Author Topic: Race to FIRE - face punches!  (Read 1238 times)

PhantomJedi

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Race to FIRE - face punches!
« on: September 14, 2018, 09:11:17 PM »
Hello, mustachians! I'm trying to figure out this whole FIRE thing so I can live my dream of becoming a full-time disaster recovery volunteer.

I'm sure I need some facepunches (who doesn't?) and I could also use some help making sure my numbers are correct for time-to-retirement under my current circumstances. My numbers are way-off enough to me that I'm not even going to post - maybe I'm just not expecting the result? Either way, your help would be greatly appreciated.

So...here we go. -braces-

Life Situation: Single, no dependents, 30.

Gross Salary/Wages: 104,000, plus a annual bonus that ranges between 1-5k.

Individual amounts of each Pre-tax deductions
: none. Health insurance is 100% employer paid (a perk of working there long-term).

Taxes: Fed + Medicare + State = $2540/month, though that's likely to change with all the stuff coming next year.

Current expenses (monthly):

Roth 401(k) - 1,560
Betterment IRA - 200

Rent: 1210 (hate this, but haven't found a better option yet)
Groceries: 180
Restaurant/work cafeteria: 180
Food (total) : 360 (braces for a punch)
Car costs (gas, insurance, etc.): 210
Medical/dental: 30
Internet: 48
Cell phone: 46
Electricity (no water bill): 42
Entertainment (movies, netflix, etc.): 52
Misc (sheet music, books, random stuff like toothpaste): ~100, varies from month to month
Charitable: see liabilities.

Assets:
Employer Roth 401(k) w/3% match - 120,900
Roth IRA through Betterment - 11,300
US Savings Bonds (some mature as of this month, most not): 2283
Emergency fund: 30k

Not sure if this category counts things like my bike, musical instruments, or bought-with-cash 2015 Kia Rio (oh, the sweet joy of telling a dealer I wasn't doing a loan...almost as much fun as finally driving a manual again).

Liabilities: No loans of any kind (I ruthlessly murdered those as fast as I possibly could). Credit card is paid off in full every single month.

I'm providing a family member's college tuition. That particular hole sits at ~18k currently, with another ~8k to go. Theoretically I'll get that money back; pragmatically, I'm assuming the money is gone for good, an assumption I made going in.

...I tend to give ~$500 a month away to various causes. Yes, it's a lot; yes, it's very important to me to help others (see my FI plans); yes, I'll probably get facepunched for it.

One quirk: I have a non-Internet-capable phone. I'm unwilling to move to a smartphone until Apple or another company has actual usage controls. Cold Turkey has saved my life on the home PC front.

Let the facepunching commence!

MDM

  • Walrus Stache
  • *******
  • Posts: 8578
Re: Race to FIRE - face punches!
« Reply #1 on: September 14, 2018, 10:36:14 PM »
Roth 401(k) - 1,560
PhantomJedi, welcome to the forum.

Why Roth instead of traditional 401k?  For most, traditional will work better.

ScreamingHeadGuy

  • 5 O'Clock Shadow
  • *
  • Posts: 60
  • Age: 39
  • Location: Down the street from the Frozen Tundra
Re: Race to FIRE - face punches!
« Reply #2 on: September 15, 2018, 08:41:11 AM »
As I understand it your expenses are $2100 per month, you invest $1760 per month and pay $2540 in taxes ( God bless your high income single status).  That only accounts for $76800 of your yearly salary.  Either your expenses are far higher than you think or you are saving somewhere off the books.

I will second MDM - why the Roth 401k? You could save $4,700 in taxes each year by using a standrd.

It looks like your monthly contributions to your Roth IRA donít add up to the annual maximun allowed. 

Do you have access to an HSA with your health insurance?  If possible I would recommend maxing that to save even more taxes. 

CalBal

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: US
  • Dont Panic
    • Journal
Re: Race to FIRE - face punches!
« Reply #3 on: September 15, 2018, 10:24:08 AM »
I will second MDM - why the Roth 401k? You could save $4,700 in taxes each year by using a standrd.

I don't think that's true. I file single, my gross is ~92k, and after all my deductions (including itemized, because I have a house) I still made $600 too much last year to get any deduction from using a tIRA, so I recharacterized back into Roth. YMMV depending on if you itemize and how much charitable giving you can claim.

MDM

  • Walrus Stache
  • *******
  • Posts: 8578
Re: Race to FIRE - face punches!
« Reply #4 on: September 15, 2018, 01:54:40 PM »

CalBal

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: US
  • Dont Panic
    • Journal
Re: Race to FIRE - face punches!
« Reply #5 on: September 15, 2018, 02:40:31 PM »
...Roth 401k
...tIRA
Apples v. Oranges.  Question was about the 401k, not IRA.
Oh I missed that sorry. I would definitely chose regular 401k, not Roth 401k.

PhantomJedi

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Race to FIRE - face punches!
« Reply #6 on: September 20, 2018, 07:52:12 AM »
Sorry for the reply delay. Yes, my tax rate is absolutely atrocious - I pay more in taxes than a lot of people I know make in a month. Grr.

Why Roth? Because that's what I was advised to do when I joined my current employer, and I figured my taxes could only ever go up.

Where's the missing money? Two places: tuition that was paid last year, and the fact that my current salary rate started in August of this year (the numbers go Sept/Sept).

ixtap

  • Handlebar Stache
  • *****
  • Posts: 1223
Re: Race to FIRE - face punches!
« Reply #7 on: September 20, 2018, 08:19:35 AM »
As for the rent:
-get a roommate. In most markets, half of a two bedroom is less than a studio or one bedroom.
-get a van. We chose against this because van dwellers in the area are reporting a lot of harassment.
-rent a room in someone's home.

Laura33

  • Handlebar Stache
  • *****
  • Posts: 2072
  • Location: Mid-Atlantic
Re: Race to FIRE - face punches!
« Reply #8 on: September 20, 2018, 08:44:26 AM »
Change your Roth 401(k) to a traditional 401(k).  Yes, taxes will go up at some point, but once you are FIREd, you will have the ability to withdraw from different accounts to keep your taxable income at lower tax rates (unless, you know, you're planning on FIREing on a quarter million a year spend).

Changing to a t401(k) will decrease your taxes.  Figure out by how much (i.e., run a projection for next year), adjust your withholdings, and put the extra into an additional investment account (in order of preference:  HSA if you have one, tIRA if you are eligible, Roth IRA if you are eligible, regular Vanguard investment account).  Because saving on taxes now helps only if you actually invest the extra and don't just inflate your lifestyle to eat up the savings.  :-)

Finally:  do you have disability insurance through work?  The biggest risk to your plans right now is something happening to you that prevents you from working at your current salary for as long as you choose to.  If work offers disability insurance, take the max benefit (usually 50-70%), make sure it's "own occupation" insurance ("any occupation" insurance doesn't apply if you can work any job, so if you are injured but could still work at McDonald's, you're not covered), and make sure to pay for it with post-tax dollars (because then any payouts are tax-free, which is why the benefits are capped around 60%).

MDM

  • Walrus Stache
  • *******
  • Posts: 8578
Re: Race to FIRE - face punches!
« Reply #9 on: September 20, 2018, 09:57:25 AM »
Why Roth? Because that's what I was advised to do when I joined my current employer, and I figured my taxes could only ever go up.
Even at $52K/yr you would be in the 22% federal tax bracket.  Unless there is something not listed, that was probably bad advice.