I find it hard to compare these three cases, since there are some things that are unclear. Social security payments mean that there was money paid for that in prior years. What are "taxes" in the third example, and does that include Social Security withheld? Should Medicare payments fit somewhere, especially IRMAA? Is the third example for someone who is also funding an IRA for the future? We have a complicated tax code, and it is always in one's interest to figure out how to pay the lowest tax once can, consistent with the law. I think someone in the third example might have ways to lower that tax. One of the lessons from the last bipartisan tax code revision - way back in 1986 - was that a "flat" tax may not serve all the purposes we need to serve in structuring income taxes, and that a "flatter" tax (as opposed to a flat one) is more achievable. And there is one economically important rule that strongly promotes that "flatter" income tax. The more credits, deductions and offsets the government can eliminate from the tax code, the lower that a "flatter" income tax rate can be. A lower rate is fundamentally good for everyone. It is also more likely that there can be a more level obligation across all taxpayers, though a group may wind up paying more. Is there anything that still should justify favoritism? Does capital gains deserve a lower rate than other income? Should we continue to incent retirement savings with deferrals of earned income for IRAs and 401(k)? How about charitable deductions? For every favored interest, there is a cost.
Excellent article. I found a way to answer that question by watching my monthy and annual "flow" and adjusting as necessary. I am lucky enough to have some fairly large RMDs now, and my budget leaves me with something extra at the end of each month. I am finding that I have a new question. It is: "What can I now afford to give to the institutions that gave me the perspectives, values, education and skills I needed to succeed?" I am grateful, and the need to show that gratitude tugs at me. And I am not just thinking of my college and law school, but older and smaller entities, like my Catholic grammar and high school, local public library, church, not-for-profit community organizations and the like. I'll never be able to thank the individuals I would like to honor, since they are mostly all gone. But these formative entities soldier on with new students, participants and members like me, and I think they deserve a share of what I've earned.
As I understand it, there has been a large excess of natural diamonds for years. The price of diamonds was carefully controlled because one supplier dominated the market, and it was able to control that world supply, stockpiling diamonds to keep them off the market. With the availability of diamonds kept low, the market-clearing price of diamonds could be kept much higher than would be merited in a freely competitive market, and the profits to the dominant supplier would be maximized. The stranglehold of that single supplier has eroded, though not completely. Artificial diamonds also carried a stigma for a while, because there was a view that "if you really loved me, you'd buy me a real diamond regardless of the price." But that stigma has eroded, too. People seem finally to be recognizing that love shouldn't be measured by the price paid for the ring.
While the author and I may agree that only realized income should be taxed, there is a growing movement to tax wealth - what is simply owned, rather than earned. The state of Washington twisted its Constitution last year to pass what is a wealth tax, and California may soon have the issue on its ballot. The end goal is not just to get more tax money, but to get tax money sooner. Government doesn't want to wait for a "taxable event" any more. It needs more money now. And so it follows Willie Sutton - it goes where the money is. But if one pays on wealth one year, should they get a credit the next year if wealth declines, or they sell an asset for less than it was taxed? The deviation from settled principles of taxation will upend the tax laws in many places, and make life even more complicated. The anomalies and contradictions will eventually impact us all. By the way, 1,000 people with a billion dollars means wealth of only a trillion dollars. Even with the multi-billionaires thrown in, the tax on their wealth will barely begin to dent the deficit. The solution is to spend less than the government collects.
Nice piece. The travel anecdote in "15 ways to happiness" is right on. I spent two months researching Japan before going last year, and enjoyed every minute. I know Jonathan read every comment I ever posted, and he taught me some things with his responses. I didn't always agree with him, but it wasn't because he was wrong - it was usually because I was committed to a "minority view". Mine. I do miss the guy.
The real problem here is that state probate mechanisms are outdated, Byzantine, intimidating and costly. The governing laws often require that the equivalent of a lawsuit be filed, that specialized counsel be retained, and that many upfront costs be incurred. The process itself usually takes ungodly amounts of time to play out. Probate should be simple, with easy-to-understand procedures, and paperwork that doesn't require an advanced degree to complete. One shouldn't have to create, fund and maintain an entirely new entity - a trust - to move one's assets to loved ones and other beneficiaries. And the process should be able to play out over months, not years.
