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Old 03-08-2019, 03:25 PM   #161
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Must correct you. An IRA or 401K is not in any way tax avoidance. They are both tax deferrals. Ultimately, when you take money out, both are taxed. There is a huge difference. You've started your argument on a false premise. Try some other analogy. Such as....



Living in FL is tax avoidance. We avoid state income tax. We avoid property tax on our boats. That's avoidance.



Then there is tax minimization. That would be buying a $2 million boat in FL as opposed to a state which taxes the full amount at 8%. So, paying $18,000 in sales tax vs $160,000.



Then there is tax acceptance. Known in psychology as radical acceptance. It's the way it is, I just live with it. That would be property taxes on a home where you've chosen to live.


B,

I view your counterpoint as semantics. I understand your technical point and I do understand the difference between deferral, avoided, etc. Technically, you are correct.

****My main point is using the tax laws in place (whatever they are) to your benefit does not make you a tax dodger, evader, schemer, or any of the other descriptions used. Whether with your boat or other areas of your life. Would you agree with the main point of my post?

It gets very tiring to hear some in our society pound on anyone who has a higher than average finances as someone who is gaming the system. It divides our society. (By no means am I referring to you.)

But, as I said, you are technically correct. My bad on the use of IRA as an example. If I would have thought through my words more technically, I wouldn’t have used it as an example. The point was using an available strategy that is available to all. Some will, some wont. Doesn’t make either good or evil. Just because I decide to pay more than I am obligated to, doesn’t make me a better person, nor tax dodger if I pay less than someone else, legally.

***And here is a question for you ... are deferred taxes ALWAYS only deferred or can they be avoided down the road? Or are there tax strategies that if employed, can change that dynamic? Technically, is it a complete false premise?

Oops i goofed again, technically that is 3 questions.

Disclosure: I am not a CPA, nor ever want to be one. Just a concerned citizen who speaks up once in awhile.
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Old 03-08-2019, 04:32 PM   #162
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If your IRA/401k earned any capital gains or dividends, you'll be subject to ordinary tax rates rather than the lower capital gains and dividends rate when you or any beneficiaries cash out.
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Old 03-08-2019, 05:05 PM   #163
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With that better information, what would he have done if the response was, "Yea, I am violating <some other state's law>, so please don't tell them because I have nothing to show you." Or, better yet, "I am a resident of <any other state>, and my state doesn't require state registration under my circumstances." Then what does the better informed officer do?
Some states, like NC, require you to register and pay taxes (or show you paid somewhere) if the boat is in the water 90 days in the State. SC has a 180 day rule. And that is 180 out of 365 in a calendar year before you owe taxes.
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Old 03-08-2019, 05:20 PM   #164
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B,

I view your counterpoint as semantics. I understand your technical point and I do understand the difference between deferral, avoided, etc. Technically, you are correct.

****My main point is using the tax laws in place (whatever they are) to your benefit does not make you a tax dodger, evader, schemer, or any of the other descriptions used. Whether with your boat or other areas of your life. Would you agree with the main point of my post?

It gets very tiring to hear some in our society pound on anyone who has a higher than average finances as someone who is gaming the system. It divides our society. (By no means am I referring to you.)

But, as I said, you are technically correct. My bad on the use of IRA as an example. If I would have thought through my words more technically, I wouldn’t have used it as an example. The point was using an available strategy that is available to all. Some will, some wont. Doesn’t make either good or evil. Just because I decide to pay more than I am obligated to, doesn’t make me a better person, nor tax dodger if I pay less than someone else, legally.

***And here is a question for you ... are deferred taxes ALWAYS only deferred or can they be avoided down the road? Or are there tax strategies that if employed, can change that dynamic? Technically, is it a complete false premise?

Oops i goofed again, technically that is 3 questions.

Disclosure: I am not a CPA, nor ever want to be one. Just a concerned citizen who speaks up once in awhile.
It's not semantics. It's accuracy. Your point is fine but better made using a better analogy.

Now, as to deferred taxes down the road. The taxes deferred through IRA's and 401K's will generally be less down the road as your income level will be less. However, many retirees are shocked at the tax impact as not only are the taxes on the IRA or 401K money higher than expected, that income may push them into a situation of making part or all of their social security taxable. Can the money also avoid taxes? Yes, if it's little enough. The other point some would make is that when retired the impact even of a smaller tax may be greater. Still I'd argue that paying even the same amount years later is a savings over paying it now, just considering the present value of money. Deferring taxes is generally positive.

