Author Topic: Case Study - FI with some Part Time work  (Read 6941 times)

Dicey

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Re: Case Study - FI with some Part Time work
« Reply #50 on: July 03, 2018, 09:50:47 PM »
Twice you've said you must pay off the SL and the car first. That is not correct.

1. Keep trying to re-fi the SL's, especially as your credit score improves.
2. Do NOT accelerate payoff on the cheap car loan. Leave it alone for now. Correction: treat it like a cream puff (as opposed to running it into the ground). It doesn't make sense to keep it unless you get another 15 years out of it.
3. Keep looking for a cream puff older version of that Camry so you can potentially switch it out and $ave money in payments and insurance.
4. Consider (and do the research) on a re-fi or HELOC to kill the student debt, especially if you can save 2 points or more.
5. Study compound interest until you truly understand what you're giving up by waiting to start investing.
6. Your enrollment period is probably in October. If you wait until January, you might miss the boat again. Please check on this well in advance.

I have more thoughts, but I'll have to save it for later. This is enough to digest for now. Happy Fourth!
« Last Edit: July 03, 2018, 11:27:09 PM by Dicey »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #51 on: July 03, 2018, 10:51:17 PM »
The thing is I don't want to wait to start investing. I would start Thursday if I understood where all the numbers are coming from. It feels like college when a professor shows you something and assumes you know the formula, not ever taking class, and just gives you answer. No work shown between as to how we arrived there. That's what's so frustrating and why I'm grasping to understand and figure it out on my own. I understand the value of 401k's and IRA's, I just learned about tax brackets today and why I want to drop down to the next one, I understand why now on waiting to pay down the SL (problem is she has two graduate degrees so we have tried for years to get it down and our credit is 804 as of two days ago), car I can scrap and just keep my truck as I own it outright already even with shitty gas mileage I don't travel much, save up and get another car with cash, I understand how compound interest works. I just don't understand where numbers are coming from.  This article is one of the causes of all my aggrivation: https://www.mrmoneymustache.com/2011/09/17/the-race-to-retirement-revisited/

What is he referring to with savings? Bank, investing, under the pillow? Then there's the investment gains. They save 46k and gain 1150. From the 46k? Because if it's a 5% gain then it should be more like 2300. Where did that number come from? And it just escalates from there. Is there an early article I missed that explains all that? I've been to several other sites hoping they show it but it's the same. Also, no mention of 401k just whoop you're retired, enjoy. 

All I'm trying to do is figure out where all the numbers are coming from and where they go so can bloody figure what I need to invest in either 401k, IRA or both, what to pay off if anything and what I need to invest in a taxable brokerage account to get this show on the road.  We've made all the necessary changes in our expenses and are comfortable with them. I apologize for the rant, I'm exhausted from lack of sleep as I've been beating my head on a wall trying to figure it out.  Even while out fishing I couldn't stop thinking about it.  I know some ppl are getting frustrated with me and apologize whole heartedly. I'm a visual learner and I need to see the work to understand the process. It feels like it's simple and I'm making it more complicated than it really is.

And just an FYI, our company gave us until August 1st to set up our acount.

Vapour

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Re: Case Study - FI with some Part Time work
« Reply #52 on: July 03, 2018, 10:52:46 PM »
For estimating stock market returns, I use this site for historical data on the US stock market: http://www.moneychimp.com/features/market_cagr.htm
For the last 146 years, the CAGR is 9.15% nominal (not adjusted for inflation) or 6.96% real (inflation adjusted).  The CAGR is a more true representation of expected returns than just a simple average.  Obviously, we don't know what the future holds, but we might as well use what data we have available for planning purposes.  It's obviously not guaranteed but likely more realistic than 5%.  In your case, you want to use the nominal return (9%) to compare to your debt, since your debt payments are fixed (not adjusted with inflation like other expenses).  For determining your needs to meet your other expenses, I'd use the 7% number.

It's not clear if you're taking into account the taxes saved by investing in an IRA or 401k.  If you're in the 12% bracket, you'd save $1320 in taxes on $11k into 2 IRAs or $2200 in taxes on $18.5k into the 401k.

Keep in mind that there are ways that you can access your IRAs/401k's without penalty before 59.5, so you don't have to assume that money is tied up until 20 years from now.  You can access your 401k if you retire when you're 55 or older and leave the money in that account.  For your wife, that's only 7 years away if she's planning to stay at the job that long.  That's for a 401k only and does not work for an IRA.  There's also something called SEPP/72t that allows to to take money out based on some approved IRS methods, but you have to continue doing this until you're 59.5 or you will be assessed a penalty on all money taken out.  The most popular option is a Roth pipeline, but this requires 5 years to get started so may not make as much sense in your situation.  Here's a post with more info about these: https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

I agree with everything Dicey said.  I don't understand why you'd want to pay off the 1.9% car loan when you have 0 savings and could be making 9% in the market.  The student loan rate is a bit higher, so I could at least understand paying that down more so, but I'd still favor retirement investing over it.

What is your house worth?  What does Zillow or a similar website say it's worth anyway?  You mentioned that you re-financed recently but also that you've been making extra payments and your balance is low.  So it's possible you could still get money out at a lower rate and pay down the SL debt with it, but we can't say without knowing what equity you have in the house.

I also would try and sell the car and get a few year old car in the $15k range, or more ideally, an older car in the $5-10k range.  I have a perfectly reliable car that's 13 years old with 115k miles on it that I bought for $6.6k about 8 years ago.  No, it's not luxurious, but it gets me from point A to point B which is all I need.  Even with higher repair costs on older cars, I think it's hard to make up for the ridiculously high purchase price of new cars.  I also bike more miles than I drive now, so that helps keep costs down, both on gas and wear and tear on the vehicle.  I figure my car has cost me about $1250 a year for the last 8 years.  This is purchase price and maintenance/repair, but not including gas.  I think this is one area where you could seriously save.

Final note: Don't forget about health care expenses in retirement.  You mentioned that your employer pays 100% of this right now and your most recent math doesn't seem to add this back into your retirement expenses.  You may be eligible for ACA subsidies if they're around then, but it'd be risky to plan on that.  You mentioned you might keep working, so it may not be a concern, but something to keep in mind.

Sorry for the wall of text.  Good luck and Happy 4th everyone!

Vapour

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Re: Case Study - FI with some Part Time work
« Reply #53 on: July 03, 2018, 11:17:14 PM »
This article is one of the causes of all my aggrivation: https://www.mrmoneymustache.com/2011/09/17/the-race-to-retirement-revisited/

What is he referring to with savings? Bank, investing, under the pillow? Then there's the investment gains. They save 46k and gain 1150. From the 46k? Because if it's a 5% gain then it should be more like 2300. Where did that number come from? And it just escalates from there. Is there an early article I missed that explains all that? I've been to several other sites hoping they show it but it's the same. Also, no mention of 401k just whoop you're retired, enjoy. 
In this case, I believe "savings" just means money that is not spent on expenses.  In this case, it's the money that is invested at 5%.

The gain is lower than $2300 likely because you don't have the $46k up front to invest.  You're likely investing it something like monthly (so 46k/12 = 3833 per month).  You can use Excel or an online calculator to determine what the total interest will be for the year.  For example here:
https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
I put in $0 for base amount (first year, no savings so far), 5% for annual interest rate, 1 year for calculation period, $3833 for regular monthly deposit, and a monthly compound interval.  I got $1265 interest, which is pretty close to MMM's $1150.

Don't get too stressed out about this.  You don't need to understand everything immediately.  You'll get there.  Just your willingness to try and figure it out means your better off than the majority out there.  Just keep slowly digesting information and trying to figure it out.  In the meantime, just start saving the money and work on figuring out what to do with it.

It sounds like you can get into the 401k now?  I'd at least get that set up and put in some small percentage to make sure you're in and can ramp it up whenever you want.  I'd recommend investing in the IRAs before the 401k though due to the higher fees in your 401k.

dmmms

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Re: Case Study - FI with some Part Time work
« Reply #54 on: July 04, 2018, 06:53:57 AM »
If you read the comments (just scroll down!), all of the math is explained in that article! https://www.mrmoneymustache.com/2011/09/17/the-race-to-retirement-revisited/

Just start! Figure out how much you need tossed per week/pay/month to a Vanguard IRA for you both to hit $5,500 each by the end of the year (or even end of March 2019 as you can contribute through tax filing!)! You are suffering from analysis paralysis! :)

Have you read JL Collins' Simple Path to Wealth? It's a fabulous book to help you understand how this all works!

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #55 on: July 04, 2018, 06:57:42 AM »
Sorry for the frustration, these last two explanations helped clear up most of the confusion. At this point it's just deciding what we want to invest in and how much. Most everyone so far has gone either 401k or just two IRA's instead and then invest as our 401k isn't very good. As far as tax brackets go, with our current deductibles it almost brings us down into the next brack so either of those will definately put us in it.  Although, my wife is applying for several jobs she qualifies for that doubles her income which will change things. Cross that bridge when we come to it.

As for the car, that's one comfort my wife is not willing to give up. Every other cut in expenses she has agreed to without hesitation but that one. So be it... 😎, Not a big deal.

Thursday we're going to open a 401k account and just put in 10% of my weekly income and leave it at that for now so it's there should the situation change at all. We'll max out both IRA's in the meantime and invest the rest as recommended. Going to keep trying to get my wife's SL worked out and hopefully lower the interest. 

We have good safety net in savings. For now with our budget we can be FI in a little over 13 yrs. Which is still early. With a little side hustle I'm hoping to speed it up a few.

Thank you again everyone for the wealth of knowledge. I definitely need to slow down with the learning and let it digest. I feel better having some direction at least. Makes it's easier moving forward.

