[quote=SK in CV][quote=no_such_reality]
Not major but those little expenses add up and more importantly drive you to realize income which then adds an additional tax expense.[/quote]
Unless I’m missing something in what you’re describing here, borrowing money doesn’t normally create any income or additional income tax expense.[/quote]
The borrowing doesn’t. The paying it back requires income. Unless you’re in the 1% or on a government pension, managing your realized income is a critical component of retirement. Most struggle to have enough income, a small percentage struggle to manage their taxable income and even smaller percentage worry about maximizing their returns, income be damned.
Say you need $10,000 for insurance, you need another $10,000 for food and utilities and $8,000 for travel and another $12K for cars and what not spending.
You can get by on $40K. The health plans will give you a subsidy backing out $8000 of that expense. Your taxes will be $2200 on the Fed form before credits.
Add the loan repayment, and you’ve bumped your costs $15-$20K a year. Your taxes jump another $2500 a year, your tax credit drops another $2500 ($5000 net swing on taxes) Run over $65K in income and you completely lose the insurance credit.
Similarly, the tax burden on $40K realized income in CA is about $290, on $60K it’s $1000, on $80K it’s $2200.
Granted, I think most of us would rather be in the crapping money out of our investment spending $150K a year, but that’s not going to happen for 98% of us.
sp, yes equity has options, but housing is illiquid for a good reason, that’s why a lot of wealth managers don’t count primary. Consuming your primary is the ultimate wealth destruction.