We may actually find ourselves in the situation where the deferral doesn't work as much in our favor as we planned. We're still a long way from retirement. But our income is more than when we worked due to businesses we now own. We'll probably only withdraw from our 401K as required. Still that's just a lucky situation to be in, I'll never complain about the deferred taxes coming due. Actually this is one time the tax law did exactly what it was designed to do and that is it encouraged us to save. We both set aside the maximum we could in tax deferred savings. Definitely I took advantage of my employer match. The majority of our employees in our businesses are young and I'm amazed at the 401-K participation level. Most are looking at retirement, but many are looking at one day making hardship withdrawals to buy a house or for their children's education. They still come out ahead.
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Old 03-08-2019, 05:22 PM   #165
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If your IRA/401k earned any capital gains or dividends, you'll be subject to ordinary tax rates rather than the lower capital gains and dividends rate when you or any beneficiaries cash out.
Thing is too that we never know what the future tax rates will be, not on ordinary income or capital gains. So it's always a bit of a gamble, but the vast majority of people benefit from the deferral and benefit from putting money into tax deferred plans.
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Old 03-08-2019, 07:31 PM   #166
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Old 03-08-2019, 07:45 PM   #167
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All this talk about taxes.... I think I'm going to head down to the club and get a steak & beer before that gets a greenhouse tax.
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Old 03-08-2019, 11:13 PM   #168
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This is simple but I can't make many people believe it. I own two USCG documented vessels, both with HONOLULU HI hailing ports on their sterns. One (a Newport 41) I bought used in Hawaii many years ago and its been her ever since. The other is a power cat in charter in the BVI (US flag, of course). It will probably never visit Hawaii.

Hawaii has no personal property tax so a documented vessel does not also have to be state registered. The Island of Oahu which is the City and County of Honolulu has a 5.5% (soon to be 6%) general excise tax that applies to everything bought new, cars, boats, a loaf of bread, rent and doctors bills, everything. This applies to importing boats to the state to remain for more than just a temporary period.

The other counties; Maui, Kauai and the Big Island, the tax will be 5.5%

Boats that are imported new or used up to a certain age pay this one-time tax if they are to remain in Hawaii. Just passing through, no tax. I don't know what the time limit is but once paid there are no more tax payments.

So USCG document your boat with a Lahaina, Maui hailing port if you ever do come to Hawaii you will pay 5.5% once for a long stay. If you never import the boat to Hawaii you will never pay anything any more unless you get caught overstaying your welcome in one of the blood-sucker states.
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Old 03-08-2019, 11:47 PM   #169
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This is simple but I can't make many people believe it. I own two USCG documented vessels, both with HONOLULU HI hailing ports on their sterns. s.
Yes, it is simple. The Hailing Port has nothing to do with anything. Nothing to do with where it needs to be registered, nothing to do with it's home, nothing to do with it's principal place of use, nothing to do with sales tax, nothing to do with property tax or excise tax. It's just a location that has nothing to do with anything else, just a means of identification.
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Old 03-09-2019, 11:32 AM   #170
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It's not semantics. It's accuracy. Your point is fine but better made using a better analogy.


Now, as to deferred taxes down the road. The taxes deferred through IRA's and 401K's will generally be less down the road as your income level will be less. However, many retirees are shocked at the tax impact as not only are the taxes on the IRA or 401K money higher than expected, that income may push them into a situation of making part or all of their social security taxable. Can the money also avoid taxes? Yes, if it's little enough. The other point some would make is that when retired the impact even of a smaller tax may be greater. Still I'd argue that paying even the same amount years later is a savings over paying it now, just considering the present value of money. Deferring taxes is generally positive.



We may actually find ourselves in the situation where the deferral doesn't work as much in our favor as we planned. We're still a long way from retirement. But our income is more than when we worked due to businesses we now own. We'll probably only withdraw from our 401K as required. Still that's just a lucky situation to be in, I'll never complain about the deferred taxes coming due. Actually this is one time the tax law did exactly what it was designed to do and that is it encouraged us to save. We both set aside the maximum we could in tax deferred savings. Definitely I took advantage of my employer match. The majority of our employees in our businesses are young and I'm amazed at the 401-K participation level. Most are looking at retirement, but many are looking at one day making hardship withdrawals to buy a house or for their children's education. They still come out ahead.

So, you came pretty hard at me with your original “correction” to my post, and then state it was for accuracy. For the sake of argument and pure accuracy for the forum participants, I asked you if deferred taxes can EVER be avoided, (because you used the word NEVER) and you replied that possibly if their income is low enough. Was your correction of me complete accuracy or a generality? The tax can be avoided in some situations you state. It wasn’t a complete false premise as you stated. Every tax situation is different. What works for one, may not work for another. Words, thus accuracy matters, right?

If someone qualifies to pay little or zero tax when they withdraw, I would state they avoided paying tax, not just deferred it. Am I wrong?

