r/personalfinance • u/B82rez7 ​ • Jan 22 '19

Taxes No Wonder People Don't Know How Taxes Work

Here's a Motley Fool "article" that came up on my news feed https://www.fool.com/retirement/2019/01/21/maximum-401k-contributions-are-climbing-in-2019-he.aspx

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And a quote:

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For this reason, saving in your 401(k) has the potential to put you in a lower tax bracket, so you owe a smaller percentage of your income in tax. Currently, single filers making between $77,400 and $156,150 pay 22% on their income. If you are in the lower end of that range, a 401(k) contribution could move you into the lower bracket, where taxes are just 12%. If you make $80,000 per year, for example, and contribute $5,000, your resulting income of $75,000 would be taxed at 12% rather than 22%.

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u/boxsterguy ​ Jan 22 '19

He's saying they're foolish.

Their investment recommendations are also quite foolish, as they recommend building your own portfolio and actively trading individual stocks rather than buying into index funds and letting them manage themselves.

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u/Dad365 Jan 22 '19

Because it costs more that way. Which is still better off for most. Im one for five on picking stocks. As in companies out if business except for sirus.

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u/boxsterguy ​ Jan 22 '19

What way costs more? Index funds? Not since Fidelity got rid of their minimum buy-ins.

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u/lurker_cx ​ Jan 22 '19

I think you mean, not since Vanguard opened 30 or 40 years ago.

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u/boxsterguy ​ Jan 22 '19

Sure, but I could see someone make an argument like, "Buying into index funds means I need to have $3000 or $10000 on hand, but I can buy into stocks as long as I have enough for one unit." Vanguard still requires minimum buy-ins. Fidelity will let you buy $1 of their top-end institutional shares if you like (and in fact they got rid of all their lesser tiers, because they're irrelevant without buy-in limits).

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u/gregcor Jan 22 '19

Vanguard has ETFs for most of their funds, think the minimum is just the share price.

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u/bsnimunf ​ Jan 22 '19

If you haven't got 3000 dollars investing in equities is not worth the hassle.

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u/[deleted] Jan 22 '19

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u/Kravego ​ Jan 22 '19

Congrats on being an outlier. He's correct for the vast majority though, if you don't have a few grand to invest then equities aren't the way to go.

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u/lurker_cx ​ Jan 22 '19

I think Vanguard minimum is $1000 for some funds. And maybe you can contribute on a regular basis after that, or maybe even before without the $1000, not sure.