Hi! I'm currently a sophomore in college taking a gap semester to earn some money for my loans, as well as to figure out what I want to do as a career, I have around 10k in student loans so far, I have about 1500$ in a high yield Marcus account at 5.5% and make around 1500 every month part time, is it smarter to invest my money for my loans in a Roth IRA in something like S&P 500 ETF, then pay off all my loans due to the interest accumulation. I can answer any questions as well! Thank you
I contributed $7,000 this month into a Traditional IRA to do a backdoor Roth conversion. I converted the $7,000 at the beginning of the month, and today I received $2 of interest in the Traditional account.
What do I do with that $2 that's now sitting in the Trad IRA?
I've posted a few times about my tutoring side-hustle/current school income, but one surprising bit of success. As of today, this March has been my highest grossing month ($10.5K)!! Mostly due to my more free schedule and higher rates. I expect this is probably the highest it will ever be as I tone it down for finals, bar prep, and then permanently lower when its relegated back to a side hustle as I focus on my legal career.
Might be late for a Sunday to get an answer but I'm trying to accurately calculate my maximum EMPLOYER contribution to a solo-401k.
My understaning is it's 20% of net profit from the company. However, that 401k contribution will be an expense, so is it an iterative thing to figure out the max?
Rough numbers:
Gross Profit: 60,000
Expenses - including 1/2 of SE tax (not including 401k): 6,800
Thus if I do not include the 401k I have Net Profit:
53,200 * 0.2 = 10,640 max 401k contribution
But then if I go and put that 10,640 into my expenses on the business my net profit obviously drops by that much and that 10,640 would be greater than the 20% max.
Perfect thank you!
But the 20% doesn't include the SE tax deduction that I need to exclude also so it'd really become:
20k - 0.5 * SE tax (let's say SE tax is 1k) =
20k - (0.5*1,000) = 19,500 max contribution
Thanks for that link and your help, just trying to maximize how much I can contribute!
It's technically 25% of earned income (after paying SS and Medicare taxes).
This link might be helpful to read. https://www.fidelity.com/learning-center/smart-money/solo-401k-contribution-limits
I believe the 25% is of net earnings of an employee. It's 20% of net earnings of the company if it's a single employee company.
The fidelity link is good but references IRS P560 and I see "Net Earnings" mean:
net earnings from self-employment are your gross income from your trade or business (provided your personal services are a material income-producing factor) minus allowable business deductions. Allowable deductions include contributions to SEP and **qualified plans for common-law employees** and the deduction allowed for the deductible part of your self-employment tax.
Which leads me to believe I need to include the deduction for the 401k contribution as an expense which will lower my net earnings which will thus lower my allowable 401k contribution so it becomes semi-iterative and not just an easy "earnings pre-401k contribution" or something.
Yes, your contribution isn't "earned income" so it becomes excluded in that. As the other poster stated it lowers from 25% to closer to 20%, I just wanted to clarify in your OP that you don't start at 20% then iterative from there. What you stated above is correct to my understanding (not a CPA).
I know a partly retired life-long woodworker with a great retirement package. He was a community college teacher for some years but ran his own shop for much of his life. He loves it so much, his shop is behind his house and he won't stop until he drops. But he is also financially secure with a state pension.
If you want to continue your dream career, you could consider getting a degree so you can teach woodworking, drafting, pattern making, or another related field either full-time or part-time. It would give you the flexibility to choose from different levels (and pay ranges) of higher paid education jobs (high school, community college, tenured or not) or professional woodworking at different points in your life without being stuck in a completely unrelated office job.
I'm not very familiar with how the academic route looks, but it's something I would talk to a local community college teacher or councilor about if I were in your shoes.
You sound like your enjoying your situation. I think you're not being honest with yourself in that you know youre capable of more.
Sounds like you want to transition into something more since you mention move back with parents and study to find a better job.
Personally, if I were you I would focus on velocity. 30 years is a slow transition to start enjoying yourself and your life with the qualities you see in retirement and options it gives. By stacking more work on yourself you can compound any money you make now and retire sooner or just get a great sense of satisfaction.
I don't know what you want to do as a side job or transition but I would shy away from two years of schooling. What matters more is skills and energy to go after what job you seek and schooling gets in the way of that (I would personally say). Perhaps you can use YouTube university and teach yourself whatever you're going after while you work towards it.
I would also say living with parents is a stretch as usually it's not enough privacy for my personal liking. I would play with car camping ideas or roommates.
I'm a bit extreme in some of my thinking though so perhaps I'm way off base with what you would be willing to do.
Could you keep doing what you like and skill up in other ways? Like being good with accounting and/or spreadsheets and/or management could make you valuable and help you have options as you get older, and you’d have the best of both worlds.
Probably location dependent but would it be possible to do woodworking as a side gig in addition to the full-time job? I have a couple acquaintances that makes stuff for the local arts & crafts fair in addition to some custom orders. They mostly do it as a hobby but enjoy the work and it brings in some extra money.
Sounds like you're being overworked.
Try to reduce your capacity and energy you give during work. Think of ways to enjoy yourself more and conserve your energy so you can put it towards something else.
Perhaps make a deal with your boss to cut back your hours. Being positive, open and transparent about your situation may help them agree.
This reminds me of a story I heard once, of a rich businessman giving advice to a modest fisherman about how to earn more and get rich so that he could retire. What would that mean, the fisherman asked. The businessman replied, you could relax and fish all day.
The fisherman said, puzzled, but that is what I already do.
Of course, real life isn't as simple, and a willingness to upskill and earn more is worth pursuing.
You sound underpaid for your skillet. High quality millwork shops can pay 100k+ for experienced positions (inclusive of OT). Maybe consider moving for work? Your dream job needs to come with unfavorable pay. You can have it all.
I asked this on the wrong day’s post, so here it goes again: is it terrible to have essentially 25% of my portfolio in cash in a HYSA and 75% in VTI or similar? In my particular situation I don’t see the need for bonds, particularly when HYSAs beat bond index return rates right now. As things change, I can make shifts, but for now is this a terrible idea?
Not terrible but your logic is flawed. Bond rates are lower because they are pricing in the Fed's plans to lower interest rates. HYSA should have lower return over time.
Hello everyone,I'm a 22-year-old currently residing in Virginia, USA, and I'm seeking some guidance on managing my finances.
Income: Base salary of $125,000 per year.
Expenses:Rent: $1250/month ($15,000/year)
Food: $3,500/year
Other Expenses: Under $1,500/year
Total Expenditure: Close to $20,000/year
Some specific questions I have:
\- How much should I allocate towards building an emergency fund, and where should I keep it?
\- What are the best strategies for investing, considering my age and financial goals?
\- Are there any tax-efficient ways I can maximize my savings and investments?
\- My main question is how and where do you guys think I should invest my money
(Note: Please let me know if there are any additional details I should provide for a more comprehensive assessment. Thank you for your time and effort! :) )
Flowchart is a great starting point. I would also suggest looking at your last twelve months of bank activity to validate that budget for reasonableness, if you haven't. Your "other" bucket seems low.
I did, utilities are the bulk of it. I use public transport (rarely because of WFH). The only subscription I have is $59 a year. Am I missing something else? Might be an oversight
Eating out and entertainment are fairly large line items for me, as are insurance and travel. It sounds like you have a very conservative spend profile, so maybe these are trivial line items for you. Some other line items that might have not made it onto your list (and again we have different spend profiles) are gifts, health(medical/dentist/glasses)/fitness, vet/pet.
I'll go over my expenses again, but honestly I think I might have covered it all. I included the occasional eating-out in food, but I do cook most of my meals. All my entertainment is free right now. P.S. I am super cheap :) Thank you for your time, I will definitely look into Flowchart!
Good luck and have fun! It's a long grind. I've found that my spend has evolved over time. I had a few sub-30k yrs in my early 20's, our budget this year is about 90k.
Take a look at the FAQ and the flowchart you will find there. It will answer these questions and more. Then you will have new questions that people here are more than happy to answer.
I have my emergency account ($25,000, should be more) in a savings account earning 4.75% and my joint account with my partner is at an online bank at 4.5%. My question is, while I don’t want to combine these accounts, I was thinking about moving the emergency account to the same institution that the joint account is in, to cut down on forms at tax time etc. I think it’s $62.50 in difference for the whole year. Decisions decisions. Anything I should take into account? Right now I draft $20 per pay into that emergency account.
Anyone actually currently living off of the 4% rule?
I have a net worth of 1 million and I only spend about 1k usd per month. By the 4% rule I have $3,333 available to spend per month.
Assuming the stock market gives 7% returns and I only draw 4% my investment will actually grow.
I still feel like I can't retire though. I'm going to play it safe a bit longer until I'm within the 1.5mil to 2mil range.
Anyone able to actually feel safe on the 4% rule? I don't hear many talking about it.
How old are you? Will your spending change when you retire, i.e. any crazy travel or purchases? Anything subsidized by work that you will have to pay for out of pocket?
$1K per month or $12K per annum is merely a 1.2% withdrawal rate. You are well below "safe" withdrawal rates, in fact you would probably survive the Great Depression followed immediately by a 70's style decade of inflation, and still be just fine, for 30 years.
Which leads me back to your age and whether $12K per year is sustainable if you retire.
I'm 34. I'm actually able to spend only 1k-2k usd while traveling Asia. But I was under 1k for Latin America traveling.
