is that all? Since we do not have a state tax we pay a good amount on property tax. My taxes for my home will come in under $8,000 or about $650 per month. They tried to go up on the value by over 17% and I filed electronically. I got it reduced to less than a 1% increase!!! Winner, Winner!

 

[Highli99]

Sussex county Delaware has property tax rates of .56% I think my taxes are about $1k per year 3 blocks from the beach. Thanks everyone for incorporating in that wonderful state and keeping my taxes so low

 

[David O]

Sussex county Delaware has property tax rates of .56% I think my taxes are about $1k per year 3 blocks from the beach. Thanks everyone for incorporating in that wonderful state and keeping my taxes so low

Yes, but Sate Income Tax??? They get it one way or another

 

[chadthechipper]

I just stumbled on this thread. Lots of good reads and interesting to see different perspectives on retirement. I for one just want to get as much of what I have into real estate and go into retirement receiving passive income from properties I own, letting a property management company take their share for hands on management of those properties. I realize it may not come with yields such as those from the market or other investments but thats ok with me. I just want to have my expenses paid for along with extra to enjoy going places.

 

[Highli99]

Yes, but Sate Income Tax??? They get it one way or another

I earn my income in Maryland so they Hoover most of that up. Lol but you are correct DE does have income tax. No sales tax though!

 

[moose]

Yeah, but who wants to live in an igloo?

More insulating than beer cans. Plus the electricity/water doesn't cut out when we get <1 inch of snow. Nor do we have that crazy demand pricing.

Housing prices are rising so fast in Canada my assessment is 400k below value. Though I am due for a reassessment soon.

I certainly find it strange that the tax burden is borne basically by homeowners but you would rather have no state income tax. Shouldn't everyone that lives in the state pay their share?

 

[CraigT78]

More insulating than beer cans. Plus the electricity/water doesn't cut out when we get <1 inch of snow. Nor do we have that crazy demand pricing.

Housing prices are rising so fast in Canada my assessment is 400k below value. Though I am due for a reassessment soon.

I certainly find it strange that the tax burden is borne basically by homeowners but you would rather have no state income tax. Shouldn't everyone that lives in the state pay their share?

I think everyone who lives he does pay their share. People live somewhere. If they rent, they are paying their shart via the property owner. The rents in my school district are higher than across the main street - where the school isn't as popular. Their taxes are lower (as property value is lower).

This issue in Texas is the appreciation of property values and the folks on fixed income. Blue hair Linda who bought her house 35 years ago for $75k is now living in a $600k house and has property taxes that may price her out of her home. I don't know how to fix that. That's why I manage software and am not a politician

 

[pltrgyst]

This issue in Texas is the appreciation of property values and the folks on fixed income. Blue hair Linda who bought her house 35 years ago for $75k is now living in a $600k house and has property taxes that may price her out of her home. I don't know how to fix that. That's why I manage software and am not a politician

Our county in Florida has a homestead exemption and an annual % cap on property tax increases. Those help...

 

[MrCatPants]

Our county in Florida has a homestead exemption and an annual % cap on property tax increases. Those help...

Texas does too, and also some help for over 65 folks. But it eventually catches up.

 

[inca911]

529 Plan Additional Info
My company recently implemented a new benefit, enabling employees to convert unused PTO time into a 529 Plan. Here's a bit of background on 529 Plans that I put together for some more junior people who work on my teams, it might be useful to someone here.

• The initial contribution made to a 529 Plan can be withdrawn at any time and for any purpose with no tax/penalty. That’s a basic tenet of a 529 plan. If you need the original principle back, it's readily available.
• The primary benefit of the plan is that earnings growth on your contribution is not taxed when it is used for qualified educational expenses. Qualified expenses include: tuition/fees, books/supplies, computers/internet expenses, as well as room/board. The 529 plan can also be used to pay for K-12 private school tuition expenses.
• If you use the appreciation/earnings for non-qualified expenses, there is a federal 10% penalty on top of normal income tax on those earnings. Reminder, this penalty does NOT apply to the initial contribution amount. Some states add a penalty on top of the federal one. MN doesn’t have a state penalty addition.
• You can setup a 529 plan for one child, and transfer it to another family member if the first child doesn’t use it. As a tax shelter, the potential upside of untaxed growth outweighs the low probability of incurring the small penalty, in my opinion.
• I believe the max annual contribution is $15k (single) / $30k (married) per each 529 Plan beneficiary without triggering the federal gift tax. This is something that is likely applicable if trying to gift to a grandchild (or grandchildren). I don’t have multiple plans, so double-check if you do have more than one beneficiary.
• In the state of MN, one can write off $1500 (single) / $3000 (married) of your annual contribution on your MN income tax. The state income tax treatment varies by state, but that's another potential benefit. Note that if you do take a state tax write off and don’t use the money for qualified expenses in the future, the state of MN can claw back the write off.
  • MN doesn’t require a MN-based 529 Plan to qualify for the write off (some states require an in-state plan). I setup mine through Vanguard, which was a NV-based 529 plan.

As always, confirm with your financial advisor before making decisions! I had a good discussion with my financial planner a few months back. I can share some details on the benefits of partial Roth conversions, if there is interest in knowing more....