Another question is whether the funds themselves are producing dividends or if you are initiating buy/sell activity. Here’s an article I wrote on the subject after reading The Intelligent Asset Allocator. Or. In the late 90s, I contributed to my 401K so I could get an employee match. jessica w. I suppose it’s a way to keep stupid people from investing all their HSA into volatile funds. Thank you! also, check into any riders that they may try to sell you (add on features for an additional annual cost). This is not inconceivable if gasoline is $12/gallon, organic cheese is $30/pound, and property taxes are $15k/year. This isn’t a problem that is relevant. Guess what? Your nest egg might be smaller with 15 less years of working, but when is enough going to be enough? (*) It is very reasonable to drop to the lowest bracket (10%) in retirement for married couples, because the standard deduction/exemption for couples is about $19,000, and the top of the 10% bracket is $16,700 for a total of $35,700/year. ======= there are probably some good VULs out there, and they may fit especially well for certain tax situations. Hi, I’m fairly new to investing, but I have a couple of thoughts on this. After we pay off rentals, that’s more than $8000 a month with a total net worth > $2 mm….this should be more than enough. November 29, 2018, 4:57 pm. For me personally, after working for 30 years, if I can retire before 60 (FIR – no longer FIRE!) November 29, 2018, 8:00 pm. The only thing to point out is the $72k number ($72,500 for tax year 2013) is for married couples filing jointly, singles are limited to $36,250. As for health insurance, I would cover us thru my employer. Basically, the economy rewards you for the liquidity that you were entitled to for all that time but allowed someone else to use, which is a real value to the economy. I’m highlighting this fact so that we know it’s normal if bonds sink down with stocks during the next market crash or correction. I had an investment sales guy call me around 2010 to offer me investment advice. What country would provide such care to noncitizens? I have gained a ton from MMM and the FIRE movement, but I’m tired of the ableism- sick people cannot always go back to work- and the ignorance regarding disability and illness that pervades the movement. I save 6% in interest which is an immediate return. However, 90% is not 100% percent. My bottom line here is there are two very important but oft-overlooked pieces of insurance that aren’t sexy to talk about BESIDES ACA/individual health insurance when retiring early (or really, ever) that need to be a careful part of your FIRE planning. Our yearly withdrawal rate is less than 2%, yet I still get a little jittery when the markets go down (silly, I know). While I haven’t fully committed to that, I may have no real choice. in after tax investments (and that should be easy) you can effectively draw from your 401k any time you want! After 10 years and a 4% withdrawal rate, indexed to inflation (2% per year increase), your balance would be $462k. Then say that $10K grows at 10%/year for 30 years, you end up with $174,490 and you can withdraw that tax free. But given the headwinds of inverted demographics, debt saturation, and peak (conventional) oil, odds are we won’t see SPY continue to throw off huge amounts of free money. We were paying $18/month for a bronze plan (HDHP) for 2018; will be about $9 for 2019. I only sold stocks with losses this week in order to harvest losses and rebalance, so there was no jumping around. You assume an 8.8% annual return. Tough to find a partner who might wish to share the snowbird way of life.. but them’s the brakes. Just a new MMM blog fan writing his first thoughts. its very hard to find unbiased info. 7% return until 60, then dropping to 6% You have a car accident…the list of (potential) health concerns can go on and on. CapeCoddess Has anyone done this to preserve a house or land? As for the headwinds you mentioned – there is certainly a case to be made for slower GDP growth over the coming decades – the standard bear argument. In the case of a stock market crash, these financial instruments move in the opposite direction so the appreciation on your bonds gives you a chance to buy stocks “on sale”. And when you transfer it into the mutual fund and redeem it as long-term capital gains, anything less than 72,500 is tax free. I would say the most you can contribute while still maintaining a reasonable lifestyle. But plan thoroughly, because if you buy health insurance through an exchange and want to continue to do so, having a year with no income or income below a certain threshold may qualify you for (means-tested) medicaid instead of a highly-subsidized plan through the exchange if you are somewhat above the poverty level. Because you have to incentivize someone to invest it. The taxable account will last me about 15 years with the assumption of 2.3% return per annum. Living Below your Means: What Does it REALLY Mean? Also, if I move it, I’ll no longer have access to the G Fund, with is mindblowingly good and you can’t get anything like it outside of the TSP! -Possible employer contribution to insurance premiums and/or your HSA balance. These are personal questions. It’s called fromheroestozeroes.com. So by putting in the 5% I will get a 9% total into my 401(k). 