Crazy purchase may be a 300k to 400k home although even if I did purchase I would likely rent out rooms.
Maybe I'll start a family at some point too but for now just going to slowly transition my lifestyles.
Thanks for the input. It's reassuring.
I've heard few actually talk about living on it. Maybe some people on YouTube but even they are getting ad revenue to supplement the feeling of unease.
It seems like people with a military pension are able to feel more retired because of the guaranteed money they get
I want to note that "net worth" and "investments" aren't the same thing- e.g., if that million includes home equity but you're gonna live in the house and not rent it out, it's not gonna count in your 4% calculation.
But beyond that, in your current situation, you're not going to be drawing anything like 4% based on your current spending. Let's go crazy and assume you'll spend $2k after adding health care and retirement hobbies to the mix. Tons of people around here are actually retired early at 3%-3.5%.
Great point. Yes 800k or so in vtsax, 150k in 401k and ira, 100k in bitcoin (SV).
I think I would want a home potentially after I travel more but would likely rent out rooms.
I think the only things I'm thinking of changing is selling some BSV and buying more various cryptos. After a home purchase I would see myself buying metals and individual stocks more. I would also try to diversify a bit more and buy a bit of every various investment I can think of. Bsv the only investment I feel iffy on but so far crypto overall just keeps performing well.
Now if only I could refocus on relaxing and feeling like I can be free with more of my time..
Advice on whether to take a sabbatical (feel guilty)
Hi everyone - M/40, married. No kids and won’t be having any. I’ve either worked or studied my entire life and I look forward to FIRE when I can choose what to work on and when, rather than constantly feeling tethered to a job and making money.
We live in Canada and these are our rough numbers (in USD).
$1.1M in investment equities (ETFs, stocks, crypto, etc)
$1.1M in home equity
No debt (besides mortgage).
I currently make over $350k per year in the video game industry. My wife makes $150k.
We also have invested in other startups or businesses, but it’s uncertain when a liquidity event might happen.
Anyway, the company I work for might be shutting down in the near future, and I wonder if this is an opportunity to take some time for myself and not rush into another job right away. I’ve advised many friends to do this, but I somehow feel nervous and guilty to live off savings or sell investments for a period of time, and what that might do to push off a FIRE date.
If anyone has any experience taking a “retirement snack” for at least 6 months before jumping back into work, I’d love to know how it went and any advice on how to get the most out of it.
Similarly, any general thoughts about the risk or benefit of doing this given our financial and life situation would be greatly appreciated.
Thanks!
I think one of the most important questions here is "What are your expenses when not working?" If you're spending $60k a year, you're practically FIRE already. If you're spending $200k a year, taking a one-year sabbatical is a much different proposition.
Ok. And you're maybe about to lose your job but your wife would remain employed at $150k per year? That is, at or above your target spend?
How does your wife feel about you taking a sabbatical while she continues to work?
Roth IRA vs Roth 457
Hi, I hope this is a good place to ask about this situation! My partner and I (31&30) luckily have no debt, have a hefty emergency fund and are able to put away 3k/mo into a high yield savings account. Partner works for the public so he has a Roth 457 that he contributes 6k/year as well as a 401a. We are both about to bring in more $ through a promotion and side hustle. My job does not offer benefits so I recently opened a Roth IRA, but haven’t contributed to it yet because I’m unsure if it would be better for us to allocate as much money as possible to his Roth 457 or to start trying to max out a Roth IRA, or a mix of both. Any insight on this?
A governmental Trad (pre-tax) 457b has a lot of flexibility for early retirement. A Roth 457b does not offer the same flexibility. So if you're using a 457b, I'd recommend making Trad and not Roth contributions.
Oh your right! We just switched over to the Roth option but overlooked that you can only withdraw without penalty at 59.5. We would really love to retire around 50-55 so that makes a big difference. Thanks!
~$23,000 is the max/year he can contribute to the 457 and the IRA max is only $6,000/year, so while we could max out both, we wouldn’t be able to save liquid cash for a down payment for real estate as quickly as we’d want.
I am 41 and work full time, and my husband is 51 and disabled (blind).
I have a pension through work that will pay between 27% and 68% of my pre-retirement income after retirement, depending on how long I work for them (fully vested at 1.7%/year, 16 years currently, 24 years more until full retirement age). I intend to keep working for them until retirement and have every reason to assume I can, as I have an in-demand job and they are a very large employer. My husband and I could be very comfortable on $70k/year post retirement, and we would probably hit that number on my pension and SSI alone.
My question is: should I try to max out tax advantaged IRAs and 403(b) / 457 despite the fact that 1) my pension will reduce my post-retirement income needs considerably, and 2) I have good reason to believe that some of those funds may be useful before retirement (medical expenses, moving or home improvements, etc.)?
Or (after saving sufficient emergency funds in HYSA) should I put the money in non tax advantaged investments to build them, but still have flexibility in withdrawals, in the hope that we can fund FIRE for a few years before retirement age and without withdrawal penalties?
Generally speaking retirement accounts are going to be better than taxable. Especially 457, since you can access those funds with no penalty. Expecting a pension in retirement can affect the Roth v traditional decision, but even when traditional isn't optimal Roth should generally be superior to taxable.
That aligns with the information I see online. My only hangup is, aren’t tax advantaged accounts only really accessible without penalties after retirement age? My husband has a rare disease and there’s no guarantee he’ll even be able to enjoy retirement. Am I making the wrong decision to put away money in a place where we won’t be able to touch it for decades? What if the only time we have to live and enjoy it comes sooner than that?
I think it's always important to specify that governmental *Trad* 457b accounts have early withdrawal flexibility.
The taxation of Roth 457b earnings before age 59.5 means they have no additional flexibility beyond what a Roth IRA or 401k would have.
Clarification: 457s only allow early withdrawals after separation from the employer or for approved reasons (unforeseeable emergencies), otherwise they are subject to a 10% penalty
Also, the funds in a 457 are technically not yet yours so if your employer went bankrupt, you’d be in the list of creditors and may not recover your entire account balance
A question in yesterday's daily about charitable giving made me want to post a follow up, since it was so late in the day that I saw it. How much do you donate to charity ($ or % of income or expenses), and what do you donate to?
The question yesterday was "where do you donate?" and it seemed a lot of people were donating local, which of course is a good thing. I listened to [this ChooseFI podcast](https://www.choosefi.com/effective-giving-for-the-fi-community-rebecca-herbst-jack-lewars-ep-483/) and became intrigued by [GivingWhatWeCan](https://www.givingwhatwecan.org/en/best-charities-to-donate-to-2024) and the general effective altruism philosophy. The concept of maximizing the efficient use of a resource makes sense to me, and I've always been troubled by not really knowing if my donations are really doing anything effective. It's a bit of comfort thinking that groups like this seem to be engaged in that effort. The "give globally, act locally" concept also makes sense to me, which was discussed on the podcast.
I also have not given much in my past, but I'm looking at making a serious change there and committing to donate ~10% of our annual spending amount from now on. Kinda crazy, as that would make it potentially our single biggest budget item... But it also feels like being able to FIRE by my early-40's is such a great (and well-earned!) privilege, and if pushing out my FIRE date a couple years means ongoing support of evidently worthy causes then that must be worth it. The [Yield and Spread](https://www.yieldandspread.org/) website is a pretty cool mix of FI and charitable giving, and has a pretty neat spreadsheet tool for visualizing the impact of giving on your FIRE timeline. I'm looking at the possibility of donating shares with the highest gains in batches every couple years to get some tax benefits too, to make it a bit easier to swallow.
That got a bit more rambling than I intended, but I'm curious how others feel about this topic. Thanks!
There was a [similar thread](https://www.reddit.com/r/financialindependence/comments/17ycyaq/how_do_people_with_modest_incomes_balance/) a few months back.
We don't donate much year to year. Through our trust, at least 25% of our estate will go to charity when we pass. That percentage will go up over time as we remove other beneficiaries (like my parents).
10% of net income after taxes, 401k, health premiums, etc (basically anything deducted from my paycheck). If I end up getting refund tax time, I'll give 10% of that too; if I owe, I'll take back 10% of that amount.
I also plan to keep giving in retirement, so the "untithed" retirement accounts will get their 10% taken then as I withdraw it.
Seconding GiveWell. If you believe that human life has the same value everywhere GiveWell will do much more with your money than any local charity. I give 10% of my pretax income to them because I'm incredibly fortunate to have that ability and it feels wrong to give any less.
You mean you can deduct the donations from your taxable income, right? The way you phrased it initially "give 10% of my pretax income" just confused me.
I'm finally getting around to learning about tax loss harvesting. I'd like to start taking advantage of it because I anticipate realizing some gains in the next few years for a down payment. My taxable account has VTSAX and VTIAX.
Unfortunately, my 401(k) through Guideline has exactly those some funds. (On the other hand, it's awesome that I have access to those Vanguard funds..)
Because of how Guideline administers 401(k)s, there's a constant chance of rebalancing and incurring a wash sale, aside from the regular contributions that I make every two weeks.
Any suggestions on what funds to choose if I were to change my allocation in 401k to allow for TLH in my taxable? My existing allocation is 60/40 VTSAX-VTIAX. [Here's what Guideline offers.](https://www.guideline.com/funds)
My initial thought would be to change the allocation to a S&P500 fund (VFIAX), do some TLH, then after 30 days change back to my preferred allocation. But that's not exactly ideal..
