Obama's Tax Increase on the Middle Class. YES, Increase

[WackyDan]

I think 529s should remain as they are. Also, I highly doubt that the proposed changes actually occur. And, if they don't, perhaps middle class people who should be using them will be slightly more inclined to learn about them and actually start using them in larger numbers.

Thanks, Obama!

Well, according to the one article, 53% of the 529 accounts are with families 150k and under. It would be nice to have an accurate read on those stats.

Either way... Should they actually bring this forth and it passes, there is time to wrangle up some extra money before the effective date and try to get as close to the limit as possible. Would hurt in the short term.

 

[DCal430]

The Roth is used for YOUR education correct? Not your child's? I'm unclear on that.

You can actually start a juvenile IRA at age 14, but the contributions have to come from the child's income ( babysitting, mowing lawns, working part time) and be detailed via a form to the IRS yearly. Allowances, etc can not be used as contribution or detailed as such... So a juvenile IRA is essentially useless for college savings as you don't get up to 18 years of gains.

A Roth can be used for yours, your spouse, or your children.

The only disadvantage is the maximum 5000 a year contribution limit.

 

[Matt1970]

Whoa... I have my confrontations with BShole too... But I'm not sure how old he/she is and if they have 1.2 mil in retirement accounts then good on them. 1.2 million in retirement accounts does not make you rich... it might make you more secure than most but not rich. Considering that you can't touch 401k, IRA's without a stiff penalty and you can't withdraw until a set age I could give a shit. It is entirely possible that he has that amount or is projecting that amount at time of retirement. Next he'll have to ration that out to himself yearly to pay for medical, bills, fun, etc. and make it last for the last 20-30 years of his life buffered by his SS checks and what ever else he has. I call that smartly done.

Yes, upper middle class if they got a good early start on their career and earnings can indeed have that much saved... Especially if they didn't go out and buy the McMansion, the 5 series BMW and all that garbage. Good on him.

That said I have a co-worker (professional sales) who plans on retiring at 55. He is 51 now and is planning on hitting $5 million in retirement savings by 55 - He is worried that $5 mil won't be enough. He lives in a modest house, drives a 12 year old car. When he was 14 years old, his uncle sat him down every six months from there on and calculated his net worth... I'd say that lesson stuck with him... But $5 mil? Yeah... It will last... I hope he learns how to have some fun at that point.

According to Investopedia a household income of $150K puts you in the upper 5%. I haven't heard him say what his wife makes but he makes that all by his lonesome. Your friend should do just fine on $5 million. If he only drew 2% a year that's $100,000 a year.

 

[WackyDan]

A Roth can be used for yours, your spouse, or your children.

The only disadvantage is the maximum 5000 a year contribution limit.

The rub there is that a ROTH is supposed to be for retirement. Any time you touch a 401k to take a loan against it or use a ROTH like this - it is incredibly stupid thing to do, hence the need for a dedicated college savings plan.

 

[Jhhnn]

I think 529s should remain as they are. Also, I highly doubt that the proposed changes actually occur. And, if they don't, perhaps middle class people who should be using them will be slightly more inclined to learn about them and actually start using them in larger numbers.

Thanks, Obama!

Well, truly middle class incomes & income stability will have to rise considerably for such participation to be significant.

Had income distribution remained constant since 1978, median incomes would be 40% larger & top 1% incomes about half of what they are today. If you can't figure out what that means, you're willfully living in the past.

In certain respects, all of this going on about education being the path to better employment is a ruse, a way to convince us that we, as a people & a nation, can win at the Job Creators' 3 card monte.

It's a way to postpone entry into a severely restricted job market, as well, not to mention creating more need for conformity to educational authoritarianism & to further inequality itself.

 

[werepossum]

I think I'll take the normal righty approach they take when a program that doesn't affect them goes away or into effect that does effect other people...

Sucks to be you guys! Doesn't do anything for me, so who cares!

Like I said, Karma's a bitch

Kind of backwards, dude. It's the left which is constantly demanding that people who earn more than they be punished. Not just that they not be given stuff, but punished. This issue is no different.

First... The parent wouldn't be the one withdrawing ideally but the student. AS you or another pointed out this puts them in a potentially lower bracket than their parents.

