In terms of capital preservation and growth what do you guys recommend doing for the newly employed first year analysts?
Are BB analysts with 100k base eligible for Roth IRA? Are there backdoors to take advantage of? Should we file for tax extensions? Should we withhold deductions? etc. These are just some buzzwords I've heard, I don't know shit so please explain like I'm five.
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Set up an overseas trust, funnel money there, pray the tax man never finds you, become Jeff Bezos
For legal purposes, this isn't legal @ the IRS
Following, but the Roth IRA question is simple. Yes, you can backdoor into the Roth IRA from depositing the 6k into a traditional ira and immediately converting it to roth. Very simple takes a few minutes and it's a no brainer for only 6k. Interested to see what people say on 401k.
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This country was literally founded because we didn't want to pay taxes bro
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Dump all your income into capital, borrow money for daily expenditures and deduct interest expense against future taxable income. Find your optimal capital structure using GoalSeek. ok jk...
is this legal?
With 100k base, you shouldn't need to do a backdoor Roth as you won't hit the income limit. Doing a regular Roth IRA contribution is fine. If you're paranoid that you'll suddenly come into a bunch of income that will put you over the threshold, you can do a backdoor Roth, which has the same end result but extra steps.
With regards to withholding, no need to do anything as your paycheck should already withhold enough taxes to keep you out of underpayment territory, provided you weren't too aggressive in reporting deductions on your W-4. If you have income from other sources (cap gains, rental income, etc), you may need to make estimated tax payments.
If a Roth 401k is available to you, consider the Roth over the Traditional when you first start. Assuming you start mid-year with 100k base and don't receive your bonus until the following year, your marginal tax rate will be extremely low, giving a Roth 401k better bang for your buck. Switch over to traditional once your bonus/pay raises raise your tax bracket.
In your early years, don't stress too much about tax planning. Most important thing is to funnel as much money as you can afford into tax-advantaged investment vehicles (IRA, 401k).
Great, thanks for the comprehensive answer. Any strategies I didn't mention originally that you recommend?
Other things to look into are payroll deductions from your employer. Main ones would be FSA/HSA for health spending and public transit/parking. You're probably spending money on these things anyway, might as well get the tax deduction for it.
The HSA is particularly attractive if you are on a high-deductible insurance plan that allows you to open one. It's triple tax-advantaged, beating out even IRA's and 401K's. You get a deduction when you contribute, the contributions can be invested and capital gains are tax-deferred, and if you spend the money on qualified health purchases, there is no tax at all in the end.
These are great, please keep the tips coming.
Not necessarily tax advice, but I'd create a budget and then sweep everything else past your number into a brokerage account and don't withdrawal it. If you want a new pair of sleds or a weekend trip you can wait two weeks and budget for it instead of selling some stock or whatever asset you own. Also, every Monday I export my bank statement into excel and then copy and paste it into a general ledger to see what I've been spending money on. Helps to cut down on needless spending and weekend debauchery when you see the line items instead of just seeing the total balance.
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