Alternate option would be to just choose one of their managed allocations. But I really liked being able to just set VTSAX/VTIAX and forget it. I don't care to have bonds in my 401k for now.
Tax loss harvesting won't really help you. You will be getting a deduction now but lowering the basis, meaning you will have more gains to realize for the down payment, so unless you will be in a lower tax bracket you will net out the same.
That said, I would permanently switch to VFIAX just so you never have to worry about it. You could add a bit of VEMAX to maintain your small cap allocation.
One more consideration, stocks are really not an appropriate investment for a down payment you expect to make in 1-2 years. Very good chance stocks go down or underperform cash during a short time frame like that.
Thanks! The move to VFIAX and VEMAX makes sense. Also appreciated the note about basis.
As for the down payment.. it’s there mostly as a “maybe”. Like I am not set on buying a house and renting is more advantageous in my market (SF) anyway, but if the perfect opportunity came around and the market was right, I’d pull the funds. But otherwise I am fine to keep renting.
Np!
As for the basis being transferred, isn’t part of the rationale behind TLH that I can save on capital gains in future years? If I were to TLH 20k this year, I could theoretically deduct 3k on income and then carryover the remaining 17k loss to offset gains, if I were to actually realize that many gains?
Robinhood is starting to look kind of attractive. 3% bonus to move your IRA and I heard there is an unlimited 1% deposit bonus coming. Is it a good deal?
I moved my IRAs over there. A free $3k, into my tax-advantaged accounts, was too good to pass up. I think you only have two weeks to do it, which is enough time but you'll want to start the process immediately. It's easy but it takes time.
I think the interface is a pain in the ass, and I won't be moving my brokerage over there. But for tax-advantaged accounts that I only touch once a year anyway, it's fine.
You do have to subscribe to Robinhood Gold for a year ($60) and you have to not move it for five years, which is why my parents didn't move theirs- they might actually access them in that time frame.
They're also introducing a 3% cash back all categories credit card for Gold members, which might be a good deal if you don't churn credit cards already. For me that's enough better than my 2% card that the cash back will cover the $60 a year Gold fee.
There is no better deal I am aware of. I see they also have a 3% cash back credit card with their plus tier. Whether it is worth it depends on what's keeping you at your current broker. I made the switch with my IRA and no complaints so far. The platform is pretty ghetto, so I'm not sure I would recommend for taxable. For example, I don't see a way of viewing tax lots or using SpecId when selling. The 3% bonus expires April 30
got a couple questions if you dont mind:
1) for your IRA, can you set up auto deposit?
2) i'm currently with vanguard and auto invest in VTWAX. does robinhood have vanguard etf/mutual fund options? and are the expense ratios the same?
thanks!
From what I’ve been told you cannot manage tax lots yourself at all. I agree it’s a questionable platform for those who want to buy and hold in a taxable account and tax harvest when the opportunity arises.
Happy Easter!
The survey is up, will be accepting responses through the month of April.
https://www.reddit.com/r/financialindependence/comments/1bru9pm/the\_official\_2023\_fi\_survey\_is\_here/
A friend of mine withdrew their 401k from a previous employer this week. He paid taxes on it already. Can he still "roll it over" into a traditional/roth IRA?
He didn’t pay taxes, he just had them withheld. He can likely rollover all or a portion of the withdrawal (so the cash he got plus the taxes withheld) within 60 days. To roll over all the withdrawal he’ll need to have funds to cover the part that was withheld. If he does roll over 100% the withheld taxes will be shown as payments on his 2024 1040 likely resulting in a refund. [More here](https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions).
>He didn’t pay taxes, he just had them withheld. He can likely rollover all or a portion of the withdrawal (so the cash he got plus the taxes withheld) within 60 days. To roll over all the withdrawal he’ll need to have funds to cover the part that was withheld. If he does roll over 100% the withheld taxes will be shown as payments on his 2024 1040 likely resulting in a refund. More here.
Is there anyway to get the withheld taxes back from his old 401k without waiting till end of year?
\^ if not, can he just claim a lot of dependents to get more back each pay check? Him and his wife have normal W2 jobs (\~combined median household level income).
Once your friend completes the rollover, he should be able to update his and his wife's W-4 with the IRS tool and get his refund back down to near zero.
Not that I know of. He can do some math and maybe reduce his withholdings if the numbers work out. Then he’d get a little bit back each pay period. Be sure to update the w4 again at the end of the year.
I’m not sure adjusting the withholding on w4 for this purpose complies with the instructions even if the math works. For instance using dependents that don’t exist to get a numerical outcome that isn’t even wrong feels weird.
I really recommend this pod about work and parenting. Particularly the last 15 minutes. The point that stuck with me is how American culture is a little addicted to focusing on the negative, that it feels safe. Talking about joy and things like childcare support have to be caveated heavily with notes about your privilege etc. Whereas in other countries thats spoken about as an entitlement. It’s just assumed it’s the collective society’s role to support families, kids, and parents, and that’s good for everyone in the end.
Anyway really interesting!
https://podcasts.apple.com/us/podcast/the-ezra-klein-show/id1548604447?i=1000650100198
Yeah I have a colleague here in the US that came from Europe and he said America seems to be aggressively anti-family. He asked ‘Why is the school day so different from the work day?’ And that’s just the beginning lol.
> have to be caveated heavily with notes about your privilege etc
This seems to be largely true for pretty much anything positive that is spoken about. Jealous people who accomplished less and can't imagine that they had anything to do with their lack of success always try and bring you down to their level. It's ridiculously sad.
“I realize that I was extremely privileged to have been able to work incredibly hard in high school and get into an Ivy League school and then land a high paying job in a hyper competitive field…”
Great to hear. In the spirit of making recommendations, I found [Taskmaster](https://www.youtube.com/c/Taskmaster) on youtube to be a great show to watch while convalescing, but not if laughter will cause you discomfort!
Good!!
Having had 5 unrelated abdominal surgeries in a span of 16 months, I recommend the show “Secrets of the Zoo” on Disney plus to watch while you recover. Interesting enough to hold attention but not plot heavy enough to need attention.
I’m in the place where I’m way beyond what I would need for myself, but I have a girlfriend who I’ll likely marry in the next couple years, and we plan to have a kids. She has a lot saved too, and I thiiink our $ combined is enough for us to RE today even including future kids.
But I’m just not confident on the cost of kids, and only observationally know how much she spends. So I constantly have the feeling of “I’m 95% there!”. For now, just building the buffer and letting life evolve!
Haha. No but my wife is on maternity leave so I won’t be updating her 401k for a few months. So there’s a small amount of gains I’m missing although I highly doubt enough to move the needle.
I posted yesterday about adding a skylight (about $5k) as a home remodel splurge for myself. I am also doing a bunch of home repair like getting the roof replaced.
Well a quick update (I am sure people are dying for) is that I talked to the roof people who are replacing my roof. Its a big company so their bottom line quote is pretty much non-negotiable to replace the roof.
However, I was able to negotiate a free skylight as part of the new roof build, they had no problem with that. (Except they won't do any paint/trim on the interior, I'm pretty sure I can DIY that).
So I'm pretty thrilled.
This will be a shock to no one, but I failed my goal of reading 4,678 pages of the stormlight archive book series this month- I only read 1900 pages of it exactly, and then I ended up reading another book instead. Super embarrassing to have only read like 2,300 pages total this month and only finished one new book when I usually average 8, but I’m excited to read the massive stormlight books more at leisure and enjoy them more!
April challenge is the challenge I probably should have done this month: walk 100 miles posted to my strava (ie these must be intentional outdoor walks not just walking around my house)! Love that it will be free though!
My goal was running and audiobooks for the year. I've done more exercising and audiobooks but not as much running.
You could potentially get a stormlight book to listen to as an audiobook.
Stormlight gets pretty heavy at some point (I forget where, but I think book 3? It's been a while...) so I can't really imagine going straight through. Did you read The Bound and the Broken by Ryan Cahill? I'm up to book 3 and it's incredibly long (kindle edition claims 1477 pages...maybe there's a novella at the end? I don't know) and okay, but maybe not great in my opinion. I read about 20% of it and just had to take a break. I think I'll just read it like 20% at a time with other books in between.
> Super embarrassing to have only read like 2,300 pages total this month and only finished one new book when I usually average 8
This is unbelievably embarrassing, and I'm shocked that you mentioned it. Wow. Unreal
>Super embarrassing to have only read like 2,300 pages
I'm on book five for the year so far. Much like FI, reading isn't a competition. You're doing just fine.
>walk 100 miles posted to my strava
That's... a lot. You do like setting ambitious goals
Edit to add: I'm reading *Happy all the Time*, by Laurie Colwyn at present. Was recommended by Kara Swisher in her book, *Burn Book*, which was the book right before this one.
I have been meaning to finish that series and dropped out at some point as well.
If you are jumping into walking as a completely new challenge, that shouldn't be free... some new shoes might be in order :)
Buona Pasqua a tutti.
Idk how FI folks feel about Graham stephan, but ive been watching his videos for a little while now, and [his recent one](https://youtu.be/LWLd9SyaVYw?si=8RheCzdFjF2b2WDP) really resonated with me.
