How are your investments doing?

[MossRoad]

Again, RMD’s aren’t forced withdrawals, ...

It's still a forced action. You have to move it from a non-taxed account to a taxed account, or you'll be penalized, usually at 25%.

From the article you linked to....

"Even though you're not liquidating an investment, you'll still have to pay taxes when you use an in-kind IRA distribution. "

 

[Torvy]

Again, RMD’s aren’t forced withdrawals, unless you choose that route. It’s forced tax time on the amount of your RMD.
Here’s an explanation of “In-kind” distribution “
Your money stays with them

Charles Schwab

Property taxes are forced taxes every year too

You're missing the point. This forced timing of taxation is not how this was sold to us. It was slipped into the Tax Reform Act of 1986. The ACT was created to reduce taxes. This was a small poison pill forced on Reagan in order to get his plan through Congress.

Subsequent legislation has pushed it back and exempted some plans.

Property taxes A) aren't federal. B) need to be phased out. Arguing that a tax is like property taxes isn't a winning point.

 

[Oaktree]

Property taxes A) aren't federal. B) need to be phased out. Arguing that a tax is like property taxes isn't a winning point.

And replaced with what? The money's got to come from somewhere.

 

[CloverKnollFarms]

Where did it come from before the introduction of income tax

 

[MossRoad]

Where did it come from before the introduction of income tax

Before the Sixteenth Amendment established the federal income tax in 1913, the government was funded primarily by
tariffs on imported goods, supplemented by excise taxes on goods like alcohol and tobacco, the sale of public land, and other fees. These sources provided the main revenue until larger expenses, such as the Civil War, necessitated new forms of taxation.

 

[MossRoad]

Like someone else said.... it came from somewhere.

 

[ultrarunner]

I get it. Simply pointing out that we could have saved our money in our 401K or IRA AFTER TAXES if we had chosen to. Later when Roth accounts became available, I (we) could have chosen to pay current taxes and contribute 100% to a ROTH account.

At the time, I (like many others) decided to save most of my contributions BEFORE TAX. I entered into that agreement knowing that I'd have to pay taxes on it later and would be forced to take distributions. That seemed like the right thing to do at the time and I entered into that "contract" freely.

I think the government is at fault for most of the problems in our world. Just can't blame "them" for our RMD situations.

What was not made clear is the Medicare etc quadrupling.

 

[MossRoad]

What was not made clear is the Medicare etc quadrupling.

If you go back several decades....

 

[drssg]

Before the Sixteenth Amendment established the federal income tax in 1913, the government was funded primarily by
tariffs on imported goods, supplemented by excise taxes on goods like alcohol and tobacco, the sale of public land, and other fees. These sources provided the main revenue until larger expenses, such as the Civil War, necessitated new forms of taxation.

That seems like a reasonable solution. Eliminate income tax, and replace it with extra taxes on alcohol and tobacco. Leave tea alone, though. We have a history of touchiness on that subject!

 

[MossRoad]

That seems like a reasonable solution. Eliminate income tax, and replace it with extra taxes on alcohol and tobacco. Leave tea alone, though. We have a history of touchiness on that subject!

You left off the one that generates the most.... tariffs, which are taxes on the buyer.

Personally, I'd like to see a flat tax on all income with no min or max caps. And no cap on FICA.

I'd also like to see all fossil fuel replaced with nuclear, safe artificial sweeteners, and Anna Nicole marry for love....

(my apologies to Mr. Rate).

 

[Highlandr]

It's still a forced action. You have to move it from a non-taxed account to a taxed account, or you'll be penalized, usually at 25%.

Applies to inherited plans also. My dad started getting the RMD from his 401k at 73 (I think). When he passed in 2020 me and my siblings inherited the 401K and we get an RMD every year just like he was still alive. AND... we have to take it ALL within ten years of his passing.

 

[MossRoad]

Applies to inherited plans also. My dad started getting the RMD from his 401k at 73 (I think). When he passed in 2020 me and my siblings inherited the 401K and we get an RMD every year just like he was still alive. AND... we have to take it ALL within ten years of his passing.

Nice!