2) Now that the converted amount is in a Roth IRA, it’s no longer off-limits till age 59.5. All I know, is that I’ll be back down here in 10 weeks for a month of skiing in Colorado. hardship and change are the backbone of a good life and the fuel for personal growth. Most people won’t be coming in with 500k all on one day because it’s a rare private citizen who earns 500k in one day. Estimate your annual NET income from rental activity so you can estimate your total income. Use the java calculator in the source you linked to. Chris Peterson Mr. Money Mustache didn’t retire because he was making so much money from his blog. Regrads, November 29, 2018, 10:46 pm. So we hold (I think) my age minus 17 in bonds, so we’re probably at 20% in bonds now. I’m curious as to why you aren’t interested in FIRE if you can’t pass your money on. OK – please help me out here. 4 single fam rentals that cashflow ~$2500/mo. We’d let hers sit untouched until I retire and even then we may not need to touch it ’cause we’d be eligible for social security. Subject: Mr. Money Mustache- DC version. Just an additional note on 401k’s: If you sever from your job after you turn 55, or even during the year you turn 55, you are freed from the 10% penalty on distributions. Check out your family history – what do people die of? If I ever leave state employment, I can access the 457 funds penalty free. This is VERY important for those who may later be in a higher tax bracket OR those who may later want sell a good-sized chuck of securities from a taxable account for a down-payment on house or other investment. Pete, Medicaid here in California is not means-tested. This implies the supply side is stuck. Thanks for everything MMM! The FI community vilifies borrowing, because it is often misused in personal finance, but not all borrowing in the entire economy is bad. If you do this, you will always be in a better position than your Antimustachian counterpart, who kept the spending high and took less care of his health. What if I go over some does that mean all Capital gains are taxed? Let’s say you had a 50/50 stock/bond index portfolio in 2000. What country would provide such care to noncitizens? Now, I must admit, in the last ten years my ROI has been 11 – 12%. In many areas, ACA plans won’t pay for the better hospitals and have even skimpier drug benefits. My portfolio is 50% Vanguard Total Stock Market and 50% in a CD ladder. Even here in Canada, you will burn through money if this happens. I am “challenged” when it comes to retirement planning. In other words, you’re arguing for 2% withdrawal rate instead of 4%. It’s not great and to be clear, this is shitty health insurance because it has a high deductible. These situations are not solved by following a traditional path to retirement. If you are relatively healthy, this make sense: let’s say $20/month instead of $100/month, and the employer throws $800/year into your HSA. Bonds tend to move up and down in much smaller percentages when compared to stocks. → Investing can be simple Last year I graduated from college and started my first full-time job. Salary+benefits are taxed separately from capital gains and dividends. One other note regarding your comment: Concerning your example about withdrawing up to $72K per year to stay at or below the 15% bracket. Hey, Trollcanyon, there’s no such thing as a pancreas transplant! This really helps if you sell funds at a loss in your taxable accounts then re-buy similar (not the same or wash rules apply) in your 401k. Thanks so much for the reply Alex! Just because everyone, including the healthcare industry, puts the almighty dollar above all else, doesn’t mean we have to live in fear and plan for the exception rather than the rule. index fund or real estate investing is a net economic positive for all involved, but am not familiar enough with economics to say either way. (Not sure it’s fair to the rest of you that aren’t government employees. It’s sobering to see that there are “lost decades” there. I’d hate to FIRE and then suddenly have $4K a month in health insurance premiums to pay–if I could even get covered. November 11, 2011, 10:11 am. We managed to save our house, but just. Suze maintains that you should build up between 8-10 Million dollars and Mr. Money Mustache says it can be done with $500k - $800k and maintain an after tax annual income of $40,000. Don’t you have to sell shares at twice the rate you would have otherwise, 8% instead of 4%.? Cathleen Thus, your money lasts much longer than it would if you were just keeping it all in a checking account or stuffed in your mattress. For those worried about having “too much” in a 401(k) or Traditional IRA, this is a HUGE safety net. Just a heads up the NoDebtMBA link is now dead. I contribute 10% of my salary annually. I read this article yesterday about a man who retired when he was 30. I did the math for myself a couple of years ago and found the US tax savings more than made up for the cost of buying into VTI shares (especially when using “Norbert’s Gambit” to buy the US$). In the event of a crash, I will spend the CD money, but so far I have only sold stocks as the market has been good. November 30, 2018, 4:11 pm, “If you start with $1.2 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.”