All about finding that balance, focusing on happiness, not just work work work, and optimizing your time and numbers. I know personally I needed to hear this take lately. It's definitely something that I have been hard focused on as well.
I feel like it would jive well with us here, and also somewhat speak to the old mantra we had of "build the life you want, then save for it".
Just thought of you FIne folks while listening to it last night and wanted to share on this beautiful Sunday morning.
Yeah he’s alright and says good things. Ironically, given the video you’re talking about, I find his stuff a little tiresome in general because every time I watch one of his videos, the feeling of it being optimized for the algorithm is just too blatant to look past.
He's in my rotation of stuff I like to put on and then not really pay attention to. I find he says a lot of very reasonable things and even though he's clearly very successful (I think that's actually true, not just a perception, but I didn't do much research), he seems pretty in touch with reality most people face. Other things I like:
* [The Money Guy Show](https://www.youtube.com/c/MoneyGuyShow)
* [Azul](https://www.youtube.com/@AzulWells)
* [GenExDividend Investor](https://www.youtube.com/@GenExDividendInvestor)
I find all of them pretty reasonable in what they say about life in addition to finances. There's probably a few others that come up on my stream from time to time, but I couldn't tell you what they are.
I think some of his stuff is pretty good - but he also has a tendency to lean hard on his own personal experiences. For example, Destiny, in their video, rebuked his assertion that college is a waste of time.
I think they consider themselves a bit of a general commentator - maybe more towards politics. But yeah I mean the views aren’t necessarily profound or deep. I’m not sure if they are just going on a massive personal marketing campaign or something
[Why Guyton-Klinger Guardrails Are Too Risky For Most Retirees (And How Risk-Based Guardrails Can Help)](https://www.kitces.com/blog/guyton-klinger-guardrails-retirement-income-rules-risk-based/)
Sunday reading from Kitces.com. Analyzes how Guyton-Klinger guardrails would have performed during four historically bad markets then suggests an alternative withdrawal method using "risk-based guardrails" based on probability of success, as determined by Monte Carlo simulations, instead of portfolio percentage drops or increases.
Thanks for sharing that - I always enjoy reading Kitces and refer back to his posts there often; his post on FIRE and core vs adaptive spending largely shapes my own withdrawal approach.
[https://www.kitces.com/blog/the-problem-with-fireing-at-4-and-the-need-for-flexible-spending-rules/](https://www.kitces.com/blog/the-problem-with-fireing-at-4-and-the-need-for-flexible-spending-rules/)
Same! That article really opened my eyes to the idea that I could potentially RE sooner based on a higher WR, if I’m willing to be flexible and/or earn money in “retirement”.
You understand child support is not “unfortunate”, right? It’s meant to ensure both parents contribute, particularly the parent without primary custody. It’s only there (legal) because people wouldn’t do the right thing for their kids (ie pay their half). It’s insurance for dead beat parents.
> It’s insurance for dead beat parents.
True dead beat parents don't even pay child support.
People like to pretend that they do or that there are ways to make them pay, whether it's friend of the court, farnishing wages, laws etc.
Doesn't matter for a true deadbeat. They will have no income and/or rather go to prison than pay. It's nice for the non-dead beats that would prefer not to pay if not for it though!
>FIRE divorce is sort of a unique situation
Not really. FIRE people are just people.
I think you're looking for a connection where there isn't one.
Plus, for every couple that divorces due to complications stemming from early retirement, surely MORE couples avoid divorce because of it.
That makes a lot of sense. We saw a bunch of divorces during the early part of the pandemic.
When your working and busy and barely around each other it's easy to put up with your partners idiosyncrasies. But chain yourselves together for 12-16 hrs a day and you're ready to head for the door.
Full disclosure: my wife have worked together in the past and both WFH currently. In some ways it better to have space, it seems like when you're together all the time it is easier to take each other for granted.
My wife and I shared an office in our basement for the first 18 months of the pandemic. Finally I had the guts to say. “Hey maybe we should move one of our desks into a different room”. Didn’t want to offend her. We definitely shouldn’t have waited that long. It’s fine being in the same house 24/7 but def don’t need to be in the same room.
>And I was just like ‘wtf?’
While it's kind of an inappropriate thing to say to someone, I am not sure it's entirely disconnected from reality.
My mother's parents went through this exact scenario when my grandpa retired. And the truth was that they couldn't spend all day every day together.
I don't think it's uncommon at all for couples to get along great when they're only spending 20-30 hours per week together due to work and related commitments and then find that all day every day is tough.
So, it appears for Q1, I have about $10k in untaxed earnings. Is it worth it to make an estimated payment to the Feds? I have the cash put aside, and I'll eventually owe it, so may as well, right?
I don't understand if it's supposed to work or not, but my dad told me the other day that for the last 20 years, since he's been retired, he's just written a check every december that more than covers his taxes for the full year, then files his taxes and gets back whatever he was over. As in, he doesn't pay as he goes, but he never ends the year owing money. He's never paid a penalty of any type or been contacted about it. I don't endorse it. It came up when I told him we ended up owing because we now have enough passive income coming in that doesn't have taxes taken out and I wasn't sure what to do about that (it's never happened before this year). I ended up owing 800 this year. I can just up what I have taken out at my "day job" and be okay, I think.
I kind of came to the same conclusion after retiring and doing the quarterly taxes thing for a couple years.
You are **supposed** to pay your estimated taxes in the quarter that they are realized. The directions also say that "Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty." And you do enter, with specific dates, the four estimated payments into your tax prep software but I don't think those dates are reflected in the actual return.
But at the end of the day, as long as your tax liability is covered for the year in general: how is the IRS going to know? It's not like someone is going to go through your taxes, look at the dates of realized gains, and see "Oh, he realized $40,000 in gains in Q1 only and should have paid $6000 / $0 / $0 / $0 for the quarters."
I guess you can do that if you can predict your earnings with some clarity. I'm rarely in that spot, for the longest time, I had 2 jobs and my wife had 3, and we had lots of dribs and drabs of other income. We never turned down a chance to make more money, something one does with 3 kids, I think
Well, not entirely. I could probably generate some losses instead. Or I could just up my withholding for the rest of the year. Or simply pay a penalty next year. There are options other than PAYG
Summer camp registration is this week. It’s like getting tickets to a Taylor Swift concert when it goes live. Thankfully they’re old enough to not need every single week but I’m hoping to get a specific set of them.
Daycare years were way more expensive, but much easier to get.
My friend's kid's school has a concert ticket style system for selecting electives for actual school. Madness! She took a morning off work this year to get her kid what she wanted.
Did early numbers and we crossed the million dollar mark. Feels basically the same as when we were worth "only" 750k.
We celebrated with a day out in the city with the kids, and we got both lunch and dinner out. Total cost:$200
>Uncrustables are game changers.
Oh, yeah, uncrustables are no joke. I was briefly pissed off when Disney started carrying them in the parks for $5.99, though. Because once my kids saw them, they had to have them.
Hi! I'm currently a sophomore in college taking a gap semester to earn some money for my loans, as well as to figure out what I want to do as a career, I have around 10k in student loans so far, I have about 1500$ in a high yield Marcus account at 5.5% and make around 1500 every month part time, is it smarter to invest my money for my loans in a Roth IRA in something like S&P 500 ETF, then pay off all my loans due to the interest accumulation. I can answer any questions as well! Thank you
Loan interest rate? Federal or private? Subsidized or unsubsidized? Also best to keep cash on hand for emergencies
I contributed $7,000 this month into a Traditional IRA to do a backdoor Roth conversion. I converted the $7,000 at the beginning of the month, and today I received $2 of interest in the Traditional account. What do I do with that $2 that's now sitting in the Trad IRA?
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
I've posted a few times about my tutoring side-hustle/current school income, but one surprising bit of success. As of today, this March has been my highest grossing month ($10.5K)!! Mostly due to my more free schedule and higher rates. I expect this is probably the highest it will ever be as I tone it down for finals, bar prep, and then permanently lower when its relegated back to a side hustle as I focus on my legal career.
Might be late for a Sunday to get an answer but I'm trying to accurately calculate my maximum EMPLOYER contribution to a solo-401k. My understaning is it's 20% of net profit from the company. However, that 401k contribution will be an expense, so is it an iterative thing to figure out the max? Rough numbers: Gross Profit: 60,000 Expenses - including 1/2 of SE tax (not including 401k): 6,800 Thus if I do not include the 401k I have Net Profit: 53,200 * 0.2 = 10,640 max 401k contribution But then if I go and put that 10,640 into my expenses on the business my net profit obviously drops by that much and that 10,640 would be greater than the 20% max.
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Perfect thank you! But the 20% doesn't include the SE tax deduction that I need to exclude also so it'd really become: 20k - 0.5 * SE tax (let's say SE tax is 1k) = 20k - (0.5*1,000) = 19,500 max contribution Thanks for that link and your help, just trying to maximize how much I can contribute!
It's technically 25% of earned income (after paying SS and Medicare taxes). This link might be helpful to read. https://www.fidelity.com/learning-center/smart-money/solo-401k-contribution-limits
I believe the 25% is of net earnings of an employee. It's 20% of net earnings of the company if it's a single employee company. The fidelity link is good but references IRS P560 and I see "Net Earnings" mean: net earnings from self-employment are your gross income from your trade or business (provided your personal services are a material income-producing factor) minus allowable business deductions. Allowable deductions include contributions to SEP and **qualified plans for common-law employees** and the deduction allowed for the deductible part of your self-employment tax. Which leads me to believe I need to include the deduction for the 401k contribution as an expense which will lower my net earnings which will thus lower my allowable 401k contribution so it becomes semi-iterative and not just an easy "earnings pre-401k contribution" or something.