My dad didn't have any retirement or pension plans. Not much savings, either. But he did have two houses and a will that said to sell everything and split it evenly between us 5 kids. That was a very nice gift.

I'd have rather he lived longer than get that gift, but was and am still very grateful for it.

 

[zzvyb6]

Remember. The RMD is the result of saving money BEFORE taxes. The original deal was that you could lower your tax bracket while working and save money without paying income tax on that money. The flip-side of that decision is that you pay those taxes at some point so you have to start taking distributions (Required Minimum Distributions) before you die and start paying the taxes. Nothing says you have to “spend” the money. Simply withdraw, pay the taxes, and reinvest the “after-tax” money if that’s best for you.

I get it. No one likes taxes. But RMDs are the result of a decision WE made years ago when we were focused on the early stages of this saving journey.

(Reminds me of a saying about death and taxes …)

Except that my tax bracket has been jumped TWICE and is way over what I was making in my good engineering job. So there's been no 'savings' for me at all.

 

[MossRoad]

Except that my tax bracket has been jumped TWICE and is way over what I was making in my good engineering job. So there's been no 'savings' for me at all.

What would the money be worth if you'd have stuffed it under your mattress all those years?

 

[ultrarunner]

If you go back several decades....

View attachment 4483915

I left out income means testing or pricing…

I have a recent retired coworker asked to come back and she is very cautious saying higher income means higher premiums…

 

[ultrarunner]

What would the money be worth if you'd have stuffed it under your mattress all those years?

Or bought US gold bullion coins… one average Joe had over 2 million in old ammo boxes…

 

[Torvy]

Sales taxes are the broadest, most fair option to replace other means of taxation. Easy to implement. Hard to avoid. Captures taxes from people who currently avoid any taxation...people who earn illegally, people who are resident aliens, visitors, etc. All of the negatives associated with sales taxes can easily be ameliorated by public policy that helps the truly poor.

The problem with tariffs is that they are regulatory more than income generating. That is why they were replaced. Northern manufacturers insisted on high tariffs that helped them and harmed Southern and Western farmers. Tariffs become a political football because they are twisted based on what and where. If tariffs are successful as a policy item, they cease to raise money. Hypothetically, all production becomes domestic.

Sales taxes push legislators (local, state and federal) to do what they can to improve the economy in order to increase revenues. (Requires that rates are fixed).

The other big reason tariffs don't work in today's government...the income tax led to a huge balloon of the spending side.

 

[MossRoad]

Sales taxes are the broadest, most fair option to replace other means of taxation. Easy to implement. Hard to avoid. Captures taxes from people who currently avoid any taxation...people who earn illegally, people who are resident aliens, visitors, etc. All of the negatives associated with sales taxes can easily be ameliorated by public policy that helps the truly poor.

The problem with tariffs is that they are regulatory more than income generating. That is why they were replaced. Northern manufacturers insisted on high tariffs that helped them and harmed Southern and Western farmers. Tariffs become a political football because they are twisted based on what and where. If tariffs are successful as a policy item, they cease to raise money. Hypothetically, all production becomes domestic.

Sales taxes push legislators (local, state and federal) to do what they can to improve the economy in order to increase revenues. (Requires that rates are fixed).

The other big reason tariffs don't work in today's government...the income tax led to a huge balloon of the spending side.

View attachment 4491793

An issue with sales tax is that low income earners have to spend a greater percentage of their income on necessities than high income earners. A flat tax with no min or max caps means everyone is in for the same percentage of their income. Sales tax, property tax, excise tax could all be eliminated if everyone paid the same percentage. Same thing with FICA cap. Remove it and social security would be funded.

 

[CloverKnollFarms]

An issue with sales tax is that low income earners have to spend a greater percentage of their income on necessities than high income earners. A flat tax with no min or max caps means everyone is in for the same percentage of their income. Sales tax, property tax, excise tax could all be eliminated if everyone paid the same percentage. Same thing with FICA cap. Remove it and social security would be funded.

I used to love it when I surpassed the max annually for OASDI. It was like getting a pay raise for 5 months

 

[MossRoad]

I used to love it when I surpassed the max annually for OASDI. It was like getting a pay raise for 5 months

I have not nor never will get to that level of income.