Author Topic: CASE STUDY update for a poker player finally out of debt!  (Read 3388 times)

MrCleanShaven

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CASE STUDY update for a poker player finally out of debt!
« on: February 10, 2020, 06:08:02 PM »
Hello all I first posted my sad state of affairs a few years back which can be found here:

https://forum.mrmoneymustache.com/case-studies/*case-study-clean-shaven-but-hoping-to-grow-some-whiskers!/msg1863175/#msg1863175

6 month later I added this update:

https://forum.mrmoneymustache.com/case-studies/**update**-for-mrcleanshaven/msg2081912/#msg2081912

that brings us to today's update!

I am about to turn 47 years old in March. I am now 100% debt free! My expected income this year will be $35,000 and my expenses are very low still at about $1200 a month. So I expect to have about 20k to invest this year. I will max out my Roth IRA at $6000 but what to do with the rest? What is the best way about starting to set up a plan towards retirement? After funding my Roth IRA I will have 14k left over to invest. What would you recommend to get started? I have heard people speak of self funded pension plans. Can anyone set one of those up and are there tax advantages? Right now my IRA is basically 97% stocks should I start adding some bonds or cd's to balance it out a bit?

My current assets are approx $16,000 in my Roth IRA which has some individual stocks along with some money in a Vanguard Total Index fund. I have $15,000 emergency fund sitting in a Barclays savings account earning 1.70% APY. I have about $2000 in 12 month cd's staggered out over the year. I am also saving up for a car and I have $5000 set aside for that so far. I will continue to add $500 monthly to the car fund until my current one dies. I bought my current car for cash back in 2007 so I've gotten my money's worth!

I still play poker professionally and as many know there is some variance as far as exact income but I assure you at the stakes I play it's pretty much a given that over the course of a year my expectations are met. I have 10k in cash I am using as my poker bankroll and another 5k in my checking account  that I use to pay my monthly expenses. At the end of each week anything I have OVER 10k I deposit into checking. After bills are paid I still have 5k+ I transfer the excess to Barclay's savings. My Roth IRA auto debits $125 a week from my checking.

Let me know any questions that would help you understand my situation better. I appreciate any and all feedback I understand my situation is a bit unique and I don't mind the criticism.

thanks

MCS

mistymoney

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #1 on: February 11, 2020, 08:17:26 AM »
Read the linked thread briefly - and I'm confused. Are gambling winnings counted as earned income? That is surprising to me.

I wouldn't have thought you could put them into Roth, IRA, etc.

Are you gaining soc. security benefits with your income? I think you will need to rely heavily on soc. sec in retirement - or if you hit disability. Aside from the monetary issues - I think having an income from poker winnings offers a lot fewer protections for unemployment or disability than if you had a more 'regular' job.

Did you ever follow up on the PT job suggestions? It seems like the poker should be more of a supplement, or a coaster situation rather than to build your stache, but maybe I am a fuddy-duddy.

I would also think it would make playing a lot less 'fun'.


dandarc

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #2 on: February 11, 2020, 08:54:56 AM »
@mistymoney - in the normal case, gambling winnings are not earned income, but the OP is a professional poker player - if you meet the IRS' standards, then you are in the business of gambling and can take advantage of all the pluses and minuses of that.

Sounds like the OP is spending the required large amount of time on it, keeping good records, and has a reasonable expectation of on-going profit as evidenced by the actual on-going profits. So probably is, in fact, a professional gambler as far as the IRS is concerned. IRS, when they challenge this to get your earnings re-classified as "non-professional gambling", almost always wins. But in general, the people that get hit by that are reporting losses, and don't have the proper records to back up what they are reporting. Same thing can be said about when the IRS challenges whether you are running a business vs. just a hobby.

Moonwaves

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #3 on: February 11, 2020, 08:57:06 AM »
Have you already read the Investment Order stickied thread? I think regardless of how you earn your money, it applies fairly universally. And just had a quick look, it was mentioned in both of your previous threads, so you may have read it already but should go back and read it now from a debt-free perspective. Have you also read https://jlcollinsnh.com/stock-series/?

It sounds like it would be a really good idea for you to sit down and write out an actual investment policy statement. There was a thread started recently where people were posting their personal policy statements, you might get some good ideas there.

AMandM

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #4 on: February 11, 2020, 12:09:49 PM »
No advice, but congratulations on getting out of debt!

MrCleanShaven

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #5 on: February 12, 2020, 04:01:24 AM »
Read the linked thread briefly - and I'm confused. Are gambling winnings counted as earned income? That is surprising to me.

I wouldn't have thought you could put them into Roth, IRA, etc.

Are you gaining soc. security benefits with your income? I think you will need to rely heavily on soc. sec in retirement - or if you hit disability. Aside from the monetary issues - I think having an income from poker winnings offers a lot fewer protections for unemployment or disability than if you had a more 'regular' job.

Did you ever follow up on the PT job suggestions? It seems like the poker should be more of a supplement, or a coaster situation rather than to build your stache, but maybe I am a fuddy-duddy.

I would also think it would make playing a lot less 'fun'.

Yes I file as a professional gambler and gain SS benefits. I think there are some people that think playing for a living makes it a "grind" and less fun but I really enjoy the social aspect of the game as well as the challenge. At least for now I really have fun with it. I think this type of thing is clearly not for everyone but my personality type seems to fit very well in this career. Thanks for taking the time to read and leave some feedback I really appreciate it!

MCS

MrCleanShaven

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #6 on: February 12, 2020, 04:06:36 AM »
Have you already read the Investment Order stickied thread? I think regardless of how you earn your money, it applies fairly universally. And just had a quick look, it was mentioned in both of your previous threads, so you may have read it already but should go back and read it now from a debt-free perspective. Have you also read https://jlcollinsnh.com/stock-series/?

It sounds like it would be a really good idea for you to sit down and write out an actual investment policy statement. There was a thread started recently where people were posting their personal policy statements, you might get some good ideas there.

Thanks a bunch I am going through both of those threads now!

MrCleanShaven

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #7 on: February 12, 2020, 04:07:05 AM »
No advice, but congratulations on getting out of debt!

Thank you! Feels great

mistymoney

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Re: CASE STUDY update for a poker player finally out of debt!
« Reply #8 on: February 12, 2020, 05:50:08 AM »
@mistymoney - in the normal case, gambling winnings are not earned income, but the OP is a professional poker player - if you meet the IRS' standards, then you are in the business of gambling and can take advantage of all the pluses and minuses of that.

Sounds like the OP is spending the required large amount of time on it, keeping good records, and has a reasonable expectation of on-going profit as evidenced by the actual on-going profits. So probably is, in fact, a professional gambler as far as the IRS is concerned. IRS, when they challenge this to get your earnings re-classified as "non-professional gambling", almost always wins. But in general, the people that get hit by that are reporting losses, and don't have the proper records to back up what they are reporting. Same thing can be said about when the IRS challenges whether you are running a business vs. just a hobby.

thank you for clarifying!