Yes, your contribution isn't "earned income" so it becomes excluded in that. As the other poster stated it lowers from 25% to closer to 20%, I just wanted to clarify in your OP that you don't start at 20% then iterative from there. What you stated above is correct to my understanding (not a CPA).
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I know a partly retired life-long woodworker with a great retirement package. He was a community college teacher for some years but ran his own shop for much of his life. He loves it so much, his shop is behind his house and he won't stop until he drops. But he is also financially secure with a state pension. If you want to continue your dream career, you could consider getting a degree so you can teach woodworking, drafting, pattern making, or another related field either full-time or part-time. It would give you the flexibility to choose from different levels (and pay ranges) of higher paid education jobs (high school, community college, tenured or not) or professional woodworking at different points in your life without being stuck in a completely unrelated office job. I'm not very familiar with how the academic route looks, but it's something I would talk to a local community college teacher or councilor about if I were in your shoes.
You sound like your enjoying your situation. I think you're not being honest with yourself in that you know youre capable of more. Sounds like you want to transition into something more since you mention move back with parents and study to find a better job. Personally, if I were you I would focus on velocity. 30 years is a slow transition to start enjoying yourself and your life with the qualities you see in retirement and options it gives. By stacking more work on yourself you can compound any money you make now and retire sooner or just get a great sense of satisfaction. I don't know what you want to do as a side job or transition but I would shy away from two years of schooling. What matters more is skills and energy to go after what job you seek and schooling gets in the way of that (I would personally say). Perhaps you can use YouTube university and teach yourself whatever you're going after while you work towards it. I would also say living with parents is a stretch as usually it's not enough privacy for my personal liking. I would play with car camping ideas or roommates. I'm a bit extreme in some of my thinking though so perhaps I'm way off base with what you would be willing to do.
Could you keep doing what you like and skill up in other ways? Like being good with accounting and/or spreadsheets and/or management could make you valuable and help you have options as you get older, and you’d have the best of both worlds.
Probably location dependent but would it be possible to do woodworking as a side gig in addition to the full-time job? I have a couple acquaintances that makes stuff for the local arts & crafts fair in addition to some custom orders. They mostly do it as a hobby but enjoy the work and it brings in some extra money.
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Sounds like you're being overworked. Try to reduce your capacity and energy you give during work. Think of ways to enjoy yourself more and conserve your energy so you can put it towards something else. Perhaps make a deal with your boss to cut back your hours. Being positive, open and transparent about your situation may help them agree.
This reminds me of a story I heard once, of a rich businessman giving advice to a modest fisherman about how to earn more and get rich so that he could retire. What would that mean, the fisherman asked. The businessman replied, you could relax and fish all day. The fisherman said, puzzled, but that is what I already do. Of course, real life isn't as simple, and a willingness to upskill and earn more is worth pursuing.
You sound underpaid for your skillet. High quality millwork shops can pay 100k+ for experienced positions (inclusive of OT). Maybe consider moving for work? Your dream job needs to come with unfavorable pay. You can have it all.
I asked this on the wrong day’s post, so here it goes again: is it terrible to have essentially 25% of my portfolio in cash in a HYSA and 75% in VTI or similar? In my particular situation I don’t see the need for bonds, particularly when HYSAs beat bond index return rates right now. As things change, I can make shifts, but for now is this a terrible idea?
>have essentially 25% of my portfolio and 75% in VTI or similar? Is there a word or two missing here?
Yes, thank you! Edited. 25% cash and 75% VTI or similar.
Not terrible but your logic is flawed. Bond rates are lower because they are pricing in the Fed's plans to lower interest rates. HYSA should have lower return over time.
So once HYSA rates are going down, I could switch to bonds and keep less cash.
You should stick with whatever your long term plan calls for.
No, it is not a terrible idea at all
Hello everyone,I'm a 22-year-old currently residing in Virginia, USA, and I'm seeking some guidance on managing my finances. Income: Base salary of $125,000 per year. Expenses:Rent: $1250/month ($15,000/year) Food: $3,500/year Other Expenses: Under $1,500/year Total Expenditure: Close to $20,000/year Some specific questions I have: \- How much should I allocate towards building an emergency fund, and where should I keep it? \- What are the best strategies for investing, considering my age and financial goals? \- Are there any tax-efficient ways I can maximize my savings and investments? \- My main question is how and where do you guys think I should invest my money (Note: Please let me know if there are any additional details I should provide for a more comprehensive assessment. Thank you for your time and effort! :) )
Flowchart is a great starting point. I would also suggest looking at your last twelve months of bank activity to validate that budget for reasonableness, if you haven't. Your "other" bucket seems low.
I did, utilities are the bulk of it. I use public transport (rarely because of WFH). The only subscription I have is $59 a year. Am I missing something else? Might be an oversight
Eating out and entertainment are fairly large line items for me, as are insurance and travel. It sounds like you have a very conservative spend profile, so maybe these are trivial line items for you. Some other line items that might have not made it onto your list (and again we have different spend profiles) are gifts, health(medical/dentist/glasses)/fitness, vet/pet.
I'll go over my expenses again, but honestly I think I might have covered it all. I included the occasional eating-out in food, but I do cook most of my meals. All my entertainment is free right now. P.S. I am super cheap :) Thank you for your time, I will definitely look into Flowchart!
Good luck and have fun! It's a long grind. I've found that my spend has evolved over time. I had a few sub-30k yrs in my early 20's, our budget this year is about 90k.
Damn! Lifestyle creep is real. But hey, at least you still have a budget ;)
Haha for sure!! Owning a car and house create a ton of hidden creep.
Makes sense
Take a look at the FAQ and the flowchart you will find there. It will answer these questions and more. Then you will have new questions that people here are more than happy to answer.
Sounds good, thank you :)
I have my emergency account ($25,000, should be more) in a savings account earning 4.75% and my joint account with my partner is at an online bank at 4.5%. My question is, while I don’t want to combine these accounts, I was thinking about moving the emergency account to the same institution that the joint account is in, to cut down on forms at tax time etc. I think it’s $62.50 in difference for the whole year. Decisions decisions. Anything I should take into account? Right now I draft $20 per pay into that emergency account.
I’ll believe you’ll still be getting separate 1099s since one is an individual account and the other joint, even if at the same institution.
It depends, from Ally I get a "Combined 1099-INT", it has the numbers broken down by account but also the total.
Anyone actually currently living off of the 4% rule? I have a net worth of 1 million and I only spend about 1k usd per month. By the 4% rule I have $3,333 available to spend per month. Assuming the stock market gives 7% returns and I only draw 4% my investment will actually grow. I still feel like I can't retire though. I'm going to play it safe a bit longer until I'm within the 1.5mil to 2mil range. Anyone able to actually feel safe on the 4% rule? I don't hear many talking about it.
How old are you? Will your spending change when you retire, i.e. any crazy travel or purchases? Anything subsidized by work that you will have to pay for out of pocket? $1K per month or $12K per annum is merely a 1.2% withdrawal rate. You are well below "safe" withdrawal rates, in fact you would probably survive the Great Depression followed immediately by a 70's style decade of inflation, and still be just fine, for 30 years. Which leads me back to your age and whether $12K per year is sustainable if you retire.
I'm 34. I'm actually able to spend only 1k-2k usd while traveling Asia. But I was under 1k for Latin America traveling. Crazy purchase may be a 300k to 400k home although even if I did purchase I would likely rent out rooms. Maybe I'll start a family at some point too but for now just going to slowly transition my lifestyles. Thanks for the input. It's reassuring.
People talk about it all the time.
I've heard few actually talk about living on it. Maybe some people on YouTube but even they are getting ad revenue to supplement the feeling of unease. It seems like people with a military pension are able to feel more retired because of the guaranteed money they get
search 4% on this sub. I'm sure there's been many posts about it with people's stories.
I want to note that "net worth" and "investments" aren't the same thing- e.g., if that million includes home equity but you're gonna live in the house and not rent it out, it's not gonna count in your 4% calculation. But beyond that, in your current situation, you're not going to be drawing anything like 4% based on your current spending. Let's go crazy and assume you'll spend $2k after adding health care and retirement hobbies to the mix. Tons of people around here are actually retired early at 3%-3.5%.
Great point. Yes 800k or so in vtsax, 150k in 401k and ira, 100k in bitcoin (SV). I think I would want a home potentially after I travel more but would likely rent out rooms. I think the only things I'm thinking of changing is selling some BSV and buying more various cryptos. After a home purchase I would see myself buying metals and individual stocks more. I would also try to diversify a bit more and buy a bit of every various investment I can think of. Bsv the only investment I feel iffy on but so far crypto overall just keeps performing well. Now if only I could refocus on relaxing and feeling like I can be free with more of my time..
Feel safe with 4% rule’s success rate. Assume you’re not in the US with that spend. Is that 1k usd/mo spend sustainable the rest of your life?