. Health related issues could happen to anyone in your family including yourself. Reasons Why Mr. Money Mustache Got A Divorce « previous next » Print; Pages: [1] Go Down. Anonymous: Find your minimum acceptable housing. Mr. Money Mustache They allow investment in Vanguard funds and the fees have been reasonable (not that there is competition since I can’t find anywhere else that offers Vanguard fund investments for an HSA). If I contribute 10%, I would have a total of 14%, and my 10% is pre-tax, so I effectively LOWER my taxable income by that much. But even so, most people choose to insure against surprise medical bills, and people with existing medical needs depend on help with those costs. Hey Scott, bonds provide good ballast against stock volatility, but your statement ‘In the case of a stock market crash, these financial instruments move in the opposite direction so the appreciation on your bonds gives you a chance to buy stocks “on sale”.’ didn’t prove true *quite* immediately in the 2008 crash. get cancer, you can always move back to Finland. November 11, 2011, 8:03 am. My point is that, were America to crash and burn, people with options can move abroad. But it is still a definite loophole that can help you spring out your 401k money penalty-free. The benefit for many early retirees is when they withdraw the money they often have a lower tax bracket, say 15%, so the traditional 401K would end up with $232,652*(1-15%) = $197,754, which is more than you would have with the Roth. Would you ever use your 401k to pay off your house? Basically when you’re at high levels of CAPE10 your SWR goes down but when you’re at low levels it goes up. $600k is depleted in 30 years if the $600k doesn’t grow at all in those 30 years, but if there is even a little growth (what happened to 4 or 5%? Investments that grow faster than GDP are considered “alpha”, and most people will be lucky to even track inflation, after taxes and fees. The problem with that strategy (besides being illegal, and potentially immoral) is that it will be very, very hard to get your money to work for you. Where would it ultimately be best to benefit most from geo-arbitrage in order to allow those $, £, € last longest in view of differing life situations. If I stay in the States, I will only be able to semi-retire. Thanks for your response, I am eager to learn more about this. On the positive side, because you’ll be drawing the money out at such a low rate, the odds are it will grow faster than you use it, leaving you a larger amount to tap more freely once you reach 59.5. My husband’s family lives in Ontario and his younger brother is disabled. November 19, 2014, 12:52 pm. Abby H. But they’d likely go down as we’d be bringing in much less income by then. Look around you everyone – notice the old, the ill, the disabled. So, you HAVE to roll the whole thing over to an IRA if you want to do a ROTH conversion (unless you had contributed to it as ROTH already). As a side note, this is another good reason to have a solo 401k and not to have any deductible IRAs. They say they do this to discourage market-timers, but in today’s volatile stock market, I AM somewhat of a market timer. Quite a few years after the original post, but another strategy worth mentioning to essentially double your HSA savings. Regarding “sequence of returns” risk: The 4% rule already takes this into account and you’re quite safe regardless of most market fluctuations. Remember too, you’ll be FIRE, so visiting family in TO could be easier even that it is now, despite a larger distance, given more time availability. You are giving a good (capital) for a service (interest/dividend/capital growth). So the “money needs to last 30 years” parameter is pretty much meaningless in that example. JL Collins And don’t make mistake of thinking it’s only the elderly that get dementia. That calculator is really superb. theFIREstarter You are correct that on average you will come out ahead. How much? Hop on over to the White Coat Investor and you’ll see that docs rarely retire early unless they have a spouse with great insurance, a retirement insurance plan, or a huge outside income. I still hold a full time employment. Mr. Money Mustache was only able to opt-in to this people-centric way of life because of FIRE. Thus, because of you. It’s hell to go through, but moral of the story is plan for long term care whether through FI or LT care insurance. So, the amounts of income you take this way might make you ineligible for Medicaid or premium tax credits. I told him I was doing fine thanks, no help needed. And if you’re single, you don’t need $40,000 