Sat Feb 01 2025, by Tyler Gardner

How I Would Shelter 55% of My Income Legally

I'm Tyler, a former financial advisor and portfolio manager. Now I create financial content for free, so you don't have to pay for it.

Step-by-Step Breakdown

Number one, let's say my wife and I make $125,000 a year pre-tax.

Number two, I'd put $23,500 into a traditional 401k, using an above the line deduction.

Number three, I'd contribute $7,000 into a traditional IRA, also with an above the line deduction. And yes, this is fully deductible because we make under $126,000 gross.

Number four, then I'd add $8,550 into our family's health savings account, again with an above the line deduction.

Number five, we take the cherry on top by applying the married filing joint standard deduction of $30,000.

Finally, we'd inform the taxman that we only made $55,950 of taxable income, even though we'll have close to six figures of disposable income.

Tax Bracket and Long-term Effects

By utilizing these strategies, we can shift from the 22% marginal tax bracket to the 12% marginal tax bracket. This planning will enable us to become millionaires in just under 17 years, alleviating concerns over unforeseen health expenses.

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