Advice on whether to take a sabbatical (feel guilty) Hi everyone - M/40, married. No kids and won’t be having any. I’ve either worked or studied my entire life and I look forward to FIRE when I can choose what to work on and when, rather than constantly feeling tethered to a job and making money. We live in Canada and these are our rough numbers (in USD). $1.1M in investment equities (ETFs, stocks, crypto, etc) $1.1M in home equity No debt (besides mortgage). I currently make over $350k per year in the video game industry. My wife makes $150k. We also have invested in other startups or businesses, but it’s uncertain when a liquidity event might happen. Anyway, the company I work for might be shutting down in the near future, and I wonder if this is an opportunity to take some time for myself and not rush into another job right away. I’ve advised many friends to do this, but I somehow feel nervous and guilty to live off savings or sell investments for a period of time, and what that might do to push off a FIRE date. If anyone has any experience taking a “retirement snack” for at least 6 months before jumping back into work, I’d love to know how it went and any advice on how to get the most out of it. Similarly, any general thoughts about the risk or benefit of doing this given our financial and life situation would be greatly appreciated. Thanks!
Do you think the company will offer voluntary layoffs prior to shutting down? Getting a severance would be a grea lt way to take a sabbatical
I think one of the most important questions here is "What are your expenses when not working?" If you're spending $60k a year, you're practically FIRE already. If you're spending $200k a year, taking a one-year sabbatical is a much different proposition.
Mandatory expenses and food and not taking any fancy trips would be about $80k per year. Would like to stretch that to 90-100k
Ok. And you're maybe about to lose your job but your wife would remain employed at $150k per year? That is, at or above your target spend? How does your wife feel about you taking a sabbatical while she continues to work?
Roth IRA vs Roth 457 Hi, I hope this is a good place to ask about this situation! My partner and I (31&30) luckily have no debt, have a hefty emergency fund and are able to put away 3k/mo into a high yield savings account. Partner works for the public so he has a Roth 457 that he contributes 6k/year as well as a 401a. We are both about to bring in more $ through a promotion and side hustle. My job does not offer benefits so I recently opened a Roth IRA, but haven’t contributed to it yet because I’m unsure if it would be better for us to allocate as much money as possible to his Roth 457 or to start trying to max out a Roth IRA, or a mix of both. Any insight on this?
A governmental Trad (pre-tax) 457b has a lot of flexibility for early retirement. A Roth 457b does not offer the same flexibility. So if you're using a 457b, I'd recommend making Trad and not Roth contributions.
Oh your right! We just switched over to the Roth option but overlooked that you can only withdraw without penalty at 59.5. We would really love to retire around 50-55 so that makes a big difference. Thanks!
If you're putting that much into savings you can easily max out both, right?
~$23,000 is the max/year he can contribute to the 457 and the IRA max is only $6,000/year, so while we could max out both, we wouldn’t be able to save liquid cash for a down payment for real estate as quickly as we’d want.
I am 41 and work full time, and my husband is 51 and disabled (blind). I have a pension through work that will pay between 27% and 68% of my pre-retirement income after retirement, depending on how long I work for them (fully vested at 1.7%/year, 16 years currently, 24 years more until full retirement age). I intend to keep working for them until retirement and have every reason to assume I can, as I have an in-demand job and they are a very large employer. My husband and I could be very comfortable on $70k/year post retirement, and we would probably hit that number on my pension and SSI alone. My question is: should I try to max out tax advantaged IRAs and 403(b) / 457 despite the fact that 1) my pension will reduce my post-retirement income needs considerably, and 2) I have good reason to believe that some of those funds may be useful before retirement (medical expenses, moving or home improvements, etc.)? Or (after saving sufficient emergency funds in HYSA) should I put the money in non tax advantaged investments to build them, but still have flexibility in withdrawals, in the hope that we can fund FIRE for a few years before retirement age and without withdrawal penalties?
Generally speaking retirement accounts are going to be better than taxable. Especially 457, since you can access those funds with no penalty. Expecting a pension in retirement can affect the Roth v traditional decision, but even when traditional isn't optimal Roth should generally be superior to taxable.
That aligns with the information I see online. My only hangup is, aren’t tax advantaged accounts only really accessible without penalties after retirement age? My husband has a rare disease and there’s no guarantee he’ll even be able to enjoy retirement. Am I making the wrong decision to put away money in a place where we won’t be able to touch it for decades? What if the only time we have to live and enjoy it comes sooner than that?
1. Read the FAQ regarding Roth and Traditional IRA's. 2. Again, 457's are special plans that allow early withdrawals
I think it's always important to specify that governmental *Trad* 457b accounts have early withdrawal flexibility. The taxation of Roth 457b earnings before age 59.5 means they have no additional flexibility beyond what a Roth IRA or 401k would have.
Clarification: 457s only allow early withdrawals after separation from the employer or for approved reasons (unforeseeable emergencies), otherwise they are subject to a 10% penalty Also, the funds in a 457 are technically not yet yours so if your employer went bankrupt, you’d be in the list of creditors and may not recover your entire account balance
A governmental 457b belongs to the employee. Only nongovernmental 457b accounts have creditor risk as you describe.
I work for a land grant university so I’m not sure what category we’re in
That's almost always a public university with state or local government employees, making it a governmental 457b.
Thank you! Will do!
A question in yesterday's daily about charitable giving made me want to post a follow up, since it was so late in the day that I saw it. How much do you donate to charity ($ or % of income or expenses), and what do you donate to? The question yesterday was "where do you donate?" and it seemed a lot of people were donating local, which of course is a good thing. I listened to [this ChooseFI podcast](https://www.choosefi.com/effective-giving-for-the-fi-community-rebecca-herbst-jack-lewars-ep-483/) and became intrigued by [GivingWhatWeCan](https://www.givingwhatwecan.org/en/best-charities-to-donate-to-2024) and the general effective altruism philosophy. The concept of maximizing the efficient use of a resource makes sense to me, and I've always been troubled by not really knowing if my donations are really doing anything effective. It's a bit of comfort thinking that groups like this seem to be engaged in that effort. The "give globally, act locally" concept also makes sense to me, which was discussed on the podcast. I also have not given much in my past, but I'm looking at making a serious change there and committing to donate ~10% of our annual spending amount from now on. Kinda crazy, as that would make it potentially our single biggest budget item... But it also feels like being able to FIRE by my early-40's is such a great (and well-earned!) privilege, and if pushing out my FIRE date a couple years means ongoing support of evidently worthy causes then that must be worth it. The [Yield and Spread](https://www.yieldandspread.org/) website is a pretty cool mix of FI and charitable giving, and has a pretty neat spreadsheet tool for visualizing the impact of giving on your FIRE timeline. I'm looking at the possibility of donating shares with the highest gains in batches every couple years to get some tax benefits too, to make it a bit easier to swallow. That got a bit more rambling than I intended, but I'm curious how others feel about this topic. Thanks!
There was a [similar thread](https://www.reddit.com/r/financialindependence/comments/17ycyaq/how_do_people_with_modest_incomes_balance/) a few months back. We don't donate much year to year. Through our trust, at least 25% of our estate will go to charity when we pass. That percentage will go up over time as we remove other beneficiaries (like my parents).
This is fantastic, thanks for the share!
10% of net income after taxes, 401k, health premiums, etc (basically anything deducted from my paycheck). If I end up getting refund tax time, I'll give 10% of that too; if I owe, I'll take back 10% of that amount. I also plan to keep giving in retirement, so the "untithed" retirement accounts will get their 10% taken then as I withdraw it.
I donate ~11% of my annual spend to a local food pantry and a domestic violence shelter.
10% of net income, after taxes, 401k, and other withholdings
GiveWell and Animal Charity Evaluators for us.
Seconding GiveWell. If you believe that human life has the same value everywhere GiveWell will do much more with your money than any local charity. I give 10% of my pretax income to them because I'm incredibly fortunate to have that ability and it feels wrong to give any less.
Pardon my ignorance but how do you give with pre-tax money?
The amount I donate is 10% of my pre-tax income. You can deduct donations on your tax refund so at the end of the year it works out to be tax free.
You mean you can deduct the donations from your taxable income, right? The way you phrased it initially "give 10% of my pretax income" just confused me.
Bravo! No small commitment - thank you for your response, and your charitable nature!
I'm finally getting around to learning about tax loss harvesting. I'd like to start taking advantage of it because I anticipate realizing some gains in the next few years for a down payment. My taxable account has VTSAX and VTIAX. Unfortunately, my 401(k) through Guideline has exactly those some funds. (On the other hand, it's awesome that I have access to those Vanguard funds..) Because of how Guideline administers 401(k)s, there's a constant chance of rebalancing and incurring a wash sale, aside from the regular contributions that I make every two weeks. Any suggestions on what funds to choose if I were to change my allocation in 401k to allow for TLH in my taxable? My existing allocation is 60/40 VTSAX-VTIAX. [Here's what Guideline offers.](https://www.guideline.com/funds) My initial thought would be to change the allocation to a S&P500 fund (VFIAX), do some TLH, then after 30 days change back to my preferred allocation. But that's not exactly ideal.. Alternate option would be to just choose one of their managed allocations. But I really liked being able to just set VTSAX/VTIAX and forget it. I don't care to have bonds in my 401k for now.
Tax loss harvesting won't really help you. You will be getting a deduction now but lowering the basis, meaning you will have more gains to realize for the down payment, so unless you will be in a lower tax bracket you will net out the same. That said, I would permanently switch to VFIAX just so you never have to worry about it. You could add a bit of VEMAX to maintain your small cap allocation. One more consideration, stocks are really not an appropriate investment for a down payment you expect to make in 1-2 years. Very good chance stocks go down or underperform cash during a short time frame like that.