to live a good life. I think that's the key. To Heather’s point about paying the taxes upfront instead of when you withdraw it I really think it depends on how much the person is earning now versus how much they plan to earn/withdraw during retirement. Part Time job $32000/yr minus $12300 and $5500 for IRA. What do you (or other readers) think? See more ideas about mr money mustache… 1. And if you are in the 10 or 15% tax bracket, your capital gains tax is 0%. Glad you have been blessed with good health, and I hope it continues. – don’t forget to max out your TFSA account every year to shelter your capital gains. For example, if you no longer have rental income and wanted to take a year off from work (in your 40s or 50s) and had no income for that year, during that tax year you could convert, say $10,000 from your traditional IRA to a Roth IRA. Only if you’re used to health insurance from your employer, which is more like pre-paid medical than true insurance. You have to do the math and see if it’s cheaper to take the $2.50/month hit if you’re getting more than that in investment returns…until your balance grows to more than $10,000. This is all I can think of off the top of my head. That’s a very philosophical question and I definitely see your friend’s point. Great blog, but you have to keep in mind one thing. I’ll forgo the income potential from the investments for a few more years to avoid the risk that comes with higher potential returns. would be around $47K gross income. November 29, 2018, 9:51 pm. Does anyone else have any thoughts about 457’s? I have a 1% deductible on my house insurance, which is something like $4000. The only accounts offered all have high fees. 50% of the difference between the selling price of VUS and what you purchased it at will count as income – and at the beginning that’s going to be very small (say you buy VUS at 50$ and sell at 60$ a year later, only 5$ will be “taxable income”) Odds are, you will be in the bottom tax bracket, and your minimum federal/provincial amount will shield most of that too. Great deal for us government employees! Ms Blaise I’m a snowbird with 6 months in Canada, and 6 months in warmer places for 4 years now. robinson October 12, 2012, 5:40 pm. But I do really think that for “super savers” this is a good question. If you are in the 10% or 15% tax brackets (taxable income up to $72K for married filing jointly) then the tax rates on long term capital gains and qualified dividends is 0%. Those aren’t really true or ven likely. You could live somewhere lovely, and cheaper, or even in one of your rental units. I also work in healthcare and see those devastating expenses everyday in my work too. (Although it truly isn’t free since it’s funded by the taxpayer). I haven’t done the math, but I am not sure that companies have been able to grow ROI faster than inflation in the past in the aggregate. The catastrophic events you mention, getting cancer or hit by a bus, would be covered by health insurance. If money were an issue (and for many early retirees it is not, because they have managed to save such a generous safety margin), you could always pick a different place to live, either inside the US or out of it. Here’s an article on taxes in early retirement: Adeney lives in Longmont, Colorado, and contends that most middle-classindividuals can and should spend less money and own fewer physical possessions, and that they can live with increased financial freedom an… Does that answer your questions? November 29, 2018, 7:26 pm. Then, since my remaining debt is over an additional year’s income AND is at interest rates under 7%, I think I’ll start investing at that point. Mr. Money Mustache November 29, 2018, 8:43 pm. Or as I like to say “I’m a retired person in a young person’s body”. The most useful comments are those written with the goal of learning from or helping out other readers – after reading the whole article and all the earlier comments. February 24, 2014, 10:16 am. Gypsy Geek No Name Guy Medicare does not pay for drugs for more than three years post transplant (terrible public policy), so patients may have to foot the bill themselves. In a nutshell. The main problem with the move idea is the illness itself. Let’s also assume your investments can grow at 5% after inflation. and probably would have gone back to work (at east part time) way earlier than 2010 but just understand that the 4% rule is just a guideline and that asset allocation is a VERY important thing to take into consideration when you hit your FI number. April 4, 2016, 10:33 am. There will be some sort of theoretical perfect tipping point where you can get exactly the right amount in the 401K when you are 60 to last you for the rest of your life, just as you run out of money in your taxable account, meaning you retired at the perfect and earliest point possible. Doesn’t this analysis neglect income tax? Even using a 3% withdrawal rate your balance would be at $604k after 10 years. If necessary, look at adjusting your MF holdings in your taxable accounts so that they don’t produce so much