Have a great 4th everyone!!! I'm going back to bed...lol

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #56 on: July 04, 2018, 06:59:41 AM »
If you read the comments (just scroll down!), all of the math is explained in that article! https://www.mrmoneymustache.com/2011/09/17/the-race-to-retirement-revisited/

Just start! Figure out how much you need tossed per week/pay/month to a Vanguard IRA for you both to hit $5,500 each by the end of the year (or even end of March 2019 as you can contribute through tax filing!)! You are suffering from analysis paralysis! :)

Have you read JL Collins' Simple Path to Wealth? It's a fabulous book to help you understand how this all works!

Never read them or most comment sections because usually they're just troll and bitchfest...lol  Guess I should do that more often with the blogs comment section. Thanks for the heads up!!!

I actually ordered that book, should be arriving tomorrow. Very excited to read it!.

Laura33

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Re: Case Study - FI with some Part Time work
« Reply #57 on: July 04, 2018, 09:23:58 AM »
Ok, so I am totally NOT the spreadsheet person, so I canít answer your specific questions.  But a couple of things jump out at me:

1.  Your write-up makes it look like you are subtracting the same amount of taxes in both cases.  That is not accurate and will eradicate a chunk of the benefit from using tax-sheltered accounts.  If you want an accurate analysis, figure out the difference in taxes, and then assume you will use those tax savings toward additional investments or debt pay-down.

2.  It sounds like you are not considering any 401(k) or IRA contributions as available early retirement assets, because you think you cannot access them until you are 65 - am I reading that right?  If that is the case, then yes, your analysis will always show that debt paydown or taxable accounts are better!  If I am reading that right, then you need to fix that in your analysis, because there are many ways that you can access that money before 65.  The good news is that you have plenty of time to learn the details of all of those options and to figure out what is best for you.  Just donít let your fears on that point keep you from taking full advantage of your tax-sheltered accounts while you figure it out!

Also, I am not sure what you meant by your decision to open a 401(k) now - I thought you said you werenít eligible because you missed the semi-annual enrollment period?  You canít open a 401(k) on your own, unless you run your own business.  Did you mean opening an IRA?

Finances_With_Purpose

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Re: Case Study - FI with some Part Time work
« Reply #58 on: July 04, 2018, 11:12:21 AM »
Life Situation:

1. File as Married / Joint
2. 1 dependent @ age 21 in college for one more year
3. Gloversville, NY - Fulton County
4. Ages - Him 40 & Her 48

Gross Salary/Wages:

1. Combined - $94,611

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc:

1. $0.00
Note: Company pays 100% medical insurance & does not match any contributions to 401k.

Other Ordinary Income:

1. National Geographic Consultant Pay - $1,500 / yr

Qualified Dividends & Long Term Capital Gains:

1. $0.00

Rental Income, Actual Expenses, and Depreciation:

1. $0.00

Adjusted Gross Income:

1. $96,111

Taxes: Federal, state/local, and FICA.

1. Federal - $11,065.60 / yr
2. Social Security - $5,866.38 / yr
3. Medicare - $1,372.02 / yr
4. NYS Income - $2,059.3 / yr
5. NY Paid Family Leave - $119.34 / yr
6. NY Voluntary Disability - $62.40 / yr
7. Total Statutory Deductions - $20,545.04 / yr

Income After Taxes:

1. $75,565.96
Note: It should be higher but I had to adjust my taxes to take out more when I was still working a second job. I just haven't remembered to readjust them back to normal.

Current expenses:

1. Mortgage - $503.10 / month
  a. Principal Balance - $45,581.18
  b. Interest Rate - 3.75%
  c. Escrow - $252.94 / month

2. Student Loans - $629.25 / month (combined)
  a.  Her - $357.30 / month
  b.  Her Interest Rate - 6.5%
  c. Her Balance - $54,351.89
    i. Him - $303.95 / month
    ii. Him Interest Rate - 3.625%
    iii. Him Balance - $45,914.16
Note: Both of our loans are half paid off at the current balance stated.

3. Car Payment - $432.58 / month
  a. Balance - $25,920.17
  b. Interest Rate - 1.9%

4. Car Insurance - $181.70
Note: Daughter still on ours while she's in college.

5. Electric - $216.18
Note: This includes heating which National Grid spreads throughout the entire yr versus all up front each month during the heating season.

6. Water - $225 - $250 / yr

7. Cell Phone - $100 / month

8. Internet - $64.99 / month

9. Physical Therapy - $35 / bi-weekly
Note: This can not be dropped as once a month per settlement is not enough for me to maintain a functioning work capacity.

10. Amazon Prime - $119 / yr
Note: We do all of our shopping on here that isn't groceries, only on sale with prime shipping and we use it for our TV watching.

11. Xbox Live - $90 / yr
Note: For watching Prime and playing video games with my family (parents, siblings and kids). Any games I purchases are either used or on sale for $20 or less (2-3 per yr) or I use the pts from my Playstation CC to get them for free.

12. Groceries - $85 - $125 / wk
Note: This fluctuates depending on if we need pet food, litter, laundry detergent, etc.

13. Dental - $680 / yr
Note: Annual 6 month cleaning for both my wife and I.

14. Total Expenses / yr - $32,120

15. Balance after Expenses - $43,445.96

Note: If I have forgotten anything important please let me know and I will update accordingly. After this weekend all our CC, Medical, Dental and Car Repair bills will FINALLY be paid off after years of playing catch up... Feels good to get those off our backs.

Assets:

1. Savings / ER Fund - $17,849.98

Specific Question(s):

1. Should my wife refinance her student loan to see if she can get a lower interest rate or should we just pay it down ASAP?

2. Neither of us have invested a dime toward retirement due financial constraints (job loss, monthly bills, supporting children, etc.). Now that our careers have finally settle and we're making a decent living we'd like to know if it's possible to become FI in the next 10-15 yrs?  I plan to keep working for a few more years as I'm the younger one and because I get bored easily and would rather work and make money when I'm not fishing, gaming or working on the house. Also, my wife has far more experience than I with finances so we agree it would be smarter for her to retire earlier and focus on investing and finances while I continue working to help fund our dream.

3. Should we focus on paying off all our loans (mortgage, student, etc.) or can we start putting money into retirement like 401K, index funds, etc.?

4. I have more questions but I think I'll stick with those 3 and see what everyone suggests and go from there.

I just would like to say thank you to everyone who takes the time to read my case study and provide information with advice so we can join in attaining FI in the future.  Have a HAPPY 4th of July everyone and look forward to comments.

Corey

Edit #1 - Updated Info
Edit #2 - Updated 401k contribution info

Can you go FI in 10-15 years?  Sure, but it will require some major changes.  And as others posted, there are some things missing/not adding up here. 

You're still paying off $100k+ of your own school loans - and I'm guessing those aren't from the past few years.  So I would strongly reconsider how much/whether/to what degree you're funding your daughter's college...  I know you love her, but she has hit that time when she needs to take responsibility for herself.  (I also realize how hard it is to change things midstream.)  I would strongly reconsider how you're financing the kids' education and realize that that is stopping you cold from moving forward.  (Ditto re: funding the kid's car insurance...time for the kid to learn the ways of the adult.) 

As for the car, see tips elsewhere on this forum re: how to talk that through, how to focus on talking about your own feelings, not hers.  And instead of focusing on the car, talk about your life goals, how you get there, and help her see what you're trading off to own the car.  That's usually more helpful than saying things like "we could save a lot if we sell the car." 

Next: listen to everything @Dicey posted.  She's dead on. 

So, step 1: get a comprehensive budget in place, so you know where your money is going.  You have to assign money a place to go; right now it's flying out all over and you're spending everything you make.  Once you track it, you can decide whether what you're doing aligns with your own priorities.  How important, to you, is retirement versus kid's college or cars or whatever it is?  Then assess, make a plan, and stick with the plan. 

I've hinted at this, but daughter needs to learn now how expensive cars/insurance are, and a great way to get her started is to wean her off of your car and insurance.  Otherwise, she'll take these things for granted and think they're cheap.  (My wife had to learn that lesson once she left home, and it was a shocker at first.)  Cars aren't cheap. 

Here are my answers and then other ideas:
1.  Yes, refi the loan if you can.  Would have been even better a year or two ago.  Rates are going up now, so I'd get on that.  Also realize: you may lose any benefits you have with that loan (rate breaks and so on) when you refi, so just be aware. 
Also, consider a HELOC if you have enough equity and use *that* on your 6.5% loan.  At least think it through; it could save you if there's enough equity there to make it worthwhile. 
2.  With some extreme changes, you have a shot at ten years to FI, but as you are, you don't look likely to get there in 15.  You've got to nail down all the spending (yours is approx. 30k higher than your case study suggested, from what you've said) and decide whether you want FI or want these other things, and especially how much to spend on kids. 
3.  See Dicey's suggestion.  It's a little complicated.  You want to pay down debts, especially that 6.5% loan, immediately.  You also don't want to miss out on tax-advantaged accounts due to the immediate income-tax savings and long-term capital gains savings.  You want to pay up to 401k match now, and for now, I would throw all the rest on wife's student loan until it is gone.  That 6.5% guaranteed return on a horrible form of debt is #1 priority.  My bias is to pay off all student debt ASAP, as it's a form of debt you can't get away from.

Feel free to throw out other questions. 