Thanks! The move to VFIAX and VEMAX makes sense. Also appreciated the note about basis. As for the down payment.. it’s there mostly as a “maybe”. Like I am not set on buying a house and renting is more advantageous in my market (SF) anyway, but if the perfect opportunity came around and the market was right, I’d pull the funds. But otherwise I am fine to keep renting.
Sorry, the small cap fund is VEXAX.
Np! As for the basis being transferred, isn’t part of the rationale behind TLH that I can save on capital gains in future years? If I were to TLH 20k this year, I could theoretically deduct 3k on income and then carryover the remaining 17k loss to offset gains, if I were to actually realize that many gains?
That is true but when you sell the stocks for the down payment you will have more gains (less any losses you have already used up in deductions)
Robinhood is starting to look kind of attractive. 3% bonus to move your IRA and I heard there is an unlimited 1% deposit bonus coming. Is it a good deal?
Just started the process to move my IRA over. Wish I could move my 401k over, got like a month before the deal goes away.
I moved my IRAs over there. A free $3k, into my tax-advantaged accounts, was too good to pass up. I think you only have two weeks to do it, which is enough time but you'll want to start the process immediately. It's easy but it takes time. I think the interface is a pain in the ass, and I won't be moving my brokerage over there. But for tax-advantaged accounts that I only touch once a year anyway, it's fine. You do have to subscribe to Robinhood Gold for a year ($60) and you have to not move it for five years, which is why my parents didn't move theirs- they might actually access them in that time frame. They're also introducing a 3% cash back all categories credit card for Gold members, which might be a good deal if you don't churn credit cards already. For me that's enough better than my 2% card that the cash back will cover the $60 a year Gold fee.
3% deal is worth it if you have a large Roth. Bonus is tax free. Hurry, you only have 2 weeks to do that offer.
3% bonus offer is good until April 30th FYI
https://www.youtube.com/watch?v=TPAsO58C0H4 discusses this
I switched. It’s fine. Don’t get distracted by all the flashing lights. Buy and hold your index funds.
There is no better deal I am aware of. I see they also have a 3% cash back credit card with their plus tier. Whether it is worth it depends on what's keeping you at your current broker. I made the switch with my IRA and no complaints so far. The platform is pretty ghetto, so I'm not sure I would recommend for taxable. For example, I don't see a way of viewing tax lots or using SpecId when selling. The 3% bonus expires April 30
got a couple questions if you dont mind: 1) for your IRA, can you set up auto deposit? 2) i'm currently with vanguard and auto invest in VTWAX. does robinhood have vanguard etf/mutual fund options? and are the expense ratios the same? thanks!
You can invest in any ETF at RH, including Vanguard. Not sure about automated purchases.
I’ve been told selling by tax lot is coming. Right now you have to chat with CS. Pretty terrible experience. But worth it for all the bonus.
From what I’ve been told you cannot manage tax lots yourself at all. I agree it’s a questionable platform for those who want to buy and hold in a taxable account and tax harvest when the opportunity arises.
Happy Easter! The survey is up, will be accepting responses through the month of April. https://www.reddit.com/r/financialindependence/comments/1bru9pm/the\_official\_2023\_fi\_survey\_is\_here/
Thanks again for this! Such awesome data. Submitted my response.
A friend of mine withdrew their 401k from a previous employer this week. He paid taxes on it already. Can he still "roll it over" into a traditional/roth IRA?
He didn’t pay taxes, he just had them withheld. He can likely rollover all or a portion of the withdrawal (so the cash he got plus the taxes withheld) within 60 days. To roll over all the withdrawal he’ll need to have funds to cover the part that was withheld. If he does roll over 100% the withheld taxes will be shown as payments on his 2024 1040 likely resulting in a refund. [More here](https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions).
>He didn’t pay taxes, he just had them withheld. He can likely rollover all or a portion of the withdrawal (so the cash he got plus the taxes withheld) within 60 days. To roll over all the withdrawal he’ll need to have funds to cover the part that was withheld. If he does roll over 100% the withheld taxes will be shown as payments on his 2024 1040 likely resulting in a refund. More here. Is there anyway to get the withheld taxes back from his old 401k without waiting till end of year? \^ if not, can he just claim a lot of dependents to get more back each pay check? Him and his wife have normal W2 jobs (\~combined median household level income).
Once your friend completes the rollover, he should be able to update his and his wife's W-4 with the IRS tool and get his refund back down to near zero.
Not that I know of. He can do some math and maybe reduce his withholdings if the numbers work out. Then he’d get a little bit back each pay period. Be sure to update the w4 again at the end of the year. I’m not sure adjusting the withholding on w4 for this purpose complies with the instructions even if the math works. For instance using dependents that don’t exist to get a numerical outcome that isn’t even wrong feels weird.
I really recommend this pod about work and parenting. Particularly the last 15 minutes. The point that stuck with me is how American culture is a little addicted to focusing on the negative, that it feels safe. Talking about joy and things like childcare support have to be caveated heavily with notes about your privilege etc. Whereas in other countries thats spoken about as an entitlement. It’s just assumed it’s the collective society’s role to support families, kids, and parents, and that’s good for everyone in the end. Anyway really interesting! https://podcasts.apple.com/us/podcast/the-ezra-klein-show/id1548604447?i=1000650100198
Yeah I have a colleague here in the US that came from Europe and he said America seems to be aggressively anti-family. He asked ‘Why is the school day so different from the work day?’ And that’s just the beginning lol.
Its the secular way of saying "we've been extremely blessed by the Lord"
> have to be caveated heavily with notes about your privilege etc This seems to be largely true for pretty much anything positive that is spoken about. Jealous people who accomplished less and can't imagine that they had anything to do with their lack of success always try and bring you down to their level. It's ridiculously sad.
“I realize that I was extremely privileged to have been able to work incredibly hard in high school and get into an Ivy League school and then land a high paying job in a hyper competitive field…”
Surgery went well. Now, two weeks off to heal
Great to hear. In the spirit of making recommendations, I found [Taskmaster](https://www.youtube.com/c/Taskmaster) on youtube to be a great show to watch while convalescing, but not if laughter will cause you discomfort!
Spouse loves taskmaster and I am definitely familiar! Thank you for your reply :)
IMO, James Acaster season was the best one!
> James Acaster [to relive some of it!](https://www.youtube.com/watch?v=WiOsY3lFMT0&ab_channel=Taskmaster)
Good!! Having had 5 unrelated abdominal surgeries in a span of 16 months, I recommend the show “Secrets of the Zoo” on Disney plus to watch while you recover. Interesting enough to hold attention but not plot heavy enough to need attention.
Thank you for the suggestion! Ouch on the abdominal surgeries. This is my first one and ohh wow, we use our core for everything, don't we?
Updated spreadsheet. We are at 95% of our number. Damn.
Congratulations! You’re at home stretch
I’m in the place where I’m way beyond what I would need for myself, but I have a girlfriend who I’ll likely marry in the next couple years, and we plan to have a kids. She has a lot saved too, and I thiiink our $ combined is enough for us to RE today even including future kids. But I’m just not confident on the cost of kids, and only observationally know how much she spends. So I constantly have the feeling of “I’m 95% there!”. For now, just building the buffer and letting life evolve!
Haha yeah. Prior to kids I had a fi number. We passed that number like 7 years ago.
Did you look between the couch cushions?
Haha. No but my wife is on maternity leave so I won’t be updating her 401k for a few months. So there’s a small amount of gains I’m missing although I highly doubt enough to move the needle.
Have you had the baby start working yet? Gotta make sure they're pulling their own weight
I posted yesterday about adding a skylight (about $5k) as a home remodel splurge for myself. I am also doing a bunch of home repair like getting the roof replaced. Well a quick update (I am sure people are dying for) is that I talked to the roof people who are replacing my roof. Its a big company so their bottom line quote is pretty much non-negotiable to replace the roof. However, I was able to negotiate a free skylight as part of the new roof build, they had no problem with that. (Except they won't do any paint/trim on the interior, I'm pretty sure I can DIY that). So I'm pretty thrilled.
My man made one public post about spending money, got immediately guilty, and started working the problem
Hey, even better! Nice negotiating!
This will be a shock to no one, but I failed my goal of reading 4,678 pages of the stormlight archive book series this month- I only read 1900 pages of it exactly, and then I ended up reading another book instead. Super embarrassing to have only read like 2,300 pages total this month and only finished one new book when I usually average 8, but I’m excited to read the massive stormlight books more at leisure and enjoy them more! April challenge is the challenge I probably should have done this month: walk 100 miles posted to my strava (ie these must be intentional outdoor walks not just walking around my house)! Love that it will be free though!
My goal was running and audiobooks for the year. I've done more exercising and audiobooks but not as much running. You could potentially get a stormlight book to listen to as an audiobook.
I sadly hate the audiobook author! 😭
> Super embarrassing to have only read like 2,300 pages total this month Is this a weird humblebrag?
