“Taxes by a long shot are my biggest expense.”
My first thought was you must be freaking rich. But our combined Federal plus (CA) State income tax for 2021 is around $10K.
All you need is decent sized IRA account(s) and RMD. Plus a low/mid 5-figure Roth conversion.
CountNoCount
Define “rich”.
Depends…
Maybe start with this article https://www.supermoney.com/much-money-take-considered-rich-u… and the New York Times app mentioned in the article https://archive.nytimes.com/www.nytimes.com/interactive/2012…
George
I have observed the most common definition of rich is more than I earn. Why do people with higher incomes avoid saying they are rich?
After looking up the percentile income numbers I decided rich is something in the range of $100,000 from my view point.
Personally, I don’t consider income to be the determination of whether someone is “rich”. Rich to me is measured by accumulated assets/wealth. If you have enough assets to support $100k+ in annual spending indefinitely, yeah you’re rich.
Why do people with higher incomes avoid saying they are rich?
It’s a mind set. Having spent most of our life earning and saving money, often by our frugality, we don’t believe we are rich, even though comparatively we may be so relative to others.
Taxes are our highest cost as well, mostly because we really don’t spend much. That may change some day, when travel becomes easier for us. If you had asked me that question a couple of years ago, it would have been college costs, but Youngest happily has graduated and now costs us almost nothing.
Our vehicles are 18 years old and 9 years old. We don’t let money burn a hole in our pockets and are easily content.
IP
It’s all relative.
1poorlady was born in the Philippines. The first time I went there I realized there are very few poor people in the USA. By Philippine standards. I’ve also seen that in other places (e.g. Mexico).
By American standards, I’m not particularly rich. I shouldn’t have to worry about having food and shelter ever again, and I can afford medical insurance (thanks to the ACA). If that’s “rich”, then I am. Would I be able to support a boat, RV, a new car every few years, and other “toys” that I see in peoples’ driveways? Probably not. But that’s not important to me anyway.
I hope my biggest expense in retirement is taxes. Taxes are just a portion of income, so that would imply I had a lot of income. I could live with that. House is nearly paid off (about 1 more year), and then it’s just food, utilities, taxes, doctors, and “play” (e.g. travel).
1poorguy
axes are just a portion of income, so that would imply I had a lot of income.
Not necessarily. You pay taxes on more than just income. Property taxes can be a massive expense for seniors, and one for which they cannot easily substitute.
Assessed values in my country popped 20% in the last year. Thankfully, we have state cap on how much we can be charged in property taxes but I imagine that there are a few seniors in my community that might be challenged to pay their higher rate - and of course their are many areas facing far greater increases.
Assessed values in my country popped 20% in the last year. Thankfully, we have state cap on how much we can be charged in property taxes but I imagine that there are a few seniors in my community that might be challenged to pay their higher rate - and of course their are many areas facing far greater increases.
We have a law that says reassessments have to be revenue neutral. If the average assessed value increases by 20% as in your example, the property tax is adjusted downward from the current 1% to 0.83% to maintain the same tax revenue.
PSU
A couple of questions –
Is that $100K per person of per family?
Does the $100K include Social Security and any pensions?
CNC: Define “rich”.
That word always remind me of an expression that I learned when I lived in Texas. “Big hat! No cattle!” It implies more image than substance.
A couple of questions –
Is that $100K per person of per family?
Does the $100K include Social Security and any pensions?
The numbers are for the tax return filed for the family.
We have a law that says reassessments have to be revenue neutral. If the average assessed value increases by 20% as in your example, the property tax is adjusted downward from the current 1% to 0.83% to maintain the same tax revenue.
PSU
We have the same law, but the upper middle class neighborhoods always get clobbered as the property values rise much more than in the lower income neighborhoods. And they increase the milage to get around the “revenue neutral” thing.
We have a law that says reassessments have to be revenue neutral. If the average assessed value increases by 20% as in your example, the property tax is adjusted downward from the current 1% to 0.83% to maintain the same tax revenue.
PSU
Good program. In Texas, all the politicians pound their chest about holding the taxes rates the same as last year or their generosity in reducing the tax rate a few tenths of a percent.