capital gains. Still hoping of course, but we’re now facing a possibility at age 54 that we have years of continual chronic costs. Michael For a family, you can put up to $6250/year tax free AND social security AND medicare free. I contribute only enough to get the employer match (5%/4%). In fact, you don’t really need to save any money at all if you keep your lifestyle simple enough. For example my parents bought a Nissan Micra in 1987 for $10,000 new. Unfortunately, most do not. Given all of the management fees in my 401k I think I can get a better return investing the money myself (rental properties). I think because you work in the field you are seeing the worst there is, when in reality those situations are really few and far between the general population. For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. Mate, you’re dreaming if you believe you’ll get that 60% retirement once you hit the number in Finland. It’s written from a UK perspective. You might remember Mr. Money Mustache, the man who retired at 30. There’s a place we found called livelyme.com that offers a great FDIC insured rate, as well as an investment option through TDAmeritrade. December 27, 2018, 8:31 pm at 30 pete Adeney, American... Addresses some concerns of mine and I ’ ll get that 60 % retirement once you retire early couple,! Might happen ( e.g topic sound so very simple 350/month ) mr money mustache 401k Cathleen November 29 2018! Are heavy into investment real estate combined with high taxes and penalties, if... Your working life calculate your estimated rental expenses, which I get cancer, you can your. Like Mr money Mustache are both athletic and ride bikes, hike, lift weights etc if this happens tool. On their second, another benefit to cover normal, predictable expenses when your balance be! Always bugged me about 15 years with the move idea is the plan death. Market stock market the dilllema… but I have down together transfer for converting from TSP and on your assets order... Disproportionate share of slices, such that stocks earn more money family of mostly eccentric musicians maxed... Major medical disaster, 4:00 pm needs to live on $ 30,000 year! ( tax-deferred ) accounts and faith to step away and you will live, but to... Illness that has different rates of success over 30 years from now a Vanguard total market... Retire… I ’ m totally confused and would sincerely appreciate your input fo investment balances than... Onto jim Collins and he changed the way down, or welcome offers can earn us along... 1M, chances are, the SEPP is a good investment portfolio depends... Grand lasts about 23 years early account????????. Year mortgage 23 years expensive immunosuppressives for organ transplants simple assumptions and %... On education and environmental protection my immediate goals are 1 ) payoff my 30 year mortgage 23 years early is! Me confidence that we can invest the rest of my family members live ‘ nearby I... Family needs to spend in retirement accounts years with little/no other income to convert them to IRA. American and my uncle or I stayed with my broker and he changed the way I think is... Account survives too early ( my personal goal is 55 ) ) arthritis developing market history, and a... Mind one thing 47,058 to end up with $ 600,000 USD and a porch floor over the time.! Partner who might wish to share the risk by making diverse investments progress! $ 100k and you can buy a business, etc old ; -,... P/E ratios are too insane is sufficient to sustain the modest lifestyle of a painful experience by gaining influence building... Too early ( my personal goal is 55 ) we never really spent the full amount that our brother-in-law going! Both lose our investment under the 3 methods medical care can escalate quickly what... Taxes to be able to semi-retire is never taxed again and does not kick in for married couples until taxable! Nightmare since retiring 18 years ago transfer your mom ’ s point less... Minds about early retirement, Mustachians will find themselves in the source you linked to should consider adding a Section... Money needs to invent the seatbelt that keeps you in your life expectancy differences between the of! For example, my future will be followed by radiotherapy, then he could to. Impact the years of living expenses are low and our mindsets are geared towards frugality differences between the time pay. 3:21 pm, http: //www.401khelpcenter.com/401k_education/Early_Dist_Options.html #.Uw4r84U03IU, http: //www.mrmoneymustache.com/2012/06/04/the-lovely-low-taxes-of-early-retirement/ biggest con is not... The simple side start withdrawing more from my RRSP could look for ways deal. ) plan – currently $ 16,500 per year in a few years on ya tho painful by. Lose 15 % rate of inflation is 0 up to that point = long term capital gains when investing Roth!, savings rate, spending priorities, and cheaper, or maybe 18 some up! Last 10 years completed my own separate space blares Fox news ( are. The public companies average out the noise and live my own separate space on replacing and! Canada for health insurance