One parting thought, and please take this in the well-meaning spirit it is intended: I went to school with a lot of folks whose families funded everything, including education.  But I came from places where that was far less common and people had to work to pay for their own education.  You want to take a guess which group of folks appreciated their education more?  Which learned the value of hard work faster?  Which learned the cost of things and didn't make so many of the dumb financial mistakes that 20-year-olds often make?  You may not be setting your kids up for opportunity, you may instead be denying them opportunities to learn on their own, make hard choices on their own, and take ownership of things.  They're also watching mom and dad mortgage themselves to the hilt to fund their kids...which will encourage them to do the same kind of thing one day.  If you *really* want to set up your kids, teach them to make hard choices about education up front, rather than defer the hard part into large student loans they're anchored to throughout their adult lives.  (I realize it's hard with your daughter almost through; she may not have any good alternatives.  But if you have other kids, you can start those conversations now.)

I don't think that's what I want to teach my kids, even though I understand that you're making an effort to set them up as well as possible for adult life.  Financial responsibility isn't a bad thing, and the kids have to learn it one way or the other soon anyway.

Dicey

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Re: Case Study - FI with some Part Time work
« Reply #59 on: July 04, 2018, 12:16:31 PM »
^^Alas, FwP, they don't receive any matching. Boo. The tax advantages are still there, but no free money.^^

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #60 on: July 04, 2018, 05:49:07 PM »
Ok, so I am totally NOT the spreadsheet person, so I canít answer your specific questions.  But a couple of things jump out at me:

1.  Your write-up makes it look like you are subtracting the same amount of taxes in both cases.  That is not accurate and will eradicate a chunk of the benefit from using tax-sheltered accounts.  If you want an accurate analysis, figure out the difference in taxes, and then assume you will use those tax savings toward additional investments or debt pay-down.

2.  It sounds like you are not considering any 401(k) or IRA contributions as available early retirement assets, because you think you cannot access them until you are 65 - am I reading that right?  If that is the case, then yes, your analysis will always show that debt paydown or taxable accounts are better!  If I am reading that right, then you need to fix that in your analysis, because there are many ways that you can access that money before 65.  The good news is that you have plenty of time to learn the details of all of those options and to figure out what is best for you.  Just donít let your fears on that point keep you from taking full advantage of your tax-sheltered accounts while you figure it out!

Also, I am not sure what you meant by your decision to open a 401(k) now - I thought you said you werenít eligible because you missed the semi-annual enrollment period?  You canít open a 401(k) on your own, unless you run your own business.  Did you mean opening an IRA?

Wife found out because the enrollment dates are July 1st and Jan. 1st and July 1st fell on a Sunday this year. Because of that they extended it to August 1st.

As for everything else, I am learning and it is a lot to take it. Right my goal is just to determine what the best path is to achieve the goal whether its paying down, refinance, 401k, IRA, etc. Once I have a plan laid out and going it'll be easier to sit back take it in slower and really learn the in's and out's that everyone is talking about. Figuring out the best course of action is what find difficult because there's soooooooo many options that, like some else said earlier, I'm paralyzed and just taking the easiest route I understand atm and going with that.  Because of this I think I've hit my wall and need to take a step back, read and soak in everything I've learned so far. With that, my wife is going to take over for now posting and asking questions. She does ALL the finances and knows where every cent goes and tracks it in a journal. She has a better understanding and will most likely know what to ask where I'm finding it difficult to articulate at times and making it more confusing.

I really want to learn this stuff so I can teach all my children as well, esp since they're so young and my eldest son is already a successful musician. Its both exciting and frustrating...lol. With that I'm going to go play Monster Hunter World on Xbox. If anyone here is interested in joining me my tag is Silverback761. Drop me a line and I'll see everyone else around the forums with lots more confusing math, questions and curiosities 😎.

Enjoy the fireworks and be safe!!!

Finances_With_Purpose

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Re: Case Study - FI with some Part Time work
« Reply #61 on: July 05, 2018, 01:53:55 AM »
That's a good plan itself.  Take it slow.  One thing at a time.  Just pick one thing, do that, then come back later for the next thing. 

This thread will be here whenever you need it.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #62 on: July 05, 2018, 08:09:44 AM »
That's a good plan itself.  Take it slow.  One thing at a time.  Just pick one thing, do that, then come back later for the next thing. 

This thread will be here whenever you need it.

I'm going to do just that :-)  I'm going to follow the order of investment plan and just go through it each step so here we go:

0. Establish an emergency fund to your satisfaction

- We have been doing that for quite some time and currently have enough to tide us over should we EVER both lose our jobs at the same time again for at least 3 months.  We will continue to add a little to it with some of the extra funds we make on the side to cover ourselves.  We're going to see what kind of savings accounts that accrue interesting our bank offers, to help it along, if that's possible.  We're in a State Employees Federal Credit Union as my Father and Brother are state employees.

1. Contribute to your 401k up to any company match - Our company has no match...

- This is pretty much where my confusion and frustration begin so I'm glad it's the next step...  I setup our 401k literally 10 min. before posting this reply.  I currently have it setup at 6% weekly contribution.  Based on my information provided would I be better served only putting in a small percentage (if so any suggestions?) or maxing it out at $18,500?

- As a side note, I currently have my 401k investments setup at roughly 33% split between Columbia Small, Mid and Large Index A to help diversify it.  Those are by far the lowest in terms of fees (0.45% for all 3) and cover the stock market as recommended.

- Having a slightly better understanding of tax brackets after some reading, I think i understand why maxing tIRA x2 (Wife and I) is better and not 401K but still invest enough in the 401K to bring us down to next tax bracket when filing as Married Jointly.  So if I'm correct, I would want to bring our gross income from $96,111 currently to under $77,401 for the tax break?  If so, then I would really only want to invest a little over $7700 to make up the difference with the tIRA x2 and stop there as the fees in my 401k are poor in comparison to tIRA's.

Is this basically what everyone has been talking about in regards to taking advantage of taxed differed investing?
« Last Edit: July 05, 2018, 11:59:39 AM by Silverback761 »

Dicey

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Re: Case Study - FI with some Part Time work
« Reply #63 on: July 05, 2018, 11:33:03 AM »
I'd probably shoot for the annual max in the 401k just for the tax savings. Then I'd do a Roth, then taxable.

Not sure if that's the suggested order, but we don't qualify for an HSA, so I don't remember where it fits in. I don't think you qualify either. If you csn get an FSA, that's a decent option, too.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #64 on: July 05, 2018, 11:51:32 AM »
I'd probably shoot for the annual max in the 401k just for the tax savings. Then I'd do a Roth, then taxable.

Not sure if that's the suggested order, but we don't qualify for an HSA, so I don't remember where it fits in. I don't think you qualify either. If you csn get an FSA, that's a decent option, too.

I updated my post right after yours...LoL  Still go with the 401K?  Thank you for the response btw!

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #65 on: July 05, 2018, 11:57:11 AM »
I do see one common misconception at play going on. You see tax brackets a little incorrectly. Basically, it seems you think if you get your gross income down you'll be in another tax bracket, and that's a big savings. The misunderstanding is we actually have something called a "marginal tax brackets". So if you're above $75,900, ONLY the earnings ABOVE that line will be taxed at the higher rate, NOT your entire income. Here's an article that explains it better than I can: https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

Your action plan isn't wrong, to be clear, just that there isn't some magic number you need to get below. Get as much as you can in tax advantaged accounts, yes, but don't worry that there's a big cliff that will hit you with a lot more taxes all of a sudden =)

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #66 on: July 05, 2018, 12:03:40 PM »
I do see one common misconception at play going on. You see tax brackets a little incorrectly. Basically, it seems you think if you get your gross income down you'll be in another tax bracket, and that's a big savings. The misunderstanding is we actually have something called a "marginal tax brackets". So if you're above $75,900, ONLY the earnings ABOVE that line will be taxed at the higher rate, NOT your entire income. Here's an article that explains it better than I can: https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

Your action plan isn't wrong, to be clear, just that there isn't some magic number you need to get below. Get as much as you can in tax advantaged accounts, yes, but don't worry that there's a big cliff that will hit you with a lot more taxes all of a sudden =)

Holy #$@%!!!  That helped immensely!!!  Thank you soooooo much :-)

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #67 on: July 05, 2018, 12:06:48 PM »
I do see one common misconception at play going on. You see tax brackets a little incorrectly. Basically, it seems you think if you get your gross income down you'll be in another tax bracket, and that's a big savings. The misunderstanding is we actually have something called a "marginal tax brackets". So if you're above $75,900, ONLY the earnings ABOVE that line will be taxed at the higher rate, NOT your entire income. Here's an article that explains it better than I can: https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

Your action plan isn't wrong, to be clear, just that there isn't some magic number you need to get below. Get as much as you can in tax advantaged accounts, yes, but don't worry that there's a big cliff that will hit you with a lot more taxes all of a sudden =)

Holy #$@%!!!  That helped immensely!!!  Thank you soooooo much :-)

Of course! Glad it helped. I look for this one because that's a misconception I had, and I fancied myself pretty well educated on all this (business minor, econ and accounting classes in college, all that jazz). It's SO incredibly common to misunderstand, but has important implications.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #68 on: July 05, 2018, 12:16:08 PM »
I do see one common misconception at play going on. You see tax brackets a little incorrectly. Basically, it seems you think if you get your gross income down you'll be in another tax bracket, and that's a big savings. The misunderstanding is we actually have something called a "marginal tax brackets". So if you're above $75,900, ONLY the earnings ABOVE that line will be taxed at the higher rate, NOT your entire income. Here's an article that explains it better than I can: https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

Your action plan isn't wrong, to be clear, just that there isn't some magic number you need to get below. Get as much as you can in tax advantaged accounts, yes, but don't worry that there's a big cliff that will hit you with a lot more taxes all of a sudden =)

Holy #$@%!!!  That helped immensely!!!  Thank you soooooo much :-)

Of course! Glad it helped. I look for this one because that's a misconception I had, and I fancied myself pretty well educated on all this (business minor, econ and accounting classes in college, all that jazz). It's SO incredibly common to misunderstand, but has important implications.