Challenge question for today: Can deferred tax of an IRA or 401k be eventually AVOIDED for someone who isn’t in the lowest tax bracket? Say in a very high bracket?

B, and other observers of this thread...again sorry to the OP ... I am participating in this community and in this thread, as if we are all sitting around a giant table, say on the back of B’s mega yacht :-), discussing boating and wherever the conversation leads. I am not aiming for a peeing match, just a conversation. Sometimes a debate over an issue can appear to be more, (sometimes they are), than just a friendly debate. Nothing more from where I site. K? I will also state publicly, that I can be wrong and I do make mistakes, often in fact! I’m OK with that. Life is too short.

I too suffer now from the higher taxes at retirement than I would have paid if I didn’t defer income in decades past. Yes, I did gain the benefit of the growth on a higher amount invested over the years, but I don’t think the math worked in my favor. If I could have paid 15-20% on that income decades ago, and now pay 50%+ all in with Fed, St, City, County, ad infinitum it is a net loss. Unless of course someone was a Buffett level investor, which I was certainly not! But I don’t regret doing it because there are no guarantees in life, and I was just a blue collar working dude when I started. One can only position themselves based on current laws at the time, but I would advise anyone in the accumulating phase of life do save/invest as much as you think you can afford, then add another 10% at a minimum, don’t rely on current tax law to be as it is now or better, and lastly don’t believe the government will always keep their hands off your retirement or savings. Ask the folks in Argentina or Cyprus.

As far as people making a choice to not make sacrifices in their early years that they know will benefit them later, all I can say is “some will, some won’t, next...”.

Have a great day people, I know I am going to!

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Old 03-09-2019, 11:36 AM   #171
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Yes, it is simple. The Hailing Port has nothing to do with anything. Nothing to do with where it needs to be registered, nothing to do with it's home, nothing to do with it's principal place of use, nothing to do with sales tax, nothing to do with property tax or excise tax. It's just a location that has nothing to do with anything else, just a means of identification.


Question which I don’t know the answer to based on this issue. Can what is put on the stern be different than where the boat is legally registered? If it is registered in Oregon or The Marshall Islands, can it have a hailing port of Taxafornia? Or is it required that the documents match the boat? ST, CG,?
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Old 03-09-2019, 12:04 PM   #172
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As far as people making a choice to not make sacrifices in their early years that they know will benefit them later, all I can say is “some will, some won’t, next...”.

Have a great day people, I know I am going to!

Keb

My one and only comment. Its much easier to take hardship when you are 40 years old than when you are 80 years old. I really didnt expect to live past 55 (known genetics) but after I reached 60 I started looking to the future. I prefer the "lavish" lifestyle I live now at 82 to rotting in a wheel chair because I didnt look to the future. Sacrifices made at 55 didnt hurt too much and God made some good choices for me.
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Old 03-09-2019, 02:06 PM   #173
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Question which I don’t know the answer to based on this issue. Can what is put on the stern be different than where the boat is legally registered? If it is registered in Oregon or The Marshall Islands, can it have a hailing port of Taxafornia? Or is it required that the documents match the boat? ST, CG,?
It has nothing to do with registration. It has to do with documentation. What is on the stern must be what is on the documentation. Registration in the US can be totally different.
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Old 03-09-2019, 02:14 PM   #174
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My one and only comment. Its much easier to take hardship when you are 40 years old than when you are 80 years old. I really didnt expect to live past 55 (known genetics) but after I reached 60 I started looking to the future. I prefer the "lavish" lifestyle I live now at 82 to rotting in a wheel chair because I didnt look to the future. Sacrifices made at 55 didnt hurt too much and God made some good choices for me.
I had a friend who at 57 was told his life expectancy from a terminal disease was 59 or 60. He had disability that would continue to 65 but then only social security. No worry though about it running out so he spent everything he had coming in, until he reached 63 years old. Then suddenly it hit him and he started saving so he'd have a little extra. It ran out around 67 and he's still alive at 70. However, his attitude toward it all is great. He said even at 57, that if the doctors were wrong and he was still alive at 65, he still would consider that a win. He still has the same terminal disease, just has progressed slowly and he's already won in his mind. The negatives of requiring oxygen and lack of mobility just don't seem so big to him.
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Old 03-09-2019, 03:46 PM   #175
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It has nothing to do with registration. It has to do with documentation. What is on the stern must be what is on the documentation. Registration in the US can be totally different.


Thanks for clarifying for me.
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Old 03-09-2019, 05:46 PM   #176
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My one and only comment. Its much easier to take hardship when you are 40 years old than when you are 80 years old. I really didnt expect to live past 55 (known genetics) but after I reached 60 I started looking to the future. I prefer the "lavish" lifestyle I live now at 82 to rotting in a wheel chair because I didnt look to the future. Sacrifices made at 55 didnt hurt too much and God made some good choices for me.


