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$$$ Benchmark as of 6/23/17

3104 Views 33 Replies 15 Participants Last post by  thetoad
For those thinking of upgrading from GEN1, and for new Volters, here's a guide. The dealer is not in business to lose money, so despite the sales guy pointing to "-$2000" on the sheet somewhere, this deal surely was profitable and should be replicable.

Venue: California
Car: Premier
Color: Summit White
Purch date: June 2017
Mfg date: May 2017
Miles: 12
GM options: Both confidence packs, ACC, leather, Bose (essentially everything possible)
Dealer inst: Ambient lighting, wheel locks, rubber mats (for when it snows in San Diego)
Car price: About $35,000
Tax/fees: About 10%, or $3,500
Down payment: zero/nada/zilch/rien
Total: $38,500 including tax, fees, license, a full tank and a full charge
Financing: Zero down, zero interest, 60 months
Rebates: Fed @ $7,500, CA @ $1,500
NET COST: $29,500 including everything
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The TrueCar average price for a loaded Volt Premier appears to be $34,940
The TrueCar average price for a loaded Volt Premier appears to be $34,940
Here's an advertised price for just over $35K with both driver confidence packages

and here's one for just under $35K

$35K is the stanard deal for a volt premier with driver confidence package 2.
One thing I didn't count on when I contributed to an IRA was the full tax picture. The notion was that I'd put the money in before taxes were taken out, then pay tax when I withdrew the money, assuming that I would be in a lower tax rate after retirement. As it turns out, if I make more than a fairly minimal amount of money outside of social security, I have to start paying taxes on my social security. So as I draw out money from the IRA, I not only pay taxes on THAT money, but it causes me to pay taxes on my SS. Kind of a double tax whammy. I'd have paid less tax on this money at the time I earned it.
Take me who earns a nice salary in the low 6 figures. As a single my marginal tax rate is 38% (28% federal, ~10% state). Putting money into a traditional IRA (or 401k) saves me 38% on taxes that can be invested elsewhere (or if I can only max it out due to the tax savings, it enables me to max it out).

If I'd put it into a Roth IRA/401k. I'd pay 38% tax on what I put in, but wouldn't pay any tax on it when I withdraw it.

In the traditional case, I do pay tax on withdrawal, but its is most likely going to be less than 38% (In retirement I'll have much more control of my tax situation, can move to a tax free state with much more ease....)

So, a Roth makes sense in basically 2 situations.

1) You'll waste the tax savings. If you won't waste the tax savings (i.e. you need it to live today, so would be putting in 38% less into the IRA/401k or you will put it into index funds and not touch it), you're better of doing that.

If you'll waste the tax savings, having less overall money today is worth it, as you'll have more overall money in the future. If you wont waste it today, I believe one does better off deferring the taxes.

2) your income tax rate today is really low (i.e. you're a student making $5-10K a year in a summer job, but living either off of scholarship / parents), as your income tax owed on this will be close to 0 as it is, so might as well have it grow and be usable in perpetuity tax free.

I'd also note that there's a risk involved with Roths. The tax code can change on us. In a Roth you are paying upfront for a deferred benefit. If the tax code changes, you paid upfront for a benefit that might be reduced. In a traditional IRA, there's little extra harm that can happen to someone as one gets the full benefit upfront.
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I agree, I'm not saying Roth's are bad, I think they are good for many people, I think others can come out ahead when it comes to traditional, consider on a $150K income (and living in NY City and California) my marginal tax rate was 38% while my actual tax rate was only in the mid 20s, my actual tax rate would have to rise a lot to offset than 38%.

In practice the calculation is a it more complicated as my tax savings from traditional are invested into S&P index funds that pay dividends and while those dividends are reinvested I pay tax on them with my income today (in practice if I was really really really smart, I'd try to mimic the S&P funds with the dividends producing stocks in my IRA/401k and the non dividend producing stocks in my non tax defferred accounts, but too complicated for me, though it makes me wonder why no on has index funds along these lines, i.e. 1 fund of S&P stocks that are dividend producing and one that is not so one can take advantage of this)
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