I have to ask just to make sure I'm understanding it correctly still :-)

So basically according to our combined income of $96,111 that $21,911 is being taxed in the 28% bracket?  If so, then by investing in my 401k and at least one tIRA, which combined equals $24,000, I would no longer be taxed in that 28% bracket for that money because it's in those taxed deferred accounts?  And because of this I would get more back in my taxes even though my weekly take home is lower?
« Last Edit: July 05, 2018, 12:30:50 PM by Silverback761 »

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #69 on: July 05, 2018, 12:26:05 PM »
I do see one common misconception at play going on. You see tax brackets a little incorrectly. Basically, it seems you think if you get your gross income down you'll be in another tax bracket, and that's a big savings. The misunderstanding is we actually have something called a "marginal tax brackets". So if you're above $75,900, ONLY the earnings ABOVE that line will be taxed at the higher rate, NOT your entire income. Here's an article that explains it better than I can: https://www.thesimpledollar.com/dont-fear-the-higher-tax-bracket-or-why-a-reader-needs-more-cowbell/

Your action plan isn't wrong, to be clear, just that there isn't some magic number you need to get below. Get as much as you can in tax advantaged accounts, yes, but don't worry that there's a big cliff that will hit you with a lot more taxes all of a sudden =)

Holy #$@%!!!  That helped immensely!!!  Thank you soooooo much :-)

Of course! Glad it helped. I look for this one because that's a misconception I had, and I fancied myself pretty well educated on all this (business minor, econ and accounting classes in college, all that jazz). It's SO incredibly common to misunderstand, but has important implications.

I have to ask just to make sure I'm understanding it correctly still :-)

So basically according to our combined income of $96,111 that $21,911 is being taxed in the 28% bracket?  If so, then by investing in my 401k and at least one tIRA, which combined equals $24,000, I would no longer be taxed in that 28% bracket for that money because it's in those taxed deferred accounts?  And because of this I would get more back in my taxes even though my weekly take home is lower?

That sounds right? (I'm really tired today, so no guarantees I'm reading well, but it sounds correct). Here's another good article on it all: https://www.gocurrycracker.com/turbocharge-savings/ I love GoCurryCracker for trying to understand tax stuff.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #70 on: July 05, 2018, 01:24:52 PM »
So after reading and discussion we're going to max out my 401k for at least 10 yrs.  Will discuss more as time passes or if someone gives me some reason not to :-)  Now to the next step in Investment Order:

2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.

- They only interest rate we have above 5% is my wife's SL which is over 6%.  We have applied for several refi's with no luck so far.  I also looked up what a HELOC is and we don't have enough equity in our house to use it.  Our house is only worth $55,000 after all the repairs and upgrades I've done.  We currently owe $45,000 on the house.  We live in Gloversville, NY which is a depressed slum after the factories either shutdown or left.  The house is worth more according to the appraiser but we won't get it because of the location and state of the economy around us which has us thinking about renting it instead of selling.  I really don't want to be a landlord...  Eventually I want to move back into the country.  Worry about that later down the line.

- After all that rambling I still plan to try and get her SL refi'd, in the meantime would we be better served paying it down if we are unable to?

- Lastly, my wife will not give up the car.  Not at this point she said, come back to the idea in a couple years she said.  So for now it's not going anywhere...  At least the interest rate is low.  I'll ask about what to do after a couple years if I'm unable to convince her :-)

I know a lot of these things have been answered and I have been re-reading a bunch of the post.  I wish I had started posting questions like this in the beginning as it's keeping it more organized for me and letting me focus on each step of the process.  I apologize for the cluster #$@%  LoL
« Last Edit: July 05, 2018, 01:34:23 PM by Silverback761 »

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #71 on: July 05, 2018, 01:32:13 PM »
So after reading and discussion we're going to max out my 401k for at least 10 yrs.  Will discuss more as time passes or if someone gives me some reason not to :-)  Now to the next step in Investment Order:

2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.

- They only interest rate we have above 5% is my wife's SL which is over 6%.  We have applied for several refi's with no luck so far.  I also looked up what a HELOC is and we don't have enough equity in our house to use it.  Our house is only worth $55,000 after all the repairs and upgrades I've done.  We currently owe $45,000 on the house.  We live in Gloversville, NY which is a depressed slum after the factories either shutdown or left.  The house is worth more according to the appraiser but we won't get it because of the location and state of the economy around us which has us thinking about renting it instead of selling.  I really don't want to be a landlord...  Eventually I want to move back into the country.  Worry about that later down the line.

- After all that rambling I still plan to try and get her SL refi'd, in the meantime would we be better served paying it down if we are unable to?

- Lastly, my wife will not give up the car.  Not at this point she said, come back to the idea in a couple years she said.  So for now it's not going anywhere...  At least the interest rate is low.  I'll ask about what to do after a couple years if I'm unable to convince her :-)

Awesome work and movement =) Don't fuss about the car- a harmonious marriage is worth more than the damn car, and it sounds like your wife is thrifty and on board otherwise. 100% not a hill worth dying on. You're not so on-fire-panic-doom financial mode that it's the deciding factor in being able to retire, you know? So I agree, no point making it a battle, revisit in a few years when you can see all your efforts paying off.

At 6%, I would probably work on paying down her student loans. The 10 year treasury note yield is currently 2.83% https://www.cnbc.com/quotes/?symbol=US10Y, so that step would be pay off anything 7.83% or above. But paying off anything in that 4-7% interest rate range kinda depends on your risk tolerance, etc. It's a case that could be argued either way. I think it would feel like a tangible win to keep you guys invested and keep you from feeling "rich" when you see retirement accounts add up, while not being so low that it's a mathematical loss relative to investing. So overall I'd say: do some reading and go with your gut, but personally I would lean pay her SLs off at 6%.

Definitely get going on 401k and tIRAs. The momentum and tax savings on those will be life changing once they start compounding. You're going to be amazed. (Sincerely, someone who had $0 networth 3 years ago, and now has broken $200k).

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #72 on: July 05, 2018, 01:55:34 PM »
So after reading and discussion we're going to max out my 401k for at least 10 yrs.  Will discuss more as time passes or if someone gives me some reason not to :-)  Now to the next step in Investment Order:

2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.

- They only interest rate we have above 5% is my wife's SL which is over 6%.  We have applied for several refi's with no luck so far.  I also looked up what a HELOC is and we don't have enough equity in our house to use it.  Our house is only worth $55,000 after all the repairs and upgrades I've done.  We currently owe $45,000 on the house.  We live in Gloversville, NY which is a depressed slum after the factories either shutdown or left.  The house is worth more according to the appraiser but we won't get it because of the location and state of the economy around us which has us thinking about renting it instead of selling.  I really don't want to be a landlord...  Eventually I want to move back into the country.  Worry about that later down the line.

- After all that rambling I still plan to try and get her SL refi'd, in the meantime would we be better served paying it down if we are unable to?

- Lastly, my wife will not give up the car.  Not at this point she said, come back to the idea in a couple years she said.  So for now it's not going anywhere...  At least the interest rate is low.  I'll ask about what to do after a couple years if I'm unable to convince her :-)

Awesome work and movement =) Don't fuss about the car- a harmonious marriage is worth more than the damn car, and it sounds like your wife is thrifty and on board otherwise. 100% not a hill worth dying on. You're not so on-fire-panic-doom financial mode that it's the deciding factor in being able to retire, you know? So I agree, no point making it a battle, revisit in a few years when you can see all your efforts paying off.

At 6%, I would probably work on paying down her student loans. The 10 year treasury note yield is currently 2.83% https://www.cnbc.com/quotes/?symbol=US10Y, so that step would be pay off anything 7.83% or above. But paying off anything in that 4-7% interest rate range kinda depends on your risk tolerance, etc. It's a case that could be argued either way. I think it would feel like a tangible win to keep you guys invested and keep you from feeling "rich" when you see retirement accounts add up, while not being so low that it's a mathematical loss relative to investing. So overall I'd say: do some reading and go with your gut, but personally I would lean pay her SLs off at 6%.

Definitely get going on 401k and tIRAs. The momentum and tax savings on those will be life changing once they start compounding. You're going to be amazed. (Sincerely, someone who had $0 networth 3 years ago, and now has broken $200k).

Agreed, my wife would feel much more at ease if her SL was paid down before we went crazy investing in taxable accounts.  So I checked the next step and we do not qualify for an HSA.  Now when talking about paying down her SL debt do we invest every free dollar we have left after covering all our expenses into paying it down?  I want to make sure before I move on to the next step of maxing out a tIRA.

If I can get it refi'd below 5% I will let everyone know :-)

Update: - After some research and more applications we were able to find several that would refi her SL for ~5% give or take a tenth of a percent.  Would that change anything in terms of paying it down or no?  Also, I don't know if anyone noticed or if it's still important to restate but we're both on Income Driven Repayment plans hence why are payments are almost half what they should be.  If we make payments for the next 18 years, already been 2 yrs since joining it, the rest of our remaining debt is forgiven.  We will set it up for autopay so that we don't miss any and get dropped from the program.  Does this information change anything?

