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re: Future Tax/Investment Question
Posted on 4/1/14 at 3:22 pm to LSUFanHouston
Posted on 4/1/14 at 3:22 pm to LSUFanHouston
quote:
What is the "big tax bill" going to be? Is it a single event that will create ordinary income? A big sale of a capital asset? Huge withdrawal from tax-deferred investment?
Loan forgiveness which at this point in time would be treated as income. (I know the obvious opposite of that is to pay the loan before forgiveness, but I already know how to do that
) Hence, the question is, does taking advantage of the advantages of the 401k going to the max contribution outweigh the withdrawal penalties when that tax bill comes due OR should I open the taxable, and use stock index fund/ETFs to keep them tax efficient and use their proceeds 20 years down the line to pay off the tax bill.
And yes, the idea is to prepare for this tax bill, I just want to have the money in the most efficient place to pay it off when the time comes.
This post was edited on 4/1/14 at 3:24 pm
2
Posted on 4/1/14 at 3:39 pm to Teddy Ruxpin
Part of the problem is, who knows what the tax law will be in 20 years. From time to time, there has been talk of making certain types of loan forgiveness not includeable in income (such as certain medical and teaching loans, if you work in certain areas). But who knows if that will actually happen or not.
Another thing to consider - will your ordinary tax rate be more in 20 years than it is today? If you think the tax rate in 20 years will be much higher than it is for your today, it might make sense to do some sort of tax-efficient investment.
There are calculators out there that you can use to model different growth rates, tax rates, etc. Take some time and play around with them.
Another thing to consider - will your ordinary tax rate be more in 20 years than it is today? If you think the tax rate in 20 years will be much higher than it is for your today, it might make sense to do some sort of tax-efficient investment.
There are calculators out there that you can use to model different growth rates, tax rates, etc. Take some time and play around with them.
Posted on 4/1/14 at 3:43 pm to Teddy Ruxpin
I'm assuming large student loan debt currently being paid under Income Based schedule?
If so, I'm right there with you and curious how to manage this myself. For now, I am handling my 401k as I might do even without the upcoming tax hit. Paying as much as possible towards loans to get them down as best I can.
If so, I'm right there with you and curious how to manage this myself. For now, I am handling my 401k as I might do even without the upcoming tax hit. Paying as much as possible towards loans to get them down as best I can.
This post was edited on 4/1/14 at 3:46 pm
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