Life Situation: 35 year old single mom with a 2-year old, I file head of household, do not take any childcare tax credits since my kid is never in childcare. We live in California.
Gross Salary/Wages: Self-employed and work from home. My income is incredibly variable across the year, but I estimate I will make approximately $26,000 before business expenses of about $4,000.
Individual amounts of each Pre-tax deductions I project that I will be able to write off approximately $4,000 for business expenses in 2018. I also plan to make a contribution to my IRA this year, of approximately $5,000 or as much as I can afford. I’ll make the contribution to my Roth IRA if my net income is below $22k, or I will make it to my traditional IRA if my income is above that amount, so that I can use it as a tax deduction on my income so my family can remain on Medi-Cal which has an eligibility income maximum of $22,108. I think this is correct, based on some basic research I have done, but please correct me if I am wrong!
Other Ordinary Income: I receive $900 a month in child support from my son’s father. These funds are not included in my taxable income per IRS rules.
Qualified Dividends & Long Term Capital Gains: Not very significant. I had about $50 in interest, $20 in dividends and $800 in capital gains in 2017, and would expect something similar in 2018.
Rental Income, Actual Expenses, and Depreciation: None.
Adjusted Gross Income: Projecting approximately $27,800 in 2018, of which only $17,000 should be subject to IRS taxation (given that the recipient is not taxed for child support).
Taxes: I haven’t calculated them for 2018, but I expect fairly minimal given current low income; in previous years, I was married so that past information would not be very relevant here.
Current expenses:
Rent: $500
Utilities (electric, gas, water, garbage): $120
Internet: $71
Grocery: $350 (mainly organic)
Restaurant/snacks while out: $50
Gas: $90
DMV annual renewal: $13
Car service: $26
Massage and acupuncture: $195 (This is the only time I get a break, considering that I am always with my kid 24/7 or working.)
Clothes/shoes: $25
Child clothes/shoes: $50 (I try to shop at thrift stores for both of us, but good-quality shoes for wide feet are impossible to get used)
Child educational books, toys, activities, swim lessons: $180
Cell Phone: $35 (I have ting so it is often less, my last bill was $25, but it is often closer to $35)
Rental Insurance: $11
Car Insurance: $62
Roth IRA: $458 (planning on making the deposit at the end of year, depending on total real income for the year)
Vacations/ travel (1-2 trips a year to visit family and friends): $100
Dentist and out of pocket medical: $60 (This is mainly dental, as our medical expenses are currently under Medi-Cal, so we have no premium and minimal out-of-pocket costs).
Business Expenses: $168 (this is additional to the % of my housing costs that I can deduct for my home office)
Miscellaneous: $40
Savings (currently just going into regular bank savings account, will put as much as reasonable into son’s 529 college savings at the end of the year): $200 (this is more on months when I get bonus money from relatives for birthdays, Christmas, etc.)
Total: $2804
Expected ER expenses: Close to the above at $2,000 a month (minus business expenses, savings, and Roth IRA contributions).
Assets:
Bank: $200,000 across savings and CDs. This is getting almost no interest—so bad, I know, but it was being held onto for a down payment on investment property. I have since decided not to buy any real estate since there is not much locally that seems to work out beneficially according to the calculations that people on this forum propose for investment real estate, and I don’t feel comfortable buying property that I couldn’t get to easily in an emergency, even with a management company.
Rollover IRA: $100,000 (using Schwab Intelligent Portfolios—projected balance of almost a million in 2035.)
Roth IRA: $40,000 (split about 50-50 between SCHA and SWPPX)
SEP IRA: $75,000 (split about 50-50 between VGTSX and VOO)
Car: An old beater, currently worth around $3,000. Not great gas mileage, but I drive around 5,000 miles a year and mainly bike for errands around home.
(I am also likely to inherit over a million in property/cash when my parents pass. They are currently in their 70s and likely to live long, healthy lives into their 90s. I am not counting on this inheritance in my calculations, but it does provide me with some level of additional financial reassurance.)
Liabilities: None.
Specific Question(s): I’m looking for advice on what I should specifically do with my cash, as well as any feedback on where my current retirement funds are, since I can move them around (however, I do need to keep my taxable income under 22,108 this year since we are on Medi-Cal). I am not risk-adverse and can weather large drops in my savings with the stock market (mostly because I don’t really monitor my accounts often and I have no time to follow the news).
I want to mainly stay home with my kid, so I’m not maximizing my income. If I was to move to a big city (and leave my low-cost rental situation), I could likely make about $100,000 a year, but would have to put my kid in daycare full time and my expenses would also skyrocket. I would prefer to keep my expenses low (and my income low) and spend as much time as possible with my kid. I currently work about 10 hours a week from home (mainly when my kid sleeps) so I do not need to put her in childcare. I’m thinking if I can keep my current spending within my current income and not touch my savings (and put my cash savings somewhere where it can grow better), then I should be able to fully retire in 15 years or so? Does my current plan seem reasonable?
Thanks in advance for reading and any feedback!