Edit - Spelling
« Last Edit: July 05, 2018, 02:41:07 PM by Silverback761 »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #73 on: July 05, 2018, 02:33:45 PM »

Definitely get going on 401k and tIRAs. The momentum and tax savings on those will be life changing once they start compounding. You're going to be amazed. (Sincerely, someone who had $0 networth 3 years ago, and now has broken $200k).  <-- KICK ASS!!!
« Last Edit: July 05, 2018, 02:36:11 PM by Silverback761 »

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #74 on: July 05, 2018, 04:21:04 PM »
Oh man. So IBR does potentially change stuff. It gets... complicated. The rules are really in flux right now. Especially if you're looking at the PSLF stuff. Basically, the debate on that comes down to: do you think the program will be cancelled, or not; and do you know about the tax hit or not. If you go and google this: "site:https://forum.mrmoneymustache.com pslf" you will see a ton of threads on it come up. A *really* good discussion on it all is here: https://forum.mrmoneymustache.com/ask-a-mustachian/gaming-repaye-and-the-student-loan-system-($148-000-debt)-to-achieve-fire-at-45/ Although that focuses on REPAYE, which I think is slightly different? Many of the same concerns though.

Definitely research that before going through with a refi. You do not qualify for that once you've refinanced, as they are no longer government loans.

Definitely get going on 401k and tIRAs. The momentum and tax savings on those will be life changing once they start compounding. You're going to be amazed. (Sincerely, someone who had $0 networth 3 years ago, and now has broken $200k).  <-- KICK ASS!!!
Thanks =) Just wanted to try and be encouraging- this shit really works! It can take a couple years to start really seeing it though. It takes a lot of hard work and faith/stubbornness/something to get through the "hard middle" when stuff is more on autopilot. Totally worth it though.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #75 on: July 05, 2018, 07:09:04 PM »
So yeah after reading the REPAYE article we're definitely going to pay her loan down but the question now is should we still max out both my 401k and tIRA while paying it down? I was leaning toward just the 401k and after its paid start up the tIRA. Although I just did the numbers and it would only save me a couple months if I didn't invest in the tIRA, and now understanding how tax brackets work along with how it'll reduce our SL REPAYE payments, so I think we'll go with capping both and get working on her SL.

Side note, we're going invest the minimum allowed to start a taxable account so we can get that ball rolling as well and leave it alone while we pay down her SL. At least we'll have some money in it working for us in the mean time.

This sound like a good plan to go with for reaching our FI goal? I don't think there's much left option wise.

@Bracken_Joy - Thanks again for the link. Helped a lot and learned a lot. Pretty sure we have our plan set and just need to finalize our budget this weekend to determine how long it'll take to pay it off.

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #76 on: July 05, 2018, 07:14:25 PM »
So yeah after reading the REPAYE article we're definitely going to pay her loan down but the question now is should we still max out both my 401k and tIRA while paying it down? I was leaning toward just the 401k and after its paid start up the tIRA. Although I just did the numbers and it would only save me a couple months if I didn't invest in the tIRA, and now understanding how tax brackets work along with how it'll reduce our SL REPAYE payments, so I think we'll go with capping both and get working on her SL.

Side note, we're going invest the minimum allowed to start a taxable account so we can get that ball rolling as well and leave it alone while we pay down her SL. At least we'll have some money in it working for us in the mean time.

This sound like a good plan to go with for reaching our FI goal? I don't think there's much left option wise.

@Bracken_Joy - Thanks again for the link. Helped a lot and learned a lot. Pretty sure we have our plan set and just need to finalize our budget this weekend to determine how long it'll take to pay it off.

Yeah, I think a big advantage to opening the 401k first is that it's automatic paycheck deduction, rather than something you have to manage, so it'll get you used to the "missing income" quickly. Pay yourself first, in it's easiest form. I would personally invest while paying down her loan, since you're getting a bit of a late start, and it's not a killer high rate.

It's been great seeing you work through all this and get a plan in place. Be sure to come back with updates as you go along! And a lot of us find participating on threads here (for me it's journals, for others it's answering other case studies or 'ask a mustachian' questions) can really help keep your mind on the topic and keep you focused. Something like the frugalwoods Uber Frugal Month Challenge can help there too- I did a lot of the challenges on "throw down the gauntlet" when I was first starting out, and that can be a big help. I also recommend looking at the thread "what small thing did you do today to save money?" for lots of good little ideas you can pursue and be inspired by: https://forum.mrmoneymustache.com/ask-a-mustachian/what-small-things-did-you-do-today-to-save-money/

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #77 on: July 05, 2018, 07:22:46 PM »
Fear not as we just received our new books today so I'll be back with more questions and curiosities 😎. Plus, I agree on the investing so the hard part will be deciding on a SL payment to investment ratio. Any links or guides on that?

Honestly, as frustrating as it's been it was a nice change to finally be challenged by lack knowledge requiring research and education vs lack of motivation from people wanting instant fix in pill form instead of a little hard work for their laziness over many years...LoL

I really enjoy the learning, it's always fun learning new things!
« Last Edit: July 05, 2018, 07:26:23 PM by Silverback761 »

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #78 on: July 05, 2018, 07:44:30 PM »
Fear not as we just received our new books today so I'll be back with more questions and curiosities 😎. Plus, I agree on the investing so the hard part will be deciding on a SL payment to investment ratio. Any links or guides on that?

Honestly, as frustrating as it's been it was a nice change to finally be challenged by lack knowledge requiring research and education vs lack of motivation from people wanting instant fix in pill form instead of a little hard work for their laziness over many years...LoL

I really enjoy the learning, it's always fun learning new things!

Yeah, this is all a heck of an investment in your well-being in other ways: keeping learning even once settled in your professional life reduces the risk of dementia. Plus all the obvious financial benefits. AND, it's pushing you to have all these awesome conversations with your wife and the desire to teach your kids, so it's strengthening relationships, too! Wins all around.

No links/guides on payoff vs investing ratio. You're getting firmly into "you do you" territory, since the math isn't clear here. Because we don't know what the stock market will do, primarily. So at this point, you can solicit opinions, but ultimately it's what seems right to you and your wife. I'd be tempted to go 50/50, for a nice even split. And make it a game- every time you *don't* go out to eat, or buy something tempting, go and invest that same amount of money instead. When we were first starting out and saving for a down payment, I would keep a monthly tally and then invest that amount every month. Feels pretty good, more direct feedback that way.

Dicey

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Re: Case Study - FI with some Part Time work
« Reply #79 on: July 05, 2018, 10:53:22 PM »
I'm going to be blunt. You need to start saving now. Compound interest is the key to success. Your money making money while you don't lift a finger is the name of the game. Do not wait another minute to start saving for your retirement. Eventually, as your investments start to grow, you may find yourself in a position to pay off the SL's in one go.
Do not prioritize SL's at the expense of retirement saving.

Also, just keep paying on the SL's until they're gone. I kinda have a problem with these forgiveness programs. You presumably took these loans voluntarily and benefitted financially from the education you received. Why should anyone subsidize your choices? (Sorry, it sounds harsher in writing than I intend to be.) There is a pride that comes from doing the hard thing. There is time and room in the budget to accomplish both goals*.

* I put myself through junior college, and graduated in 1979 with no debt. I do not know shit about modern day student loans or advanced degrees, so my advice and opinions could well be worthless. Make no mistake, what I know about how to get to FIRE is a LOT, and I'm happy to help. Everything I know about SL's is secondhand stuff that I learned here. Oh, and a friend of mine worked for Earnest for a while. Not a fun experience.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #80 on: July 06, 2018, 05:16:46 AM »
I'm going to be blunt. You need to start saving now. Compound interest is the key to success. Your money making money while you don't lift a finger is the name of the game. Do not wait another minute to start saving for your retirement. Eventually, as your investments start to grow, you may find yourself in a position to pay off the SL's in one go.
Do not prioritize SL's at the expense of retirement saving.

Also, just keep paying on the SL's until they're gone. I kinda have a problem with these forgiveness programs. You presumably took these loans voluntarily and benefitted financially from the education you received. Why should anyone subsidize your choices? (Sorry, it sounds harsher in writing than I intend to be.) There is a pride that comes from doing the hard thing. There is time and room in the budget to accomplish both goals*.

* I put myself through junior college, and graduated in 1979 with no debt. I do not know shit about modern day student loans or advanced degrees, so my advice and opinions could well be worthless. Make no mistake, what I know about how to get to FIRE is a LOT, and I'm happy to help. Everything I know about SL's is secondhand stuff that I learned here. Oh, and a friend of mine worked for Earnest for a while. Not a fun experience.

@Dicey  I tried sending you a PM but everytime I do it says failed or that nothing was sent so I'll just ask you here.

Basically make minimum payments to loans and maximize investment in Taxable Account?  Other than that the rest of our plan with 401k and tIRA are sound?  We're going to finalize our budget this weekend, every little spending detail, to determine how much is being invested each month and what we're comfortable living with.

Also, after reading the REPAYE article i planned on paying back the loan.  I agree with you on paying what you owe and take pride in always paying my debts especially if they're to my benefit like a new house, car, degrees, etc.

If you have any other suggestions please let me know.  I really appreciate the bluntness and honesty I've received as it's helped us focus on our ultimate goal and what has to change to get there.
« Last Edit: July 06, 2018, 05:33:32 AM by Silverback761 »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #81 on: July 06, 2018, 05:53:58 AM »
Also, as a side question, should I make any adjustments to my W-4 as I'm now doing max investments into my 401K and tIRA?

I have it setup for basic Personal Allowances of 2 (1 for myself and 1 for married filing jointly).  Is it worth doing the Deductions, Adjustments, etc. or just keep it simple as it is and take the refund at the end of the year?

Thanks!!!
« Last Edit: July 06, 2018, 06:03:12 AM by Silverback761 »

dmmms

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Re: Case Study - FI with some Part Time work
« Reply #82 on: July 06, 2018, 06:13:11 AM »
A thought to consider is gradually increasing your investment % as you adjust to your new budget. As the last thing you want to do is overextend with so much to investments it's hard to pay bills! It is still a new mindset/habit and will take time to reset your thinking.