So your example above isn't really accurate.

Here is a solution. Yearly withdrawals exceeding $30k get taxed at the final year end income rate of the student withdrawing the funds. This allows most students their choice of school, private or public, 4 year school or something in between all that. I'm basing that on today's tuition rates of course... Part of the value of the 529 and growth potential coupled with tax free status is that we have no fucking clue what college tuition will look like in 14 years when my daughter is 18.

Why $30k? I threw that out there without much thought really. I know that there are some quality schools that are going to be close to that or well exceed that per year. You advocate community college to start. So do I. The quality of instruction in most community colleges has been studied and proven to be better than attended a four year school for the first two.

If I could plan all things out for my daughter I would hope she would choose to live at home, attend community college and then transfer up to one of our in state schools. I have no idea what she will want to do when she is 18, 19, 20, etc and what those goals mean for her educational needs. Maybe she'll just go to a trade school, maybe she'll enlist in the military. Beats me. I'll support her rational decisions fully. I won't support her getting an arts degree and going into debt for it. If there is money left in her 529 when all is said and done (doubtful) then she or I can cash it out and pay the tax penalty for doing so.

I know you probably don't agree with my example of $30k, but it leaves room for choice. Some rich kid has a fully funded year over year 529 with $200k plus in it and wants to go to med school, etc at a prestigious school, then yeah, lets tax his/her withdrawals over a certain amount if that makes everyone happy. The problem is we'll all have different opinions at where that tax kicks in. I believe in choice even if my own approach to school would be as conservative as yours. I think you might want everyone to make the conservative choice regardless of different options present.

So the 529's "cost" the gov't $2 billion a year? No they don't. I hate that mentality. The proper context would be the gov't has an "opportunity" to collect tax revenue. The change in taxation of 529's in 2001 could be called a cost... sure. When they made the tax free status permanent, all aspects of 529's costing the gov't anything became moot. Now it is just an opportunity to tax something that is beneficial to the middle class and to the country overall. We should be encouraging all programs or incentives that allow any citizen to save for school or make the up front costs seem cheaper. Anything that prevents a child from going into obscene amounts of debt for an education should be encouraged.

Do you think it is unfair that some parent's have the option to sacrifice and save in a 529 for their child's future education?

I very much agree with the bolded. The concept that tax breaks or cuts cost the government has to begin with the assumption that all money legitimately belongs to government.

The rub there is that a ROTH is supposed to be for retirement. Any time you touch a 401k to take a loan against it or use a ROTH like this - it is incredibly stupid thing to do, hence the need for a dedicated college savings plan.

Don't you assume that Roth IRAs will also be subject to future taxes and assessments? I can't imagine government keeping its hands off such a huge pile of cash, especially one practically identified as a tool of the evil rich, once Democrats have the permanent majority demographics guarantee them. (Granted there may still be a GOP, but if so it will compete for the same voter base and thus will be even more similar than today.)

 

[Fern]

How is this better than a Roth IRA which grows tax free, and isn't subject to capital gains tax. A Roth IRA can also be used on education, as well as having the advantage of not counting against your fafsa, unlike 529 whixh count against your financial aid.

E.g., a relative, say grandparents, can open/contribute to different grandchildren with a 529 whereas they couldn't with just their one Roth plan.

Fern

 

[ivwshane]

Kind of backwards, dude. It's the left which is constantly demanding that people who earn more than they be punished. Not just that they not be given stuff, but punished. This issue is no different.


I very much agree with the bolded. The concept that tax breaks or cuts cost the government has to begin with the assumption that all money legitimately belongs to government.


Don't you assume that Roth IRAs will also be subject to future taxes and assessments? I can't imagine government keeping its hands off such a huge pile of cash, especially one practically identified as a tool of the evil rich, once Democrats have the permanent majority demographics guarantee them. (Granted there may still be a GOP, but if so it will compete for the same voter base and thus will be even more similar than today.)

Be punished? Do tell!

 

[OverVolt]

Be punished? Do tell!

Its this stuff called money. Democrats are typically pretty bad with it and then have to try and take other peoples money. If you're awesome you might even get a bonus! Its like a reward of money.