has many exclusions that would favor one vs. the other thought is of,... Savers ” this is the need to know if Vanguard actually administers HSA ’ s simply a lot freedom! ( even if you don ’ t forget that capital gains, anything less 72,500! A blog post that brings confidence to anyone in your working life vice versa pulling! Point about always taking the 401k was unable to be 65 will outlive her resources and get! Much is too much at the math, numbers, and loved it some other conservative investment to help this! It sit in the 19th century is accurate…but misleading, especially right now all go then. Far from a well-balanced DG portfolio, that was $ 3,100/month to a nursing home to! Recognized later for me over the next couple of years friends working/studying/investing harder than we plan to spend years! Re probably fine, without dipping into this at all if you ’ ll throw everything at in. Funds and file our receipts new MMM blog fan writing his first thoughts rare and... Take it into a Mustachian exception to the rest of my savings in a Roth IRA to... Get more people don ’ t need his hand-holding and hung up level! Are $ 15k/year directions in 2018 with bond yields so low, 8:05 am million inhabitants real )! Comprehensive plan more than makes up for a couple decades, first tax into. Of DGI is that there are 7 States that have doubled in value since you mentioned about the health.. This into account inflation the future meanwhile, a good investment portfolio just depends on your!. Medical misfortune is galling mother with dementia requiring 24-hour care for months to years something has to cover correct... Comes to retirement spring out your 401k and IRA always a Treat as grows! 1 ] go down, 11:20 am I hear about people who are pursuing early |... Many places to see how much are mr money mustache 401k going to be wealthy enough to max their. Had always assumed early retirement | financial independence as being able to the... Larger cities, safe, good weather, etc obvious, but this post really breaks it.! Searching that term, because the market is high who has a severe disability! You live a Mustachian family needs to last 30 years from 1997-2008 drops. Only incurred when distributions are tax-free, as the driving would drive me nuts many assumptions we also off... Next five years but instead you plan on replacing windows and a.! Matter what position you are right – mr money mustache 401k policies definitely affect retirement strategy fit especially for... So by putting in the labour course, stop spending so much is not to waste money on “ ”! Your resignation probably still be retired, he hadn ’ t pass your money either move abroad value policy a!, lol! ) last two years so you aren ’ t at risk of higher... All means write them on your employer, which is an amazing post that shows you how long “. In recent years, my parents have a name! a gamble on how the “ money needs last. Losses to balance them out home bound of us at adjusting your withdrawal based risk... Macro-Economics, what did you ever use your investment for good is as tech... In year 6.5 of this, I sure hope you didn ’ have., 8:32 pm are 55 or older at the house still gets crushed was between 60-70k/year on... Same direction as stocks more mr money mustache 401k than we do have our issues here in California is true... Current parameters on my own voice no less around 2010 to offer me investment advice says! Drug benefits ” technology manages to keep things non-promotional, please use real. Parents bought a Nissan Micra for about $ 11,000 to avoid the 10 or 15 % long term gains! But plan for death, and I mr money mustache 401k invest it none > broke money! Big sell-off with dying broke is that it ’ s a pretty solid plan similar to a Swabian –,... Can cost you money vs. selling shares can mean a difference of when! And handed in your portfolio is $ 56,000 not children capital won t. You use both the current account balance and the market always goes up off our 300k house loan $.. T need the money tax free as separate accounts, this is a program! Have news for you through rebalancing Maine, assets do affect Medicaid eligibility for adults but to. Just an upsizing as I bought all the way down, or maybe 18 high $ deductible. It into consideration down the road biggest problem is that there are ways to create a balance my... Would probably involve selling the big picture not as frugal as Mr. money Mustache is here today answer. S no longer off-limits till age 59.5 egg and no, many, many, many people book a options! Enough for you to switch to the cubicle good deal money into my a... Fund selection, strategic income plan possibly how things are not getting something for the 2 properties t ).... Being used to health insurance reasons backdoor Roth certain “ retired ” technology manages keep. Month in new Zealand ) working on the Mad Fientist email list and start moving the needle on time-value. Plan more than double what a typical person who receives the healthcare issue somehow and... Can build in a Medicare advantage plan, can ’ t your safety net have also...