Or you could start both investment/SL payment at a realistic, curent budget-based 50/50 and as you trim your budget increase the investment % to the max. Definitely start the IRA as you can do that thru Vanguard easily and fees are so low.

Really great job!

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #83 on: July 06, 2018, 06:49:19 AM »
A thought to consider is gradually increasing your investment % as you adjust to your new budget. As the last thing you want to do is overextend with so much to investments it's hard to pay bills! It is still a new mindset/habit and will take time to reset your thinking.

Or you could start both investment/SL payment at a realistic, curent budget-based 50/50 and as you trim your budget increase the investment % to the max. Definitely start the IRA as you can do that thru Vanguard easily and fees are so low.

Really great job!

Thanks, we were going to take this month to get the 401K and tIRA going first, get our Taxable Account setup with Vanguard as well and investing the minimum required of $3000 out of saving and build that back up before we invest more.  Once that is back to where we're comfortable and the budget is set we're off to the races.  Our plan currently is to put the money into our investment account at the end of each month that way IF there are any emergencies we have that month of savings to cover it.  We're setting all our bills and loans to autopay through a cash back credit card to make them easy to track and prevent forgetting to pay them.  Pay the credit card off each month and invest the rest if there are no emergencies.  Any cash back we get will also be reinvested as well.  My wife is 100% on board and excited, especially since she gets to keep the car...LMFAO  Small price to pay for a Happy Wife Happy Life scenario I figure :-)  Picking up a couple bikes this weekend as well since work is literally a couple miles down the road and there's a bike trail that brings us out about a 1/4 mil from work by our house.  We'll figure out travel when winter comes.  LOVE Northeast Winters.../sigh

Trifele

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Re: Case Study - FI with some Part Time work
« Reply #84 on: July 06, 2018, 07:45:27 AM »
A thought to consider is gradually increasing your investment % as you adjust to your new budget. As the last thing you want to do is overextend with so much to investments it's hard to pay bills! It is still a new mindset/habit and will take time to reset your thinking.

Or you could start both investment/SL payment at a realistic, curent budget-based 50/50 and as you trim your budget increase the investment % to the max. Definitely start the IRA as you can do that thru Vanguard easily and fees are so low.

Really great job!

Thanks, we were going to take this month to get the 401K and tIRA going first, get our Taxable Account setup with Vanguard as well and investing the minimum required of $3000 out of saving and build that back up before we invest more.  Once that is back to where we're comfortable and the budget is set we're off to the races.  Our plan currently is to put the money into our investment account at the end of each month that way IF there are any emergencies we have that month of savings to cover it.  We're setting all our bills and loans to autopay through a cash back credit card to make them easy to track and prevent forgetting to pay them.  Pay the credit card off each month and invest the rest if there are no emergencies.  Any cash back we get will also be reinvested as well.  My wife is 100% on board and excited, especially since she gets to keep the car...LMFAO  Small price to pay for a Happy Wife Happy Life scenario I figure :-)  Picking up a couple bikes this weekend as well since work is literally a couple miles down the road and there's a bike trail that brings us out about a 1/4 mil from work by our house.  We'll figure out travel when winter comes.  LOVE Northeast Winters.../sigh

Great job about the bikes @Silverback761!  You are very lucky to live so close to work.  It sounds like it would be walkable even in winter.  I lived for 20 years in the snowbelt of upstate NY, and one investment that paid off was my Neos overshoes.  They are lightweight, waterproof overshoes with built in gaiters -- I have the knee-high version.  They wear like iron.  Kept my feet warm and dry even in that deep wet snow that you know so well.  :)


CalBal

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Re: Case Study - FI with some Part Time work
« Reply #85 on: July 06, 2018, 07:48:49 AM »
Just a couple small notes - once you set up your 401k and your IRA they are extraordinarily easy to change your contributions to. (My 401k is through Wells Fargo and it's literally a click of a button to change my contribution, and I can chose to do it via % or straight $ amount per paycheck. I think it takes only a few days for the change to go into effect too. My IRA is through Vanguard and changes there only take a few days as well.) So I agree with some others on here, just get them set up with an "easy" amount going in each pay period to start (even if it is just 5%), and once you start seeing what your paycheck will look like in a few weeks then you can adjust as necessary. Like others have said, you don't want to make it impossibly hard, and if you ease into it it will feel a lot less painful and a lot more achievable. Also, I used to wait until the end of the year to fund my IRA but this year I decided that was stupid, so I set up direct deposit to happen monthly, with the total to hit the max ($5500) by December, and am happy I did it. It feels a little easier this way, and gets money into the market sooner, and I don't have to think about it. You don't have to max it out initially, once you have it set up you could set it up to deposit some small amount ($100/month?) and see how you feel in a month or two about the amounts. Vanguard makes it easy, because with IRA accounts, they explicitly tell you how much room you have until you will hit the yearly limit.

I did adjust my W-4, but it took a while to see what the effect would be. If you've not been contributing at all, you'll definitely see a difference in taxes, although obviously you'll see a lower $ amount getting deposited to your checking account too. I'd wait a month or so and what the numbers look like (if you can). Since it is mid year it might be a little messy to try to figure out what your new tax burden will be. You could find a tax calculator online to see what your tax will be for the first 6 months of the year, and what it will be for the second half, and you could look at various contribution scenarios. I increased my allowances by 1 this year for federal because my refund last year was considerably higher than I expected (although that was mostly because last year was the first full year I could take mortgage interest deduction). But I've increased allowances in the past too, when I got my 401k contribution up to the max I think. I don't have any credits for children or education, so retirement contributions is the only thing that changes my tax burden (aside from mortgage interest deductions and OOP medical - really, anything that can be itemized). The tax laws changing this year may also complicate things... I guess I would just wait and see if I could - although I don't like giving the government a free loan, the worst thing that happens is that you get a big refund. You definitely don't want to have to end up having a big tax bill IF you set up your new budget to be on the tight side during this first year. Someone smarter on tax law might chime in too (if so, listen to them, lol).
« Last Edit: July 06, 2018, 07:51:39 AM by CalBal »

MoseyingAlong

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Re: Case Study - FI with some Part Time work
« Reply #86 on: July 06, 2018, 08:32:57 AM »
First, congrats on diving in and making it happen. Fantastic for you and the example you're giving your kids. I don't remember my parents ever sitting us down and discussing personal finances but I am ever grateful for their example and how it helped me and my siblings start early.

Re. Adjusting your tax withholding

So, for your taxes, I'm of the philosophy that there is no reason to let the government hold your money for months, pay no interest and give you a tax refund once a year. For a couple reasons.
1. That money could be growing for you over that time.
2. Many people have a distorted perception of their tax refunds, they see it as free money and spend it on "crazy" things instead of seeing it as their own money that they were saving.  For example, it they receive a $6K tax refund, they may "blow" it on a trip to Disney, a late Christmas or new electronics. If instead they had been saving/investing $500/month, they might put it towards long term goals or regular bills. (I'm not making this up. It was an eye-opening (and painful) experience to prepare taxes in a lower income area and talk to people about their plans for the refunds and why they "could not" invest any in an IRA. The "refunds" were generally child tax credits and earned income credits so not necessarily something they would have saved on a monthly basis but the perception and how they treated the money were not long-term oriented.)

So with that background, yes, I recommend adjusting your W4 to reduce tax refunds and avoid that feeling of a "windfall."

Rough calculation:
   
Gross Income   96000
   
Tax Advantaged Investing   
his 401k   -18500
her 401k   -18500
his tIRA   -5500
her tIRA   -5500
   
Adjusted Gross Income   48000
   
Standard Deduction   -24000
   
Taxable Income   24000
   
Federal (IRS) taxes estimate   
MFJ with 1 dependent   2500

So if your (you and your wife's) federal withholding is more than $2,500, adjust it to 99 exemptions so no more is withheld.

And look at those numbers while working on your budget this weekend. If you maxed your 401ks and tIRAs, your take home would be ~$48k, well over what you posted for living expenses. How great would it feel to invest $48k per year for your FI goals!

Now given that the year is half over, it may be tough to max all those accounts for 2018 in which case you can use any of the many tax calculators available online to estimate what your taxes will be and adjust your withholding accordingly.
If you want to make maxing everything a stretch goal for 2018, you would max your 401ks first and do your iIRAs next since you have until 15Apr2019 to fund your 2018 tIRAs but only until the end of the year for your 401ks.

I recommend aiming for 0 tax refund and 0 taxes owed. That way if you're off a little bit, you'll most likely be below the $1,000 taxes owed in April threshold when penalties and interest start applying. Just something else to be aware of.

Hope this helps.
If it just brings up more questions, please post.

Edited: the tax estimate was very simplified to make the point. It didn't include education loan interest or education credits. Nor did it include the effect of Social Security and Medicare taxes on take-home pay.





« Last Edit: July 06, 2018, 08:37:35 AM by MoseyingAlong »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #87 on: July 06, 2018, 09:36:52 AM »
@MoseyingAlong   I'll be honest, your math suggesting we both max out our 401k and IRA's vs just me, which was my plan originally, completely caught me off guard. The reason being I still don't understand how maxing out retirement funds can lead to FI earlier if you can't really touch them til then. I haven't gotten to the work around either that everyone has mentioned as I've been busy setting up the plan first. I understand the taxes brackets and can see the benefits in what you're showing though which makes me feel good.  I figure set it all up to max (401K and IRA) and we get what we can invested this year and at years end we'll be all set up for both always being maxed each year.

As for the tax adjustment, I was debating just letting this year fly as standard deductions and get the lump sum at the end and while we're working with our tax person have them help us figure it out so we break even or at least not owing much. Thoughts on that idea? Me spending large sums is not in my DNA. I've been through to much to ever take that chance of shit happening and not having a safety blanket.  We already lost one house because of that, I won't let it happen again. I love my parents but cramming 5 additional people in a house only meant for 5 total and now 7 was a nightmare and took a toll on my relationship with my parents which has always been extremely tight. Recently things are back to normal since we've been in our current house for 8 yrs.  Not Fun!!!

