Friday, April 1, 2011

Taxes and Deadlines

Got the Roth funded for 2010! Thanks again to my friend for letting me know about the income cap workaround. Because by the time I can spare enough funds for a Roth, over paycheck to paycheck, I've hit the income limits. Yeah, yeah, poor baby. But I find it pretty frustrating that after buying one of the ten cheapest condos in my county (which is now worth half of what I paid for it) I have to supplement my income with stock options to get unrestricted disposable income. (Restricted disposable income going to food and gas.)

When I check against national statistics, my income puts me in the top 20% of earners and possibly in the top 20% of households. Granted, this is national, not local, and I have always contributed to my pre-tax retirement savings, but I seriously can't imagine trying to live comfortably on half of what I make. I'd have to downgrade from my condo (rated as 'affordable housing' in the area) to the mobile homes next door or rent a room in someone's house. I'm sorry, but a single person in her late thirties, with an established carreer, with a technical degree from one of the country's top universities earning in the top 20% of earners shouldn't be feeling as lower middle class as I have. In the last year, I've started to feel more regular middle class given that I was able to hire maids and an organizer and a trainer at the gym, but that was because my company's stock skyrocketed and I sold some options and all of that money was unrestricted disposable income.

Maybe my perception is off, but shouldn't I at least feel like I *could* by a car worth more than $20K, like I *could* afford a home on my own that's bigger than my 720 sq foot 1 bedroom condo? Like I *could* hire gardeners if I bought a bigger place? I don't so much have a problem with living within my means as being upset that my objectively considerable means don't get me enough margin to save without pain, or shop in moderation without worry.

This year is different. It's the third year of my adult (whole?) life that I've had freely disposable income. I'm inclined to dispose of most of it given that my retirement savings, diversely invested in the recommended "smart" options would have done better had I shoved cash under a mattress or bought scratch lottery tickets. Playing by the rules doesn't seem to have gotten me where the rulemakers promised and I'm feeling a little bitter about that.

But at least for 2010 I was able to save money in a Roth by making a post-tax contribution to an IRA then rolling it over into the Roth, thereby utilizing the legal loophole on earnings limits. And I can afford someone else to do my taxes.


S said...

I'm reminded of what an older coworker told me once about Social Security: "It's a Ponzi scheme, and you're on the wrong end of it."

Your perceptions aren't off and your feelings of frustration are justified. You shouldn't have to be pinching pennies this much. It's just that you're one of (many, many people) who bought into the housing bubble at exactly the wrong time.

You can't undo that decision (without totally trashing your credit rating) any more than we can opt out of the Social Security Ponzi scheme. Which sucks. But I hope you can find a way to stop feeling quite so bitter about where it's put you now.

Anonymous said...

The good news is that you have several years before you're going to use your 401(k) money go live on, and hopefully by then it will be worth much more than it is now.

I'm sorry you've become a victim of the housing crash, but your condo's value will rebound. It just may take a few years. Our climate isn't going anywhere; there will always be people who want to live here!

I can relate about feeling poor. I made over $70K last year, but I don't feel well off. I'm still renting, and I'm scared to buy a new car (my Toyota Corolla has almost 102,000 miles on it now, but it runs great!). I think we're all in the same boat, especially as gas and food costs are rising so quickly.


Up My Mind said...

I can so feel your pain! I'm probably nowhere near the top 20%, haven't really researched.

But for where I live, I make a decent amount of money. I live pretty conservatively, and stick to my budget.

My house was on the low end when I bought, and hasn't lost value (thank goodness) but most likely hasn't increased in the last 4 1/2 years either. Even with the remodeling I've done, sad to say.

At this point I'm scrambling to pay off other debt because my car is almost 12 years old and I'll probably need to do major repairs or get a new one in the next few years.

If it dies now I'll have to resort to credit cards.

And forget saving for retirement. I set aside some pre-tax money monthly, but am nowhere near hitting any of the caps. Wish I were!