 

[werepossum]

Its this stuff called money. Democrats are typically pretty bad with it and then have to try and take other peoples money. If you're awesome you might even get a bonus! Its like a reward of money.

lol +1

It's worth pointing out that the bar for "awesome" can be pretty darned low. Put a crucifix in a jar of urine? Here's some of other people's hard-earned money. "Paint" the Mona Lisa in elephant dung? Here's some of other people's hard-earned money. Wanna carry out a study on why poor people tend to live in smaller, less expensive homes than do rich people? Here's some of other people's hard-earned money.

 

[Jhhnn]

Kind of backwards, dude. It's the left which is constantly demanding that people who earn more than they be punished. Not just that they not be given stuff, but punished. This issue is no different.

Yeh, the financial elite has been horribly punished. It explains how their share of national income has doubled over the last 35 years, huh?

I very much agree with the bolded. The concept that tax breaks or cuts cost the government has to begin with the assumption that all money legitimately belongs to government.


Don't you assume that Roth IRAs will also be subject to future taxes and assessments? I can't imagine government keeping its hands off such a huge pile of cash, especially one practically identified as a tool of the evil rich, once Democrats have the permanent majority demographics guarantee them. (Granted there may still be a GOP, but if so it will compete for the same voter base and thus will be even more similar than today.)

Nothing like a little fear mongering & false attribution, a little simple name calling, huh?

Changes to the tax code happen all the time. If adopted, this measure wrt 529 plans would not affect the status of funds already contributed & their earnings. It seems highly unlikely that any changes to Roth plans would be any different. Except when viewed from Glenbeckistan.

Be sure to stoke that perverse conservative persecution complex anyway. They're chumps, but they're good earners, so they'll go with it, even if you don't believe a word of it yourself.

 

[ivwshane]

Its this stuff called money. Democrats are typically pretty bad with it and then have to try and take other peoples money. If you're awesome you might even get a bonus! Its like a reward of money.

lol +1

It's worth pointing out that the bar for "awesome" can be pretty darned low. Put a crucifix in a jar of urine? Here's some of other people's hard-earned money. "Paint" the Mona Lisa in elephant dung? Here's some of other people's hard-earned money. Wanna carry out a study on why poor people tend to live in smaller, less expensive homes than do rich people? Here's some of other people's hard-earned money.

So basically you've got nothing. Go take your meds, the progressive boogeyman is scaring you again.

 

[WackyDan]

Don't you assume that Roth IRAs will also be subject to future taxes and assessments? I can't imagine government keeping its hands off such a huge pile of cash, especially one practically identified as a tool of the evil rich, once Democrats have the permanent majority demographics guarantee them. (Granted there may still be a GOP, but if so it will compete for the same voter base and thus will be even more similar than today.)

See for reference what happened in Argentina. Yes, it could happen. It would be incredibly destructive to the middle class and even the public pension funds that are invested in many of the funds the ROTH's and 401k's are.

 

[Jhhnn]

See for reference what happened in Argentina. Yes, it could happen. It would be incredibly destructive to the middle class and even the public pension funds that are invested in many of the funds the ROTH's and 401k's are.

And you double down on possum's bullshit so he doesn't have to.

 

[werepossum]

See for reference what happened in Argentina. Yes, it could happen. It would be incredibly destructive to the middle class and even the public pension funds that are invested in many of the funds the ROTH's and 401k's are.

Gotta love the far left's simplicity. They actually feel that people might buy "Of course we should tax your tax-free college savings account, but how dare you suggest we might ever tax your tax-free retirement savings account!"

 

[Jhhnn]

Gotta love the far left's simplicity. They actually feel that people might buy "Of course we should tax your tax-free college savings account, but how dare you suggest we might ever tax your tax-free retirement savings account!"

And now, false equivalency. Roth accounts aren't tax free. Taxes are paid on the front end rather than the back end.

You already knew that, of course.

 

[werepossum]

And now, false equivalency. Roth accounts aren't tax free. Taxes are paid on the front end rather than the back end.

You already knew that, of course.

Yep, but it grows tax free. Right up until the Democrats decide it shouldn't.

