Talking stocks, trading, and investing in general

[ThinkDerm]

As Texasmade mentioned, 401k, HSA or Healthcare FSA, and Daycare FSA. If maxing everything and for 2 people that is something like $50K.

Piob mentions something about another 401k type vehicle and the limit being around $50K alone but I do not know if that affects AGI.

Thank you. Didn't know if there were any other methods.

 

[patrickBOOTH]

You could also just make less money.

 

[Piobaire]

457 which can be government (better) or non profit. Usual limits.

HSA is the very best as you don’t even pay FICA.

 

[Piobaire]

Scenario:

Husband and wife, both work for a government entity or nonprofit. Both at least 50, both have a 457 and a 401/3, and at least one has an HSA.

Add that up. Boom.

 

[Omega Male]

Oof. Ouch. Owie. My financial future!

https://www.investmentnews.com/arti...36/financial-literacy-an-epic-fail-in-america

 

[RedLantern]

457 which can be government (better) or non profit. Usual limits.

HSA is the very best as you don’t even pay FICA.

We did an HSA this year, but not through the employer, because they didn't offer one. As a result, it wasn't a pretax payroll deduction - any way to recoup the payroll tax if you're filing your own income tax deduction for it?

 

[Piobaire]

Good question but no answer here.

 

[jbarwick]

We did an HSA this year, but not through the employer, because they didn't offer one. As a result, it wasn't a pretax payroll deduction - any way to recoup the payroll tax if you're filing your own income tax deduction for it?

I an not certain but I feel like when you file your taxes, you will get a credit for the taxes paid on HSA contributions. This feels similar to a Traditional IRA contribution but I never used one other than for rollover purposes.

 

[Piobaire]

But don't forget an HSA doesn't pay FICA and I've no idea how to get your FICA taxes back.

 

[brokencycle]

Is it just an observation bias or are more companies doing stock buy backs rather than dividends? Why do people think this is the case?

 

[jbarwick]

Buybacks are preferential from a tax standpoint.

 

[patrickBOOTH]

Also I would imagine if a company thinks their share price will increase significantly in the future it is also preferential.

 

[otc]

Not just a recent thing. Dividends have been dying off since the 80s. Some of it seems to have been a bit of a fickle non-rational investor story...it wasn't "cool" to start paying dividends. A tech stock in the 90s that started paying dividends was like a company saying "OK, we are done innovating" so people shunned them.

Taxes are one good reason though. Dividends may be taxable at the capital gains rate...but unrealized appreciation caused by buybacks isn't taxed until the investor chooses to cash out.

It probably also simplifies management. You don't have to worry about maintaining a steady dividend, paying transfer agents to actually make sure everything gets paid, or facing repercussions if you don't keep raising them (like mutual funds that will divest if you don't). Buybacks are less official.

As to booth's comment...I believe most companies cancel their shares when they buy them back (except those they keep on hand for things like employee compensation), and even those that get moved into treasury stock are taken out of their float, so it is not like the company actually benefits from owning shares in themselves when prices rise.

 

[patrickBOOTH]

I agree with you on the maintenance of dividends, it puts the Company on a slippery slope with investors.

What I meant more by price appreciation is not so much that they invest in their own shares (they can do that via retained earnings) but more that they feel they are undervalued in the market vs. paying a dividend.

 

[lawyerdad]

Not just a recent thing. Dividends have been dying off since the 80s. Some of it seems to have been a bit of a fickle non-rational investor story...it wasn't "cool" to start paying dividends. A tech stock in the 90s that started paying dividends was like a company saying "OK, we are done innovating" so people shunned them.

Taxes are one good reason though. Dividends may be taxable at the capital gains rate...but unrealized appreciation caused by buybacks isn't taxed until the investor chooses to cash out.

It probably also simplifies management. You don't have to worry about maintaining a steady dividend, paying transfer agents to actually make sure everything gets paid, or facing repercussions if you don't keep raising them (like mutual funds that will divest if you don't). Buybacks are less official.

As to booth's comment...I believe most companies cancel their shares when they buy them back (except those they keep on hand for things like employee compensation), and even those that get moved into treasury stock are taken out of their float, so it is not like the company actually benefits from owning shares in themselves when prices rise.

Well, that sort of goes to the esoteric distinction between "the company" and its shareholders. When a company buys back stock and cancels it (or moves it into treasury) they're reducing the number of outstanding shares and thereby theoretically increasing the value of the remaining outstanding shares. So along the lines of PB's comment, it's seen as a way of enhancing shareholder value.