My daughter and most likely soon to be son in law are looking forward to learning as he's been investing in a Roth IRA since he was 16 so he's curious about the rest.

@Dicey As for the info you requested, I'm currently at my physical therapy treatment but I'll get that info to you as soon as I get home.  Also, I was up so early because our youngest daughter had a flight to return back home for school, dance and all the other stuff she's involved in. We see her once a yr she's sooooo bloody busy 😎. My kids are work horses, which I'm glad I could get that instilled in them young, especially during all our financial struggles.

Edit - Update and Spelling
« Last Edit: July 06, 2018, 10:59:47 AM by Silverback761 »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #88 on: July 06, 2018, 10:18:45 AM »
A thought to consider is gradually increasing your investment % as you adjust to your new budget. As the last thing you want to do is overextend with so much to investments it's hard to pay bills! It is still a new mindset/habit and will take time to reset your thinking.

Or you could start both investment/SL payment at a realistic, curent budget-based 50/50 and as you trim your budget increase the investment % to the max. Definitely start the IRA as you can do that thru Vanguard easily and fees are so low.

Really great job!

Thanks, we were going to take this month to get the 401K and tIRA going first, get our Taxable Account setup with Vanguard as well and investing the minimum required of $3000 out of saving and build that back up before we invest more.  Once that is back to where we're comfortable and the budget is set we're off to the races.  Our plan currently is to put the money into our investment account at the end of each month that way IF there are any emergencies we have that month of savings to cover it.  We're setting all our bills and loans to autopay through a cash back credit card to make them easy to track and prevent forgetting to pay them.  Pay the credit card off each month and invest the rest if there are no emergencies.  Any cash back we get will also be reinvested as well.  My wife is 100% on board and excited, especially since she gets to keep the car...LMFAO  Small price to pay for a Happy Wife Happy Life scenario I figure :-)  Picking up a couple bikes this weekend as well since work is literally a couple miles down the road and there's a bike trail that brings us out about a 1/4 mil from work by our house.  We'll figure out travel when winter comes.  LOVE Northeast Winters.../sigh

Great job about the bikes @Silverback761!  You are very lucky to live so close to work.  It sounds like it would be walkable even in winter.  I lived for 20 years in the snowbelt of upstate NY, and one investment that paid off was my Neos overshoes.  They are lightweight, waterproof overshoes with built in gaiters -- I have the knee-high version.  They wear like iron.  Kept my feet warm and dry even in that deep wet snow that you know so well.  :)

I'll have to check out those Neo Overshoes.  They might be handy for my wife!  Usually I just huff it in my all weather, all resistant, steel toes, blah blah blah, Wolverines...LoL  Lifetime warranty so I trade them every year for a new pair because it's all work related dmg so they're free :-)  The walk is a couple miles so it'll depend on weather and how cold it is.  My wife is not a Snow Bunny...LoL  I on the other hand am a Polar Bear :-)  10 degrees outside and I'm out just in shorts loving it...hehehe  That's BRISK BABY!!!
« Last Edit: July 06, 2018, 11:16:34 AM by Silverback761 »

Trifele

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Re: Case Study - FI with some Part Time work
« Reply #89 on: July 06, 2018, 11:53:39 AM »
A thought to consider is gradually increasing your investment % as you adjust to your new budget. As the last thing you want to do is overextend with so much to investments it's hard to pay bills! It is still a new mindset/habit and will take time to reset your thinking.

Or you could start both investment/SL payment at a realistic, curent budget-based 50/50 and as you trim your budget increase the investment % to the max. Definitely start the IRA as you can do that thru Vanguard easily and fees are so low.

Really great job!

Thanks, we were going to take this month to get the 401K and tIRA going first, get our Taxable Account setup with Vanguard as well and investing the minimum required of $3000 out of saving and build that back up before we invest more.  Once that is back to where we're comfortable and the budget is set we're off to the races.  Our plan currently is to put the money into our investment account at the end of each month that way IF there are any emergencies we have that month of savings to cover it.  We're setting all our bills and loans to autopay through a cash back credit card to make them easy to track and prevent forgetting to pay them.  Pay the credit card off each month and invest the rest if there are no emergencies.  Any cash back we get will also be reinvested as well.  My wife is 100% on board and excited, especially since she gets to keep the car...LMFAO  Small price to pay for a Happy Wife Happy Life scenario I figure :-)  Picking up a couple bikes this weekend as well since work is literally a couple miles down the road and there's a bike trail that brings us out about a 1/4 mil from work by our house.  We'll figure out travel when winter comes.  LOVE Northeast Winters.../sigh

Great job about the bikes @Silverback761!  You are very lucky to live so close to work.  It sounds like it would be walkable even in winter.  I lived for 20 years in the snowbelt of upstate NY, and one investment that paid off was my Neos overshoes.  They are lightweight, waterproof overshoes with built in gaiters -- I have the knee-high version.  They wear like iron.  Kept my feet warm and dry even in that deep wet snow that you know so well.  :)

I'll have to check out those Neo Overshoes.  They might be handy for my wife!  Usually I just huff it in my all weather, all resistant, steel toes, blah blah blah, Wolverines...LoL  Lifetime warranty so I trade them every year for a new pair because it's all work related dmg so they're free :-)  The walk is a couple miles so it'll depend on weather and how cold it is.  My wife is not a Snow Bunny...LoL  I on the other hand am a Polar Bear :-)  10 degrees outside and I'm out just in shorts loving it...hehehe  That's BRISK BABY!!!

The Neos are really great.  You slip into them with whatever shoes you have on (even sneakers), and tell your wife that they are warm.  I have been out in them in -25 temps -- no problem.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #90 on: July 06, 2018, 05:08:36 PM »
I found an article explaining how 401k withdraw works and FI. Hopefully I have it correct so let's see. By investing in both of our 401k and IRA's we lower our marginal tax bracket. Get more back in refund or paycheck to reinvest You can withdrawal with very little penalty if you FI and don't work but withdraw from it. Is that correct? If I setup an Roth IRA eventually we can do the 5 yr rollover plan and withdraw without any fees or penalties. Correct?

So basically my wife and I should BOTH max our 401k and IRA, then determine our budget and after that invest in a taxable account?  Have I figured it out finally?

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #91 on: July 06, 2018, 05:13:51 PM »
I found an article explaining how 401k withdraw works and FI. Hopefully I have it correct so let's see. By investing in both of our 401k and IRA's we lower our marginal tax bracket. Get more back in refund or paycheck to reinvest You can withdrawal with very little penalty if you FI and don't work but withdraw from it. Is that correct? If I setup an Roth IRA eventually we can do the 5 yr rollover plan and withdraw without any fees or penalties. Correct?

So basically my wife and I should BOTH max our 401k and IRA, then determine our budget and after that invest in a taxable account?  Have I figured it out finally?

The "how" is a tiny bit off, but the "why" and "what" look spot on to me! =) You shouldn't have to pay a penalty at all, and anyway a lot of places will require you move your 401k off their plan when you quit working for them- at that point it's common to convert it to an IRA (step 3 on this: https://www.cbsnews.com/news/best-401k-moves-when-you-leave-a-job/ explains it pretty well I think). So what you're looking at is called "drawdown methods" and it gets a little complicated, but you don't have to worry about that part until later. (Plus, tax codes may change from now til then anyway!) But yes exactly, that's why we're encouraging you to do the tax-advantaged accounts BEFORE a taxable account.

Have you seen this thread yet? https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #92 on: July 06, 2018, 06:18:13 PM »
I found an article explaining how 401k withdraw works and FI. Hopefully I have it correct so let's see. By investing in both of our 401k and IRA's we lower our marginal tax bracket. Get more back in refund or paycheck to reinvest You can withdrawal with very little penalty if you FI and don't work but withdraw from it. Is that correct? If I setup an Roth IRA eventually we can do the 5 yr rollover plan and withdraw without any fees or penalties. Correct?

So basically my wife and I should BOTH max our 401k and IRA, then determine our budget and after that invest in a taxable account?  Have I figured it out finally?

The "how" is a tiny bit off, but the "why" and "what" look spot on to me! =) You shouldn't have to pay a penalty at all, and anyway a lot of places will require you move your 401k off their plan when you quit working for them- at that point it's common to convert it to an IRA (step 3 on this: https://www.cbsnews.com/news/best-401k-moves-when-you-leave-a-job/ explains it pretty well I think). So what you're looking at is called "drawdown methods" and it gets a little complicated, but you don't have to worry about that part until later. (Plus, tax codes may change from now til then anyway!) But yes exactly, that's why we're encouraging you to do the tax-advantaged accounts BEFORE a taxable account.

Have you seen this thread yet? https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Nope, but I'm going to now :-)  And thank you for clarifying that for me.  It is so liberating to finally be getting a grasp on all of this!!!  I also started reading "The Simple Path to Wealth" and am enjoying it immensely.

I punched in the numbers in a compound interest calculator figuring standard 7% and HOLY SCHNIKES!!!  Just in 10 years from both our 401K and IRA being maxed we are just a hair under our current expenses at a 4% standard withdrawal.  Just for S&G's I did $10,000 yearly invest in a taxable account leaving us $38,000 for yearly expenses and if it's correct still a 7% interest and a 4% withdrawal (i know there's taxes) and all 3 combined are quite a few dollars above our required expenses after 10 years.  If I actually did that correctly...that is absolutely staggering!!! 