It really shouldn't be this hard.

CrankyOtter said...

"It really shouldn't be this hard."
That's what I should have called my post. I don't mind a struggle now and again, but if I'm in the top 20% and *I'm* struggling mightily, how the hell are the other 80% of people even putting one foot in front of the other?

I have to admit, this year I'm doing well. This last year is how I expected my finances to be about 10 years ago. This year, I can afford to do things. We'll see how long this lasts. That's the other thing - I've lived through 2 significant market downturns. The only saving grace for me is that I'm not yet 40. I have friends over 50 who were all but wiped out of their comfortable retirement.

Funding social security makes more sense when the older folks are significantly less numerous than the younger. We can only hope that because people are working longer that the donation pool can keep up a little. I also have been saving for retirement because I don't trust that social security will be fully funded when I need it but that it'll be roughly half of what it is now. Given my experience, though, if I save enough money, they'll probably means test me out of it by then, whereas if I'd just been a flake, I'd get it.

Of course, now my car has died pretty heinously. I think it's the dealer's fault, or there were faulty parts. We'll see tomorrow.

Up My Mind said...

I'm sorry your car has died!!! I remember when you bought it; it wasn't that long ago!

I don't expect there to be any social security when I retire. What I'm going to do I don't know. I have hopes (dreams) that I'll be able to start setting aside enough for my own retirement. But the closer I get to 40, the more those hopes fade.

I'm starting to think buying a home might not have been the way to go. I like being a homeowner; not worrying about being evicted if someone complains my dogs bark, etc. Being responsible for the upkeep and repairs/fixes...not so much.

CrankyOtter said...

The car should be fixed soon. It was a bearing somewhere in the clutch/transmission mechanism. They think my driving is wearing it out but there's no amount of clutch use that could wear out that bearing in a year of normal driving. I think there's something off kilter about the alignment or something that degrades it. I could be wrong, but they offered to pay half, and most of the cost is labor. If it truly gets fixed, I'm fine with it. But if it flakes again, I need someone elses eyes on it and have 2-3 good references for local mechanics.

As for retirement money, I was educated in high school to start saving money right out of college. I've always funded my 401K match, and generally a little more than that. Then I realized that ALL My savings was retirement savings. I took my employee stock purchase plan money, sold some stock and, well, bought my first car. The second batch I used to fund some ROTHs which defeated the purpose of non-retirement savings. After that I had some stock options that I was able to use to save money.

But just on my base salary while either paying off student loans or a car payment, I made very little traction. I did start funneling a trivial amount per paycheck into a savings fund so I could at least buy people christmas presents with money up front, and since paying off the car bumped that up a lot so now it's real money. Most of my current relaxtion is due to stock option windfalls though, not salary or savings.

Junior and Orion said...

I so feel your pain. I have no savings. My 401k took a hit like everyone else's. It's damn scary!

When I changed jobs for that short time, I transferred over my 401k to the new job. Now that I am back to the other, I can't transfer it back. So an IRA of some sort it is. I just have to figure out which one.

CrankyOtter said...

I was able to leave my 401K under the aegis of my old company. However, I saw that when Ford had difficulties, they blocked access to the 401K for even their former employees for 9 months. I thought, "they can do that?" and rolled my old company's 401K into an IRA. I now have that IRA, my new company's 401K, and some paltry Roth IRAs that I just consolidated. (Consolidated so recently that I don't know the status of all of them at this time and probably won't for another week.) The irony is that I couldn't afford to fully fund a Roth account until I started to hit the income limits.

For non-retirement funds, it's only last year that I've held on to what I consider to be "enough" to start investing, but I'm feeling pretty gun-shy about it so that money is in savings and money-market funds at this time. I need to look into what options I want to do with that - either safer low interest things like CDs or riskier stocks/mutual funds. I guess it depends on when I think I'll need it.