 

[WackyDan]

Gotta love the far left's simplicity. They actually feel that people might buy "Of course we should tax your tax-free college savings account, but how dare you suggest we might ever tax your tax-free retirement savings account!"

Quoting Jhhnn:

"If adopted, this measure wrt 529 plans would not affect the status of funds already contributed & their earnings. It seems highly unlikely that any changes to Roth plans would be any different. "

He is basically saying "fuck you, they leave your existing gains alone so you should just suck it up".

Of course, he probably doesn't have a 529 plan for his kids or doesn't have kids or just doesn't proactively plan like that.

Progs are perfectly fine burning down the village if it means they get to also burn down the mansion in the center of town as part of the process.

 

[WackyDan]

And you double down on possum's bullshit so he doesn't have to.

What I said is fact Jhhnn. Look it up. The additional fact that a U.S. Congressperson has already been suggesting this also happen here isn't comforting either.

Tell you what... Help me understand your stance. I don't care what you make or do for a living...

I am curious.. How old are you, do you have a 401k/IRA and how long have you been saving for retirement if you even are? Or are you on a public pension plan?

Generally I find people give a shit more about stuff like the topic and investments in general if they have a stake in something.

 

[werepossum]

Quoting Jhhnn:

"If adopted, this measure wrt 529 plans would not affect the status of funds already contributed & their earnings. It seems highly unlikely that any changes to Roth plans would be any different. "

He is basically saying "fuck you, they leave your existing gains alone so you should just suck it up".

Of course, he probably doesn't have a 529 plan for his kids or doesn't have kids or just doesn't proactively plan like that.

Progs are perfectly fine burning down the village if it means they get to also burn down the mansion in the center of town as part of the process.

Pretty much. He and others like him are happy to punish middle class folks if they feel the upper class are punished too. Although he probably feels that if you don't spend every penny you make, you are wealthy.

 

[Jhhnn]

Quoting Jhhnn:

"If adopted, this measure wrt 529 plans would not affect the status of funds already contributed & their earnings. It seems highly unlikely that any changes to Roth plans would be any different. "

He is basically saying "fuck you, they leave your existing gains alone so you should just suck it up".

Of course, he probably doesn't have a 529 plan for his kids or doesn't have kids or just doesn't proactively plan like that.

Progs are perfectly fine burning down the village if it means they get to also burn down the mansion in the center of town as part of the process.

As I understand it, whatever is in the account today would be free to grow & future gains on that amount would receive the same tax treatment as if they were withdrawn today.

The great thing about privilege is that those who have it always think that having it means they should automatically have more- not just more money, but more favorable tax treatment as well. Obviously, taxes are for the little people.

The best part about it is that the 97% of Americans who don't have 529 plans won't be whining at all.

 

[Jhhnn]

What I said is fact Jhhnn. Look it up. The additional fact that a U.S. Congressperson has already been suggesting this also happen here isn't comforting either.

Zimbabwe happened, too. It doesn't mean the circumstances are even vaguely similar. You heard it from a congressperson? Louie Gohmert, perhaps?

Tell you what... Help me understand your stance. I don't care what you make or do for a living...

I am curious.. How old are you, do you have a 401k/IRA and how long have you been saving for retirement if you even are? Or are you on a public pension plan?

Generally I find people give a shit more about stuff like the topic and investments in general if they have a stake in something.

I am 65 years old. We have 2 children, 21 & 18 who are both still living at home. One is currently enrolled in college. The other works. My wife is 10 years younger. I have $80K in retirement accounts. I draw SS & a pension, significantly reduced so that my wife will continue to receive benefits after I'm gone. Her retirement accounts are much larger because she never had a pension plan. We own our home & vehicles outright & are debt free. Our combined income exceeded $100K only twice in our years together, one being when I cashed in a mountain of accumulated sick leave on retirement.

I'll readily admit that I've been more lucky than good. It's unfortunate that the much revered Job Creators aren't leaving enough behind so that more people can't have it so good. Having ridden the rollercoaster of valuation a couple of times, I'm a lot more concerned about the machinations of Wall St than I am about taxes, the latter being much more predictable.