That doesn't even include what we plan to invest with my wife re-opening her old online business selling sewing, crochet and stitching patterns and me doing antique flipping.  All this assuming I can do the math correctly...LoL

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #93 on: July 06, 2018, 07:01:17 PM »
I found an article explaining how 401k withdraw works and FI. Hopefully I have it correct so let's see. By investing in both of our 401k and IRA's we lower our marginal tax bracket. Get more back in refund or paycheck to reinvest You can withdrawal with very little penalty if you FI and don't work but withdraw from it. Is that correct? If I setup an Roth IRA eventually we can do the 5 yr rollover plan and withdraw without any fees or penalties. Correct?

So basically my wife and I should BOTH max our 401k and IRA, then determine our budget and after that invest in a taxable account?  Have I figured it out finally?

The "how" is a tiny bit off, but the "why" and "what" look spot on to me! =) You shouldn't have to pay a penalty at all, and anyway a lot of places will require you move your 401k off their plan when you quit working for them- at that point it's common to convert it to an IRA (step 3 on this: https://www.cbsnews.com/news/best-401k-moves-when-you-leave-a-job/ explains it pretty well I think). So what you're looking at is called "drawdown methods" and it gets a little complicated, but you don't have to worry about that part until later. (Plus, tax codes may change from now til then anyway!) But yes exactly, that's why we're encouraging you to do the tax-advantaged accounts BEFORE a taxable account.

Have you seen this thread yet? https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Nope, but I'm going to now :-)  And thank you for clarifying that for me.  It is so liberating to finally be getting a grasp on all of this!!!  I also started reading "The Simple Path to Wealth" and am enjoying it immensely.

I punched in the numbers in a compound interest calculator figuring standard 7% and HOLY SCHNIKES!!!  Just in 10 years from both our 401K and IRA being maxed we are just a hair under our current expenses at a 4% standard withdrawal.  Just for S&G's I did $10,000 yearly invest in a taxable account leaving us $38,000 for yearly expenses and if it's correct still a 7% interest and a 4% withdrawal (i know there's taxes) and all 3 combined are quite a few dollars above our required expenses after 10 years.  If I actually did that correctly...that is absolutely staggering!!! 

That doesn't even include what we plan to invest with my wife re-opening her old online business selling sewing, crochet and stitching patterns and me doing antique flipping.  All this assuming I can do the math correctly...LoL

Compound interest is one of the strongest forces in the universe =P And with debt, it's working against you. Flip that on it's head and it feels like a miracle. You see the potential now, and are really GETTING the how and why. You'll kill it =) Especially since you haven't inflated your life that much since the "tight times", you won't feel the pinch of reduction the same way most people do. Still, be sure your changes are sustainable and you don't burn out. It's a big risk, like with dieting.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #94 on: July 06, 2018, 07:19:33 PM »
I found an article explaining how 401k withdraw works and FI. Hopefully I have it correct so let's see. By investing in both of our 401k and IRA's we lower our marginal tax bracket. Get more back in refund or paycheck to reinvest You can withdrawal with very little penalty if you FI and don't work but withdraw from it. Is that correct? If I setup an Roth IRA eventually we can do the 5 yr rollover plan and withdraw without any fees or penalties. Correct?

So basically my wife and I should BOTH max our 401k and IRA, then determine our budget and after that invest in a taxable account?  Have I figured it out finally?

The "how" is a tiny bit off, but the "why" and "what" look spot on to me! =) You shouldn't have to pay a penalty at all, and anyway a lot of places will require you move your 401k off their plan when you quit working for them- at that point it's common to convert it to an IRA (step 3 on this: https://www.cbsnews.com/news/best-401k-moves-when-you-leave-a-job/ explains it pretty well I think). So what you're looking at is called "drawdown methods" and it gets a little complicated, but you don't have to worry about that part until later. (Plus, tax codes may change from now til then anyway!) But yes exactly, that's why we're encouraging you to do the tax-advantaged accounts BEFORE a taxable account.

Have you seen this thread yet? https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Nope, but I'm going to now :-)  And thank you for clarifying that for me.  It is so liberating to finally be getting a grasp on all of this!!!  I also started reading "The Simple Path to Wealth" and am enjoying it immensely.

I punched in the numbers in a compound interest calculator figuring standard 7% and HOLY SCHNIKES!!!  Just in 10 years from both our 401K and IRA being maxed we are just a hair under our current expenses at a 4% standard withdrawal.  Just for S&G's I did $10,000 yearly invest in a taxable account leaving us $38,000 for yearly expenses and if it's correct still a 7% interest and a 4% withdrawal (i know there's taxes) and all 3 combined are quite a few dollars above our required expenses after 10 years.  If I actually did that correctly...that is absolutely staggering!!! 

That doesn't even include what we plan to invest with my wife re-opening her old online business selling sewing, crochet and stitching patterns and me doing antique flipping.  All this assuming I can do the math correctly...LoL

Compound interest is one of the strongest forces in the universe =P And with debt, it's working against you. Flip that on it's head and it feels like a miracle. You see the potential now, and are really GETTING the how and why. You'll kill it =) Especially since you haven't inflated your life that much since the "tight times", you won't feel the pinch of reduction the same way most people do. Still, be sure your changes are sustainable and you don't burn out. It's a big risk, like with dieting.

Ahh yes, but just like dieting it doesn't work.  The only way to make it work just like dieting is an ACTUAL lifestyle change.  That's why so many of my clients failed.  They wanted instant results for years of laziness and bad habits which as we all know doesn't work just like getting yourself in debt.  There's no miracle wipe away the debt.  It takes time to get out of it and pay it off, no pill for instant results.

Honestly, I'm still blown away by the numbers and how they turn out in just 10 yrs and that's just with our base incomes.  That doesn't include anything on the side we make or my wife getting a new job with significant pay increase.  The only real issues  now are setting up a solid budget we can stick to and are happy with and figuring out what to do with her SL. @Dicey has been awesome in helping us in that regard.

I will keep everyone posted each step of the way and continue asking questions :-)  Hopefully someday soon I'll be able to teach others and especially my children.  That is going to be...AMAZING!!! :-)

Off to bed, wife aggro...LoL  I haven't slept much during my entire vacation as I have literally been focused on this 24/7.  I don't regret it one bit either :-)

Have a great night everyone!!!

"KEEP IT HARD!!!" ~PanterA

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #95 on: July 07, 2018, 03:33:34 AM »
Edit - I want to keep this post for learning about the entire process and making changes.  I'm going to keep very specific questions like investing itself to that forum itself.  Help keep it organized for me and things focused.  Thank you again EVERYONE!!!  You all frakkin' rule!!!
« Last Edit: July 07, 2018, 10:32:31 AM by Silverback761 »

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #96 on: July 07, 2018, 04:00:41 PM »
So our budget is set, both our 401k's are up and running, and tIRA's are setup also (just waiting for funds to clear from bank).  I'm holding off on starting the taxable account until the funds clear through Vanguard for our IRA's and we have auto withdrawal setup.  I have no idea what to invest in for that so I posted on the investor's forum to see what they suggest. 

I'm actually really nervous about the taxable account because I have no bloody clue what I'm looking for with that.  The ones I've seen most ppl suggest is the VSTMX ($3,000 min) and the VSTAX ($10,000 min).  Figure I'd start with the VSTMX and after we get over the min. limit of the other switch to it.  No idea...LoL I'm just grasping at straws on this.  I'll just wait and see what is suggested.

Still exciting that we're on the train rolling towards FI!!! :-)

Bracken_Joy

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Re: Case Study - FI with some Part Time work
« Reply #97 on: July 07, 2018, 04:05:58 PM »
So our budget is set, both our 401k's are up and running, and tIRA's are setup also (just waiting for funds to clear from bank).  I'm holding off on starting the taxable account until the funds clear through Vanguard for our IRA's and we have auto withdrawal setup.  I have no idea what to invest in for that so I posted on the investor's forum to see what they suggest. 

I'm actually really nervous about the taxable account because I have no bloody clue what I'm looking for with that.  The ones I've seen most ppl suggest is the VSTMX ($3,000 min) and the VSTAX ($10,000 min).  Figure I'd start with the VSTMX and after we get over the min. limit of the other switch to it.  No idea...LoL I'm just grasping at straws on this.  I'll just wait and see what is suggested.

Still exciting that we're on the train rolling towards FI!!! :-)

Almost certainly what'll be suggested =) And it's a good and simple way to go.

Re: all the progress:



Well friggin' done. You came, you learned, you conquered. A+ follow through.

Silverback761

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Re: Case Study - FI with some Part Time work
« Reply #98 on: July 07, 2018, 05:36:16 PM »
I wish there was some other way I could express my gratitude but this truly has been an eye opening and life changing experience for both my wife and I. We are truly grateful to you and everyone that has taken the time and patience to help me figure this out, and in such a short amount of time. I know there's still a lot to learn but not that the trains rolling we don't have to rush and can really take it all in. We truly are grateful.

Will keep posted as I learn in the investment forums and read our new books 😎

CalBal

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Re: Case Study - FI with some Part Time work
« Reply #99 on: July 07, 2018, 05:45:49 PM »
I'm actually really nervous about the taxable account because I have no bloody clue what I'm looking for with that.  The ones I've seen most ppl suggest is the VSTMX ($3,000 min) and the VSTAX ($10,000 min).  Figure I'd start with the VSTMX and after we get over the min. limit of the other switch to it.  No idea...LoL I'm just grasping at straws on this.  I'll just wait and see what is suggested.

I think VTSMX and VTSAX are the same fund, you just get a discount on the cost ratio once you get to the $10,000 minimum. I don't know if they still do this, but way back when I was setting up my accounts at Vanguard, once they reached $10,000 they automatically rolled them into the Admiral shares versions for me.