Unsaid of course is that appraisal creep provides a reliable built in, and significant, increase in tax revenue year over year. Weasels, all.
I responded other. I use Quicken for all of our finances so running a report on the past 12 months spend is easy. Of course, everyone probably categorizes their income and expenses a little differently, but here are the past 12 months Top 10 for us:
Dining Out = 11,745
Vacations = 9,800
Household (new furniture and other small expenses) = 9,400
Real Estate Tax (MA) = 9,300
Utilities (Oil, Electricity, Cable, Mobile Phone) = 9,140
Wife’s Payroll Taxes = 5,844
Groceries = 5,615
Misc Expenses (Largest Expense = Liquor) = 3,650
Home/Auto/Umbrella Insurance = 3,198
Medical (Insurance Premiums and Deductibles) = 2,119
I guess I need to cut down on the dining out and drinking at home with friends 
'38Packard
'38Packard: Real Estate Tax (MA) = 9,300, … Wife’s Payroll Taxes = 5,844
Apparently Big Hairy Mike’s taxes in Texas are much higher than yours in MA. When I was in Massachusetts, we called it, “Taxachusetts”.
Texas has no income tax so the state is financed by sales taxes and real estate taxes. Both are high. But they don’t hit the precious billionaires very hard,compared to the lower income folks.
CNC
Apparently Big Hairy Mike’s taxes in Texas are much higher than yours in MA. When I was in Massachusetts, we called it, “Taxachusetts”.
Texas has no income tax so the state is financed by sales taxes and real estate taxes. Both are high. But they don’t hit the precious billionaires very hard,compared to the lower income folks.
CNC
Missing from 38P’s expense list was federal taxes. Maybe his are really zero but that is the major difference between his taxes and mine.
When I was in Massachusetts, we called it, “Taxachusetts”.
Ohh, it’s still called Taxachusetts! It’s just that I’m now retired and DW brings home the “bacon bits and benefits” - she works for a local college and makes hardly anything in pay. But at least she can get employer sponsored health insurance and 401K match up to 8%. She has another year before she hits 65 and can join me in retirement.
But to answer your question, our tax liability for 2021 was:
Federal = 1,859
State = 1,405
TOTAL = 3,264
That puts total taxes just between Miscellaneous Expenses and Home/Auto/Umbrella Insurance.
'38Packard
Define “rich”
Not having to worry about money.
My hippie brother doesn’t worry and his net worth is maybe $400k all tied up in his house. I don’t worry and my net worth is into 8 figures (not counting the decimal point). We are both rich.
JLC
Taxes was are highest expense by far when working and remains our highest expense now that we are retired. During our working years, since we were both self employed (and paid both sides of FICA, etc.) and had high incomes plus state income tax, income taxes alone took roughly 50%. We are now down in the 25% range on income taxes. I won’t mention gross numbers but they were/are higher than numbers currently being tossed around here. Yes, a good problem to have.
Outside of that, probably entertainment is our biggest expense. Season sports tickets, concerts, etc., and you won’t find us in the nose bleed section. When Darius Rucker threw his guitar pick into the crowd a few years ago I caught it. DW and SIL wound up in the Twitter feed of The Goo Goo Dolls when they did a from behind performer shot showing the front row.
But not all self centered spending, our #2 expense until last year was each of us endowing a scholarship at our Alma Maters.
JLC
Define “rich”
Not having to worry about money.
This can cut both ways, depending on the person. My first job was at a property management firm that had some wealthy clients. I grew to divide them into two categories: those who used their wealth to worry less about money, and those who used it to worry even more (“Now I have $100,000 worries instead of $1,000 worries”).
I got a close look at that at an early age, which allowed me to make a conscious decision which group I wanted to fall in, should I be fortunate enough to get there.
Good point. But Casa Poorfamily isn’t a mansion, or even a McMansion. It’s a decent size to be comfortable, but the taxes are only a few grand per year. We’re actually the smallest house in our upscale neighborhood, as near as I can tell. A few of the others are almost manors, but a lot are similar to ours, just bigger. RV garages are popular here.
Property taxes have been almost invisible to me because that’s part of the mortgage. A year from now I’ll be more aware because the mortgage will go away.
1poorguy