Comments on: Buying out DW in 2013.5

By: Benjamin

Benjamin — Fri, 06 Nov 2009 15:30:49 +0000

I support measuring net worth in beers, so long as it’s good beer and not budweiser/miller etc.

By: Kevin M

Kevin M — Fri, 06 Nov 2009 14:57:28 +0000

That 0% tax rate on dividends and capital gains is a great benefit for someone like Jacob. Filing as married, joint return they (or anyone) could have taxable income (that’s after deductions) of $67,900 for 2009 and pay no income* tax. That easily covers your $360k x 5%.

http://www.irs.gov/formspubs/article/0,,id=179793,00.html

*I’m assuming the P/T job is on a 1099 basis, so SE tax still applies.

By: Jacob

Jacob — Fri, 06 Nov 2009 08:45:15 +0000

@Dave – ATM simply means at-the-money, that is, the stock price is close to or at the money of the strike price of the option.

By: Jacob

Jacob — Fri, 06 Nov 2009 08:43:44 +0000

@Mo – I don’t put any of my part time work into retirement accounts, but I max out a spousal IRA due to DW’s W2. It would be difficult to calculate taxes on capital gains. First and foremost it depends on the amount of churn which will vary during the years.

By: Jacob

Jacob — Fri, 06 Nov 2009 08:40:17 +0000

@Alex – 5% and 0% I think. We’re still in the 15% for capital gains due to DW’s income.

By: tlblack

tlblack — Fri, 06 Nov 2009 07:23:32 +0000

Interesting–so, Jacob, you and DW don’t mix your savings if I understand correctly?

I’m not sure that DW could be considered a ‘kept woman’ if she contributes to your ability to reduce your living expenses. For example, your life is quite frugal–living in the RV and all–but doesn’t DW contribute to 1/2 of your expenses, allowing you to live for even less–say by sharing ‘parking’ fees or utilities?

Also, just out of curiosity, aren’t DW’s own savings significant? Again, I look at the lifestyle–and even taking into account cable TV and the occasional pack of cookies –DW strikes me as pretty frugal too!

DW– on feeling like a ‘kept woman.’ DH and I have just moved to France and I still don’t have a job (2 months since my last paycheck). I helped stock up a significant portion of our savings before the move because I happened to come into a pretty nice salary a while back. I tell myself that I’m not ‘kept’ due to my extensive previous contribution. . .but it feels weird, very disconcerting!

Also, luckily, since I’m the one at home with time, I have the role of budget Nazi–but yeah, I did worry that DH would try to exert budgetary influence on me as well–as you mentioned Jacob might with the cable tv! Not that I spend a lot, but still–I don’t even like the idea of being told what to do!

By: Alex

Alex — Fri, 06 Nov 2009 00:22:05 +0000

@Mo- what is it in the lower tax brackets?

By: Mo

Mo — Fri, 06 Nov 2009 00:19:25 +0000

I wrote that question before learning that in the lower tax brackets, capital gains tax isn’t 15%. So, I guess there is a difference.

By: Mo

Mo — Thu, 05 Nov 2009 22:51:06 +0000

Jacob, this is a bit off topic, but this post got me thinking… At some point, would you mind writing about your approach to taxes? It seems that the amount you earn from part time work and investments would keep you in such a low bracket that the difference between capital gains tax and income tax wouldn’t be an issue. Of course there are some factors to consider– filing status, spouse’s earnings, deductions, etc… Do you put any of your part time work earnings into a tax sheltered vehicle (if that’s even possible for you)?

When you say 8% capital appreciation, is that net of taxes?

By: Dave

Dave — Thu, 05 Nov 2009 21:59:51 +0000

Thanks for the article. I enjoy this type of analysis – I checked your ehow and didn’t see any articles on ATM options – could you recommend books/sites you read on this topic?

By: DW

DW — Thu, 05 Nov 2009 21:59:17 +0000

Nice to know the option is there.. leaves it a bit more open to be able to change fields, move to other parts of the county, etc..

But no, don’t think I’d do too well as a “kept woman”. You’d (try harder to) make me get rid of cable

By: John Ingle

John Ingle — Thu, 05 Nov 2009 21:17:06 +0000

I really like this sort of analysis. Thank you for sharing it. I try analyze my own finances on a regular basis to keep up with the movements of my personal expense and savings rates. I’m currently stable at a 50/50 split. Within the month it should adjust more toward savings of 60% and then to 70% in mid-2010.

I have a single debt to settle before I can hit that 30/70 ratio though and it will drain a large portion of my current assets. At that point I’ll be debt-free with an established budget and saving habit. I’ll be just 27 years old by then, so I feel good about it.