Author Topic: smart moves to make 7 months out from FIRE  (Read 3419 times)

BTTG

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smart moves to make 7 months out from FIRE
« on: December 18, 2014, 11:51:33 AM »
I am planning on quitting my job at the end of June 2015 and beginning my FIRE stage.

My current savings mechanisms are:
1)   contribute fully in a Roth IRA for both myself and wife yearly ($11K total)
2)   contribute to my works 403(b) plan (5% of total income paid by me and work pays in at 9%  of total income; about 15k/year contributed)
3)   save about 50% of my take home pay (keep some in savings and most goes into a taxable investment account)

After work I plan on rolling over my wife’s and my 403(b)’s into a Traditional IRA and then slowly into my Roth to eventually start taking $$ out of to provide partial income…

Right now I have about 150K in our Roth’s and 200K in 403(b)’s…traditional IRA’s have been established, but not funded yet ($0).

My thoughts:
I wish I had been putting our self directed IRA contributions all along into a Traditional IRA instead of a Roth IRA.
For 2015 I plan on putting our IRA contributions into the Traditional IRA to reduce our taxable income.
Since we are close I don’t want to create too much stress, but thought there may be simple things I could do to better position us? For instance is there a simple way to get my Roth contribution for 2014 into my traditional IRA (I put these contributions in back in January) to help me reduce our AGI?
I assume getting my AGI as low as possible for 2014 will help as this likely will be used in determining costs for health insurance (we are planning on moving to Vermont in July)

My question is whether there is anything worthwhile to do in the next 7 months while I still have the opportunity (i.e., while I’m employed) to put us in a better position down the road?

Gone Fishing

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Re: smart moves to make 7 months out from FIRE
« Reply #1 on: December 18, 2014, 12:10:16 PM »
For instance is there a simple way to get my Roth contribution for 2014 into my traditional IRA (I put these contributions in back in January) to help me reduce our AGI?

Yes.  You can recharacterize your 2014 contributions.  If your Roth and traditional are at the same firm, this should be pretty easy just give them a call and tell them what you want to do. 

You may also want to ramp up your 403(b) contributions to the max as this will also help reduce your 2015 AGI.

Catbert

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Re: smart moves to make 7 months out from FIRE
« Reply #2 on: December 18, 2014, 12:32:32 PM »
Take the time to do a dry run on your taxes for 2015 and even 2016. 

*I'm not sure how much your income will drop but if it's substantial you may find that deductions you couldn't take in 2014 will be available in the future. 

*Maybe the standard deduction will make sense in the future. If so accelerate deductions into this year (e.g., next year's property taxes or charitable contributions.)

*If you'll be in 15% marginal rate then you could generate some capital gains  and pay 0%.

*Traditional IRAs that make sense in 2014 probably won't in 2016, but maybe in 2015.

Eric

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Re: smart moves to make 7 months out from FIRE
« Reply #3 on: December 18, 2014, 12:36:23 PM »
This Best Day To Quit thread has a lot of items to consider.  Read through that if you haven't yet.

MooseOutFront

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Re: smart moves to make 7 months out from FIRE
« Reply #4 on: December 18, 2014, 12:41:03 PM »
You could contribute $17,500 to the 403b from Jan 1 through the time you quit.  That will reduce the taxes you pay in 2015 and increase the amount you have growing tax free. Assuming you have enough in Roth principal and taxable to not need it.

sol

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Re: smart moves to make 7 months out from FIRE
« Reply #5 on: December 18, 2014, 12:56:01 PM »
If you have home equity you might consider trying to secure a HELOC while you still have income from a job, just as a backup source of funds in retirement.  After you quit, I would expect emergency credit to be much harder to come by.

BTTG

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Re: smart moves to make 7 months out from FIRE
« Reply #6 on: December 19, 2014, 04:57:01 AM »
Thanks you all for your suggestions. This will help direct me.
I've already contacted HR and will be calling my IRA holder...

any other ideas will be appreciated.

DK

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Re: smart moves to make 7 months out from FIRE
« Reply #7 on: December 19, 2014, 05:52:52 AM »
I've always thought about doing a pre-emptive strike on common maintenance items to keep 'emergency' costs down in retirement...

Old hot water heater, get it taken care of now while still earning a pay check.....new roof needed soon, fridge about to die, etc, etc.

arebelspy

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Re: smart moves to make 7 months out from FIRE
« Reply #8 on: December 19, 2014, 09:12:27 AM »
I've always thought about doing a pre-emptive strike on common maintenance items to keep 'emergency' costs down in retirement...

Old hot water heater, get it taken care of now while still earning a pay check.....new roof needed soon, fridge about to die, etc, etc.

But.. but.. you're spending money now to do that!  Why not save that money, and spend it when it's necessary?  I'd rather have the liquid funds now than the new roof now, and then use those funds when you need to.
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