I support this, although I'm not sure 12% is the right number. I think it is highly useful and desirable for the government, too. Personally, I would probably take advantage of this action even if the rate was in the 12-15% range, since it is much lower than my marginal rate for my RMDs, and I'd still have enough years left to recoup much of the negative impact of an earlier tax payment. I support a related move even more strongly - let whatever withdrawal tax rate is adopted facilitate conversion to a Roth. The main benefit from that for the government is that it will generate much more tax revenue for the government in the near term as retirees pay present taxes to avoid future ones. It works like any sales promotion - a short term discount will encourage "stocking up" on the offer.
A twist on an old adage: Failing to plan for bad health is planning to fail when it arrives. We are all different, and different pieces of our machinery will fail or slow down and impact us as we age. I rely heavily on exercise. I have for years. At 75, I'm slower and can't do everything I used to. But I still work on balance, flexibility, strength and maintaining good circulation. I push myself, but not into any danger zones. I tell people I may have 20 years left. I trust the first 10 will be OK. It is the second 10 I exercise for. (I'm not so sure about those first 10 any more. I see and feel things that worry me. But one must soldier on, and try to be prepared to deal with new things as they arise and old things that get worse. The alternative is far worse. The Boy Scouts were right - Be Prepared.)
Clever ideas? I'd love to see a list of all the gadgets, work-arounds, inventions and modifications of off-the-shelf products that readers of HumbleDollar have devised. My father was a gadgeteer, and his usual comment to the people at Home Depot who asked if they could help him was that he wasn't sure exactly what he was looking for, since he had to jury-rig something to achieve a unique end, and he'd know it when he saw it. I've inherited that gene. I love to tinker, and small (and large) manifestations of ideas to solve a problem fill my home. They help something work better. Some do things nothing else can do. Sometimes they even save me a lot of money.
Comments
I find it hard to compare these three cases, since there are some things that are unclear. Social security payments mean that there was money paid for that in prior years. What are "taxes" in the third example, and does that include Social Security withheld? Should Medicare payments fit somewhere, especially IRMAA? Is the third example for someone who is also funding an IRA for the future? We have a complicated tax code, and it is always in one's interest to figure out how to pay the lowest tax once can, consistent with the law. I think someone in the third example might have ways to lower that tax. One of the lessons from the last bipartisan tax code revision - way back in 1986 - was that a "flat" tax may not serve all the purposes we need to serve in structuring income taxes, and that a "flatter" tax (as opposed to a flat one) is more achievable. And there is one economically important rule that strongly promotes that "flatter" income tax. The more credits, deductions and offsets the government can eliminate from the tax code, the lower that a "flatter" income tax rate can be. A lower rate is fundamentally good for everyone. It is also more likely that there can be a more level obligation across all taxpayers, though a group may wind up paying more. Is there anything that still should justify favoritism? Does capital gains deserve a lower rate than other income? Should we continue to incent retirement savings with deferrals of earned income for IRAs and 401(k)? How about charitable deductions? For every favored interest, there is a cost.
Post: …..taxes and you
Link to comment from June 14, 2026
Excellent article. I found a way to answer that question by watching my monthy and annual "flow" and adjusting as necessary. I am lucky enough to have some fairly large RMDs now, and my budget leaves me with something extra at the end of each month. I am finding that I have a new question. It is: "What can I now afford to give to the institutions that gave me the perspectives, values, education and skills I needed to succeed?" I am grateful, and the need to show that gratitude tugs at me. And I am not just thinking of my college and law school, but older and smaller entities, like my Catholic grammar and high school, local public library, church, not-for-profit community organizations and the like. I'll never be able to thank the individuals I would like to honor, since they are mostly all gone. But these formative entities soldier on with new students, participants and members like me, and I think they deserve a share of what I've earned.
Post: Defining Enough
Link to comment from June 14, 2026
As I understand it, there has been a large excess of natural diamonds for years. The price of diamonds was carefully controlled because one supplier dominated the market, and it was able to control that world supply, stockpiling diamonds to keep them off the market. With the availability of diamonds kept low, the market-clearing price of diamonds could be kept much higher than would be merited in a freely competitive market, and the profits to the dominant supplier would be maximized. The stranglehold of that single supplier has eroded, though not completely. Artificial diamonds also carried a stigma for a while, because there was a view that "if you really loved me, you'd buy me a real diamond regardless of the price." But that stigma has eroded, too. People seem finally to be recognizing that love shouldn't be measured by the price paid for the ring.
