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That’s good advice for a layman but most high earners can do much better if they care and are motivated. Most are neither though lol. Mostly on the tax side. S
by lurking_swe 1y ago
That’s good advice for a layman but most high earners can do much better if they care and are motivated. Most are neither though lol.
Mostly on the tax side. Some specific examples:
- after maxing out your 401k what should you do next? IRA? Mega backdoor roth? Something else?
- If you have kids, how to best save for future education expenses? Hint: consider 529 plan.
- HSA is technically the best tax advantaged account, most high earners don’t realize it and “waste” the HSA funds to reimburse typical medical bills. HSA has triple tax benefits: contributions are tax-free, growth is tax-free, and withdrawals are also tax-free after age 65 for any reason, not just medical expenses. So basically investing without any tax obligation. You can also withdraw tax free before 65, but for medical expenses only.
i could go on…investing is great, but reducing your tax obligation is an even more powerful technique if you want to grow your net worth.
- davidivadavid 1y agoAt that point get someone to do it for you for x% of what they're getting you back and live blissfully unaware of arcane tax code specifics.
- Jtsummers 1y agoAt least the 401k, IRA, and HSA don't require knowing anything particularly arcane. Money goes in, don't touch until 59 1/2 (401k, IRA) or 65 (HSA). 529 plans can get a bit more complicated because you'll want one from your state (if your state has an income tax) and they may offer several, but then it's less about knowing tax code specifics than about what the differences are between their offerings.
- lurking_swe 1y agoright, it’s not that arcane at all. I discovered all this over a couple weekends in my 20s. Started on reddit, then moved on to more official guides and books. I spent maybe 5 weekends in total doing this learning. It’s really not that hard and i don’t understand why more people aren’t interested. Let’s reframe for a minute…if i said a high earner could retire a year earlier, or maybe even a few years earlier just by learning some semi-advanced tax strategies. Should they do so? Yeah. They’d be crazy not to lol.
- recursive 1y agoFor a beginner it's hard to tell which information is trustworthy and which is a sales pitch.
- tylerflick 1y ago529s are also capped based on the recipient, not donor.
- laserlight 1y ago> what they're getting you back Even that is not a simple thing. What’s your benchmark? Is that the right benchmark for you and your goals? Agency has a cost.
- taneq 1y agoIs it really x% of the profits? Most of the investment and financial advising services that I've had pitched to me (although that's not too many, tbh) seem to charge x% of your portfolio, and if their sage advice doesn't create a return greater than x% then sucks to be you.
- mattbrewsbytes 1y agoWhat you have stated is almost the same as call Vanguard, all those options are the same in the sense that they all involve investing, leaving it alone for a long time. Its just the vehicle thats slightly different and tax advantages. I wouldn’t consider those options needing much motivation or research. The key with all of them is investing early and leaving it alone.
- lurking_swe 1y agoIf one is clueless with investing and taxes in general, and they call vanguard, their eyes will glaze over. It would be like me explaining software development to my 85 year old father. I do agree people should call vanguard. But just blindly following steps they give you is unlikely to be productive if you don’t understand why you’re doing those steps. Furthermore, those people who don’t understand _why_ will freak out every time there’s a huge market correction. They get scared - because they don’t understand any of it. I’m also curious, do they offer financial advice for your accounts outside vanguard? Genuinely curious since i’m unsure.
- mattbrewsbytes 1y agoI’ve think the “call” part is a bit from the past, should be a setup account online with Vanguard, put it in VOO or VTSAX or the equivalent low fee market index fund and leave it alone. Replace Vanguard with any other firm but the key is picking low fee ETFs and leaving them alone. Vanguard tends to have a reputation for the lowest fees.
- d_burfoot 1y ago#1 Rule of Investing: you can't beat the market, but you can beat the tax man
- 1241231241 1y agoIs is beating when taxes are setup in a way to incentivize investing ?
- arjvik 1y agoThe HSA thing intrigued me and so I did some digging. It appears that post-65, you still have to pay income tax on non-medical withdrawals from an HSA? That is, besides the tax-free-for-medical-expenses part it reverts to a traditional IRA? One additional trick though is that it looks like you can pay for any HSA-eligible medical expenses (incurred after you created the HSA) out-of-pocket now, and reimburse your bills at any point in the future? Thus you can still earn interest on the cash before withdrawing it at any point in the future (treating it as tax-free liquidity). (I don't fully understand this so these are questions not statements, but hopefully I'm correct!)
- scarface_74 1y agoYes and you can invest your HSA funds just like anything else.
- shmerl 1y ago> The HSA thing intrigued me and so I did some digging. It appears that post-65, you still have to pay income tax on non-medical withdrawals from an HSA? That's what I understood too. That claim that you can completely skip taxes looks wrong.
- sokoloff 1y agoYou can completely escape taxes for any amounts that you have receipts for medical expenses incurred after the HSA was opened. You can pay cash for a qualified medical expense in 2025 and take out that amount of money from the HSA decades later.
- koolba 1y agoYou can also use it to pay for Medicare premiums.
- hopelite 1y agoOne thing to note!!!! Make sure to also keep records on the HSA start date and any transfers you may engage in, e.g., after leaving an employer or just changing providers. It is worth having that on record in case 20, 30, 40 years later your claims are rejected because the original opening date was lost in some transfer at some point.
- xhrpost 1y agoLooked into HSA recently at work but legally you need a high deductible health care plan to be eligible. Looking at the options, just nothing looked good compared to my current $0 deductible/$0 co-pay plan. Hard to know for sure but just seemed like I would be paying a lot more out of pocket every year.
- SlightlyLeftPad 1y agoYou have the unicorn health plan it appears
- xhrpost 1y agoActually I miss typed and can't edit but I have co-pays and meant to type $0 co-insurance.
- yieldcrv 1y agoYeah get a high deductible plan as secondary insurance JUST for the HSA Max out contributions to the HSA all medical expenses (except for premiums) since the beginning of the hsa account’s existence are eligible for reimbursement, decades later
- konfusinomicon 1y agoreading this sparked my interest as it is a great idea but from what I've read if you are covered by a non hdhp you can not do this per IRS publication 969. too bad because that would have been one hell of a loophole and I would have considered starting an astronomically high deductible with ultra low premium secondary insurance company to cater to this market
- 1oooqooq 1y agoi tried that hack one year. Cigna just emptied my account on the first try with a provider charging 2 emergency room visits when I was there only for a xray. Cigna refused to lift a finger unless i sued them both. yeah, i wouldn't recommend that.