Well there you go Jim, you made some good choices early enough in life for it to make a difference. They may or may not have been easy, but they had an impact. Ya still got plenty of fair winds and calm seas ahead of you. 80 is the new 50.

I fully agree on when hardship hits you, and how one deals with it.

I lived a rather normal life, good health, earning money, taking financial risks that could have ruined me several times (entrepreneurship), but if successful would allow us to have a comfortable life. Then in my mid 50’s, my early retirement target, and beginning to shop for thenboat, I was diagnosed with throat cancer. Had never spent a day in the hospital or broke a bone my whole life. My target of buying my dream boat and going cruising had to be put on hold. Everything went on hold. I went through treatment with the usual ups and downs (3rd degree burns inside and outside my throat from radiation- lots of extremely potent drugs with only a determination to not get hooked for life on pain killers) and came out the other side with very little speaking voice, but a determination that I could still follow my dream. During my treatment I read a book about a guy who had the same cancer as I did, who ended up only being able to “eat” through a straw and he succeeded in his dream to sail to Alaska and beyond. If he could do it, I could do it. I also remember reading some TF posts that Janice started about a gentlemen who, if I remember correctly was always going to push off the dock and never did before he passed. So, I took some courses and began in earnest that next year 2016, and caught a ride as crew on a trawler (brand that I was considering, but specifics don’t matter) crossing the gulf of Mexico. Was going to be a month long trip of a lifetime, then continuing on to New Orleans crossing the Gulf a second time. Saying I was excited, was an understatement. We were hit by a storm, I fell and crushed my L1 vertebrae on day 2 (no alcohol allowed or involved) and spent what ended up as a 4.5 day crossing being tossed around in the forward stateroom bunk. Bashing through a rough gulf stream with 30 knot winds has a very clear meaning for me. :-) I Had spinal surgery in a Cancun “hospital” that was under heavy machinery construction. Think of the large bulldozer jackhammer thingy taking down a concrete building. My surgery was postponed twice ... once for another patient who fell off a hotel balcony (spring break event and only one qualified surgeon in town), and then a second time while I was on the operating table and spinal surgical equipment broke down. Spent a week there and not a single person there spoke english. And I spoke very little spanish. Tequila please to go with the morphine, ....please? They were all wonderful though given the circumstances. Made it back home and had to learn to walk again. Truth be told, that experience just about crushed my dream, but it was still hanging around in the dark recesses. That was mid 2016. In 2017, after learning to walk without assistance, I had to deal with my step Dad’s passing, my biological fathers passing, and putting my Mother in a care facility. The dream is still there though. 2018, a divorce of a 15 yr relationship. Fairly crushing mentally, but ya get back up and realize it is going to take more than that to keep me away from my dream. I am a victim? F No!
As they say, “stuff” happens. I have never really strung it together in writing like that, but as I do, it is rather comical if one has a sense of humor, which I do.

No wheel chair for me, very close but no cigar. I can still achieve my dream as others have, who have had more hardship than me. The only thing I would pass on to those, like me, who have or are postponing doing something until the “time is right”, don’t wait, go now. You may not get the chance. Listen to the Pardey’s classic, classic, classic quote. Wish some one had drilled that into my strong willed head decades ago. Haha, No regrets! Standing room engine rooms rule!

So my boat loving friends, there is a little perspective regarding where my boating questions may come from and my admitted ignorance. Why do you think I want to hang around you fine folks and learn as much as possible? I may even share an opinion now and then. I did hang around a few years ago, but got distracted for a bit. Again Jim, 80 is the new 50, so 60ish must be the new 40ish.

Mucho apologies to the OP and the tax conversation. I think I got seasick on your thread.
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Old 03-09-2019, 09:54 PM   #177
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We'll probably only withdraw from our 401K as required.
The law requires you to withdraw it at a certain age - or be taxed as though you did.
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Old 03-09-2019, 10:04 PM   #178
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The law requires you to withdraw it at a certain age - or be taxed as though you did.
That's why I said "as required."
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Old 03-10-2019, 10:58 AM   #179
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Not true. After a certain age (depending on your date of birth) you can withdraw any amount up to 100% and only be taxed at the same rate as any ordinary partial withdrawal. In other words no penalty. Also you can convert a 401K to an IRA at any time which will have mandatory minimum annual withdrawals, but with proper planning if there is anything left when you die you can leave it to your descendants.
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Old 03-10-2019, 12:00 PM   #180
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Holy cow, some of you need to step back after you read a post, and reread your own.
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