Post: Gold and Diamonds
Link to comment from June 14, 2026
While the author and I may agree that only realized income should be taxed, there is a growing movement to tax wealth - what is simply owned, rather than earned. The state of Washington twisted its Constitution last year to pass what is a wealth tax, and California may soon have the issue on its ballot. The end goal is not just to get more tax money, but to get tax money sooner. Government doesn't want to wait for a "taxable event" any more. It needs more money now. And so it follows Willie Sutton - it goes where the money is. But if one pays on wealth one year, should they get a credit the next year if wealth declines, or they sell an asset for less than it was taxed? The deviation from settled principles of taxation will upend the tax laws in many places, and make life even more complicated. The anomalies and contradictions will eventually impact us all. By the way, 1,000 people with a billion dollars means wealth of only a trillion dollars. Even with the multi-billionaires thrown in, the tax on their wealth will barely begin to dent the deficit. The solution is to spend less than the government collects.
Post: Billionaires, taxes and you
Link to comment from May 31, 2026
Nice piece. The travel anecdote in "15 ways to happiness" is right on. I spent two months researching Japan before going last year, and enjoyed every minute. I know Jonathan read every comment I ever posted, and he taught me some things with his responses. I didn't always agree with him, but it wasn't because he was wrong - it was usually because I was committed to a "minority view". Mine. I do miss the guy.
Post: Money and Me
Link to comment from May 31, 2026
The real problem here is that state probate mechanisms are outdated, Byzantine, intimidating and costly. The governing laws often require that the equivalent of a lawsuit be filed, that specialized counsel be retained, and that many upfront costs be incurred. The process itself usually takes ungodly amounts of time to play out. Probate should be simple, with easy-to-understand procedures, and paperwork that doesn't require an advanced degree to complete. One shouldn't have to create, fund and maintain an entirely new entity - a trust - to move one's assets to loved ones and other beneficiaries. And the process should be able to play out over months, not years.
Post: The Financial Stress a Simple Document Could Have Prevented
Link to comment from May 31, 2026
I support this, although I'm not sure 12% is the right number. I think it is highly useful and desirable for the government, too. Personally, I would probably take advantage of this action even if the rate was in the 12-15% range, since it is much lower than my marginal rate for my RMDs, and I'd still have enough years left to recoup much of the negative impact of an earlier tax payment. I support a related move even more strongly - let whatever withdrawal tax rate is adopted facilitate conversion to a Roth. The main benefit from that for the government is that it will generate much more tax revenue for the government in the near term as retirees pay present taxes to avoid future ones. It works like any sales promotion - a short term discount will encourage "stocking up" on the offer.
Post: Should Retirees Get a Temporary Flat Tax Window on IRA and 401(k) Withdrawals?
Link to comment from May 30, 2026
A twist on an old adage: Failing to plan for bad health is planning to fail when it arrives. We are all different, and different pieces of our machinery will fail or slow down and impact us as we age. I rely heavily on exercise. I have for years. At 75, I'm slower and can't do everything I used to. But I still work on balance, flexibility, strength and maintaining good circulation. I push myself, but not into any danger zones. I tell people I may have 20 years left. I trust the first 10 will be OK. It is the second 10 I exercise for. (I'm not so sure about those first 10 any more. I see and feel things that worry me. But one must soldier on, and try to be prepared to deal with new things as they arise and old things that get worse. The alternative is far worse. The Boy Scouts were right - Be Prepared.)
Post: The Humbling Side of Aging
Link to comment from May 30, 2026
I'd love that if I could flip the money to a Roth.
Post: Should Retirees Get a Temporary Flat Tax Window on IRA and 401(k) Withdrawals?
Link to comment from May 25, 2026
Clever ideas? I'd love to see a list of all the gadgets, work-arounds, inventions and modifications of off-the-shelf products that readers of HumbleDollar have devised. My father was a gadgeteer, and his usual comment to the people at Home Depot who asked if they could help him was that he wasn't sure exactly what he was looking for, since he had to jury-rig something to achieve a unique end, and he'd know it when he saw it. I've inherited that gene. I love to tinker, and small (and large) manifestations of ideas to solve a problem fill my home. They help something work better. Some do things nothing else can do. Sometimes they even save me a lot of money.
Post: Lifetime Supply
Link to comment from May 23, 2026