Pretty much. He and others like him are happy to punish middle class folks if they feel the upper class are punished too. Although he probably feels that if you don't spend every penny you make, you are wealthy.

See above. The notion that people in my upper middle class position are being punished is absurd. The people being punished live lower on the economic food chain, the vast majority of American families. It's being done in a systematic way by those you admire & emulate, the financial elite. The lot of you worship at the altar of greed.

 

[WackyDan]

As I understand it, whatever is in the account today would be free to grow & future gains on that amount would receive the same tax treatment as if they were withdrawn today.

The great thing about privilege is that those who have it always think that having it means they should automatically have more- not just more money, but more favorable tax treatment as well. Obviously, taxes are for the little people.

The best part about it is that the 97% of Americans who don't have 529 plans won't be whining at all.

You missed the article about 6.25 million of the 11.8 million 529's being held by households less than $150k income?

Same point still stands. I started a 529 at time... not long after Obama and crew were out promoting them for their tax free status. Only 3 years in buddy... It isn't like my daughter had 10-12 years of contributions and gains to benefit from before they changed things again. Shit, it was only 2009 when the tax free aspect became "permanent".

 

[fskimospy]

You missed the article about 6.25 million of the 11.8 million 529's being held by households less than $150k income?

Same point still stands. I started a 529 at time... not long after Obama and crew were out promoting them for their tax free status. Only 3 years in buddy... It isn't like my daughter had 10-12 years of contributions and gains to benefit from before they changed things again. Shit, it was only 2009 when the tax free aspect became "permanent".

I wonder what percentage of the money is in those 6.25 million accounts? My guess is not that much.

Regardless, nothing has changed for the money you contributed, so what's the issue?

 

[WackyDan]

Zimbabwe happened, too. It doesn't mean the circumstances are even vaguely similar. You heard it from a congressperson? Louie Gohmert, perhaps?



I am 65 years old. We have 2 children, 21 & 18 who are both still living at home. One is currently enrolled in college. The other works. My wife is 10 years younger. I have $80K in retirement accounts. I draw SS & a pension, significantly reduced so that my wife will continue to receive benefits after I'm gone. Her retirement accounts are much larger because she never had a pension plan. We own our home & vehicles outright & are debt free. Our combined income exceeded $100K only twice in our years together, one being when I cashed in a mountain of accumulated sick leave on retirement.

I'll readily admit that I've been more lucky than good. It's unfortunate that the much revered Job Creators aren't leaving enough behind so that more people can't have it so good. Having ridden the rollercoaster of valuation a couple of times, I'm a lot more concerned about the machinations of Wall St than I am about taxes, the latter being much more predictable.



See above. The notion that people in my upper middle class position are being punished is absurd. The people being punished live lower on the economic food chain, the vast majority of American families. It's being done in a systematic way by those you admire & emulate, the financial elite. The lot of you worship at the altar of greed.

Then you have been fortunate. I'm 44. I've often wished I had been born twenty or more years earlier and had the benefit at the time of a cheaper education, perhaps a job with a pension instead of these bullshit 401k's, etc. We live in a modest home that we bought way under market value in 2004 because it was a wreck - in a modest part of town... drive a ford and an old chevy. Keep our bills to the mortgage and save pretty much everything else. I just want to ensure my daughter has a slightly better start that I didn't have in life. I'm also just trying to save enough for retirement that we can retire at a reasonable age and still be able to do the things we enjoy and not be a burden to anyone. I grew up poor the first ten years of my life when my father fell down an elevator shaft and was pretty fucked up for several years before he was back to work. Our family survived off the good will of the community, and social programs at the time.

So I don't worship the wealthy, or try to emulate them. I'm never going to be rich. I'm fortunate enough to be living comfortably by my standards. I'm not driven by greed at all... I actually make plenty and could make less. I'd be ok with that as I built our lives around needing far less. Having been laid off once in 2010 for eight months and surviving that only reinforced I had the right principles.

My concern in this 529 shit is for my daughter which I admit drives some of my disgust at some of the responses to this post. Every now and then one of these debates rolls around and there is no middle ground. "Eat the rich" clouds your argument in this as much as my desire for my daughter to not be up to her eyeballs in college debt drives mine.