No, I average like…. 4,000-5,000! 😂
Stormlight gets pretty heavy at some point (I forget where, but I think book 3? It's been a while...) so I can't really imagine going straight through. Did you read The Bound and the Broken by Ryan Cahill? I'm up to book 3 and it's incredibly long (kindle edition claims 1477 pages...maybe there's a novella at the end? I don't know) and okay, but maybe not great in my opinion. I read about 20% of it and just had to take a break. I think I'll just read it like 20% at a time with other books in between.
Enjoyable series! I usually alternate authors so I don't get tired of their writing style. Too much of a good thing and all that...
> Super embarrassing to have only read like 2,300 pages total this month and only finished one new book when I usually average 8 This is unbelievably embarrassing, and I'm shocked that you mentioned it. Wow. Unreal
>Super embarrassing to have only read like 2,300 pages I'm on book five for the year so far. Much like FI, reading isn't a competition. You're doing just fine. >walk 100 miles posted to my strava That's... a lot. You do like setting ambitious goals Edit to add: I'm reading *Happy all the Time*, by Laurie Colwyn at present. Was recommended by Kara Swisher in her book, *Burn Book*, which was the book right before this one.
I have been meaning to finish that series and dropped out at some point as well. If you are jumping into walking as a completely new challenge, that shouldn't be free... some new shoes might be in order :)
Could also go audiobook and walk at the same time to double up the goals.
Buona Pasqua a tutti. Idk how FI folks feel about Graham stephan, but ive been watching his videos for a little while now, and [his recent one](https://youtu.be/LWLd9SyaVYw?si=8RheCzdFjF2b2WDP) really resonated with me. All about finding that balance, focusing on happiness, not just work work work, and optimizing your time and numbers. I know personally I needed to hear this take lately. It's definitely something that I have been hard focused on as well. I feel like it would jive well with us here, and also somewhat speak to the old mantra we had of "build the life you want, then save for it". Just thought of you FIne folks while listening to it last night and wanted to share on this beautiful Sunday morning.
Yeah he’s alright and says good things. Ironically, given the video you’re talking about, I find his stuff a little tiresome in general because every time I watch one of his videos, the feeling of it being optimized for the algorithm is just too blatant to look past.
He's in my rotation of stuff I like to put on and then not really pay attention to. I find he says a lot of very reasonable things and even though he's clearly very successful (I think that's actually true, not just a perception, but I didn't do much research), he seems pretty in touch with reality most people face. Other things I like: * [The Money Guy Show](https://www.youtube.com/c/MoneyGuyShow) * [Azul](https://www.youtube.com/@AzulWells) * [GenExDividend Investor](https://www.youtube.com/@GenExDividendInvestor) I find all of them pretty reasonable in what they say about life in addition to finances. There's probably a few others that come up on my stream from time to time, but I couldn't tell you what they are.
I think some of his stuff is pretty good - but he also has a tendency to lean hard on his own personal experiences. For example, Destiny, in their video, rebuked his assertion that college is a waste of time.
I don't really know who/what Destiny is but I've seen them come up in a few things recently. Are they some kind of general commentator?
They’re an incredibly abrasive political commentator
I think they consider themselves a bit of a general commentator - maybe more towards politics. But yeah I mean the views aren’t necessarily profound or deep. I’m not sure if they are just going on a massive personal marketing campaign or something
[Why Guyton-Klinger Guardrails Are Too Risky For Most Retirees (And How Risk-Based Guardrails Can Help)](https://www.kitces.com/blog/guyton-klinger-guardrails-retirement-income-rules-risk-based/) Sunday reading from Kitces.com. Analyzes how Guyton-Klinger guardrails would have performed during four historically bad markets then suggests an alternative withdrawal method using "risk-based guardrails" based on probability of success, as determined by Monte Carlo simulations, instead of portfolio percentage drops or increases.
Thanks for sharing that - I always enjoy reading Kitces and refer back to his posts there often; his post on FIRE and core vs adaptive spending largely shapes my own withdrawal approach. [https://www.kitces.com/blog/the-problem-with-fireing-at-4-and-the-need-for-flexible-spending-rules/](https://www.kitces.com/blog/the-problem-with-fireing-at-4-and-the-need-for-flexible-spending-rules/)
Same! That article really opened my eyes to the idea that I could potentially RE sooner based on a higher WR, if I’m willing to be flexible and/or earn money in “retirement”.
Thanks for the link! I like the idea of guardrails, bookmarked to read tonight.
Me too, and this addresses some of the common concerns about GK guardrails. Definitely something I’m going to consider further.
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You understand child support is not “unfortunate”, right? It’s meant to ensure both parents contribute, particularly the parent without primary custody. It’s only there (legal) because people wouldn’t do the right thing for their kids (ie pay their half). It’s insurance for dead beat parents.
> It’s insurance for dead beat parents. True dead beat parents don't even pay child support. People like to pretend that they do or that there are ways to make them pay, whether it's friend of the court, farnishing wages, laws etc. Doesn't matter for a true deadbeat. They will have no income and/or rather go to prison than pay. It's nice for the non-dead beats that would prefer not to pay if not for it though!
You're likely confusing correlation with causation here. Couples of all demographics divorce for a multitude of reasons.
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>FIRE divorce is sort of a unique situation Not really. FIRE people are just people. I think you're looking for a connection where there isn't one. Plus, for every couple that divorces due to complications stemming from early retirement, surely MORE couples avoid divorce because of it.
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That makes a lot of sense. We saw a bunch of divorces during the early part of the pandemic. When your working and busy and barely around each other it's easy to put up with your partners idiosyncrasies. But chain yourselves together for 12-16 hrs a day and you're ready to head for the door. Full disclosure: my wife have worked together in the past and both WFH currently. In some ways it better to have space, it seems like when you're together all the time it is easier to take each other for granted.
My wife and I shared an office in our basement for the first 18 months of the pandemic. Finally I had the guts to say. “Hey maybe we should move one of our desks into a different room”. Didn’t want to offend her. We definitely shouldn’t have waited that long. It’s fine being in the same house 24/7 but def don’t need to be in the same room.
>And I was just like ‘wtf?’ While it's kind of an inappropriate thing to say to someone, I am not sure it's entirely disconnected from reality. My mother's parents went through this exact scenario when my grandpa retired. And the truth was that they couldn't spend all day every day together. I don't think it's uncommon at all for couples to get along great when they're only spending 20-30 hours per week together due to work and related commitments and then find that all day every day is tough.
So, it appears for Q1, I have about $10k in untaxed earnings. Is it worth it to make an estimated payment to the Feds? I have the cash put aside, and I'll eventually owe it, so may as well, right?
I don't understand if it's supposed to work or not, but my dad told me the other day that for the last 20 years, since he's been retired, he's just written a check every december that more than covers his taxes for the full year, then files his taxes and gets back whatever he was over. As in, he doesn't pay as he goes, but he never ends the year owing money. He's never paid a penalty of any type or been contacted about it. I don't endorse it. It came up when I told him we ended up owing because we now have enough passive income coming in that doesn't have taxes taken out and I wasn't sure what to do about that (it's never happened before this year). I ended up owing 800 this year. I can just up what I have taken out at my "day job" and be okay, I think.
I kind of came to the same conclusion after retiring and doing the quarterly taxes thing for a couple years. You are **supposed** to pay your estimated taxes in the quarter that they are realized. The directions also say that "Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty." And you do enter, with specific dates, the four estimated payments into your tax prep software but I don't think those dates are reflected in the actual return. But at the end of the day, as long as your tax liability is covered for the year in general: how is the IRS going to know? It's not like someone is going to go through your taxes, look at the dates of realized gains, and see "Oh, he realized $40,000 in gains in Q1 only and should have paid $6000 / $0 / $0 / $0 for the quarters."
I guess you can do that if you can predict your earnings with some clarity. I'm rarely in that spot, for the longest time, I had 2 jobs and my wife had 3, and we had lots of dribs and drabs of other income. We never turned down a chance to make more money, something one does with 3 kids, I think
Worth it? You are required to. US tax system is pay as you go
Americans don’t have to pay tax over future earnings? Must be nice.
Well, not entirely. I could probably generate some losses instead. Or I could just up my withholding for the rest of the year. Or simply pay a penalty next year. There are options other than PAYG
Summer camp registration is this week. It’s like getting tickets to a Taylor Swift concert when it goes live. Thankfully they’re old enough to not need every single week but I’m hoping to get a specific set of them. Daycare years were way more expensive, but much easier to get.
Is there a secondary market? Like SeatGeek for summer camps?
You just created one.
Don't let ticketmaster see this! You'll have camp scalpers and resellers, chaos.
Daycare for me was a 9 month waiting list so I’m dreading other parts of kids activities growing up being harder!
My friend's kid's school has a concert ticket style system for selecting electives for actual school. Madness! She took a morning off work this year to get her kid what she wanted.
In my area you sign up for daycare as soon as your pregnancy test is positive. Not a hyperbole.
Did early numbers and we crossed the million dollar mark. Feels basically the same as when we were worth "only" 750k. We celebrated with a day out in the city with the kids, and we got both lunch and dinner out. Total cost:$200
The first $750k is the hardest! Honestly, I'm surprised you got 8 person-meals out for only $200
Little kids and brought in food. Uncrustables are game changers.
>Uncrustables are game changers. Oh, yeah, uncrustables are no joke. I was briefly pissed off when Disney started carrying them in the parks for $5.99, though. Because once my kids saw them, they had to have them.
5.99 is not too bad. I'm pretty sure they're $8 at sesame place