Originally Posted by
Bucking Bar
In most states, "taxable income" for the final $ of yearly earnings is ~ 40%. The way it works out with the extra Net Investment Income Tax of 3.8% is going to be 35+7+3.8 for our family in 2022. ... 45.8%. The Paul Ryan/Trump plan moved the threshold for itemization. As a result, most people are taking their standard deductions.
Tax Rate Taxable Income
(Single) Taxable Income (Married Filing Jointly)
10% Up to $10,275 Up to $20,550
12% $10,276 to $41,775 $20,551 to $83,550
22% $41,776 to $89,075 $83,551 to $178,150
24% $89,076 to $170,050 $178,151 to $340,100
32% $170,051 to $215,950 $340,101 to $431,900
35% $215,951 to $539,900 $431,901 to $647,850
37% Over $539,900 Over $647,850
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Plus state. Georgia is 7%
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I am FOR the MBCBP.
Even without adding in state income tax, you're looking at a 40% haircut for DPSP cash. To just get BACK to zero, it takes a 67% return. Average S&P returns over the past 20 years is about 8.5%, slightly higher over 40 years (not inflation adjusted). Let's be wild and assume the S&P returns 10% a year, which, honestly, will be on the high side. To recover the money you lost day 1, to get the 67% return, you would need 6 years just to get back to zero. And that's completely ignoring 1) The returns you have have gotten on the full amount and 2) Any capital gains you would have suffered on your S&P strategy.
And this isn't a day one math exercise. Every single year you're taking a 40% loss on your DPSP cash, which means that recovery is always rolling out 6 years in front of you. Time it wrong, and it could be much longer. And if you are in a high tax state, it's even worse. Yes, it's a conservative investment, but I assume everyone has those to at least a small degree, and it would allow you to shift whatever percentage that's there to a more aggressive plan. PLUS it would be in place if there are any future, unforeseen tax increases.