Author Topic: Coast FIRE, now what?  (Read 1072 times)

CurledMoss

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Coast FIRE, now what?
« on: January 02, 2021, 01:56:37 PM »
First off, for those of you that don't know what "Coast FIRE" is.

"Coast FIRE is defined as having enough money invested at an early enough age that you no longer need to invest any more to achieve financial independence by age 65 (or whatever age you define as a retirement age)."

I'm 35 years old and according to the retirement calculator at Personal Capital, I have invested enough to make my retirement goal (say 62 years old), and have an emergency account funded. I have a house, no debt, no girlfriend, no kids. Let's say I make 80k a year, live off of 15k-20k, and invest the remainder in tax advantage accounts (HSA, Roth, 457b, SEP), then taxable. I have no hobbies or interest that cost much, spending money on a nice hotel and expensive restaurants do nothing for me. I'm happy sleeping in the hatchback during a road trip, shopping at Aldi, drinking 8 cent coffee from a free work mug, free t-shirts from work, drive a modest car, yeah you get the point. I'm essentially a modern-day caveman. That's probably why I'm still single. I've traveled and got that out of the system. I love working and staying busy, but can't think of a reason to work full-time until 62. Maybe somewhere between 40-50 if the numbers work? Who knows.

I CAN'T imagine (other than health costs, I'm healthy now) that I would need much more invested for retirement (62).

Going forward:
-Do I keep maxing out tax advantage accounts, then taxable?
-Or instead, plow money into the taxable account in anticipation of early/semi-retirement, or a massive unexpected expense such as an investment, or a splurge in fun (Airplane as an example but would never happen).
-Third option. Since nobody knows the future cut back but still invest in tax advantage, more in the taxable, a compromise that's not 100% wrong or 100% right.

maizefolk

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Re: Coast FIRE, now what?
« Reply #1 on: January 02, 2021, 02:16:57 PM »
What is your current breakdown of net worth between retirement and non-retirement accounts?

Given strategies like the Roth conversion latter that let you move money out of retirement accounts, if you're going to keep working for some years, I'd be inclined to keep putting money into retirement accounts. As a single person without dependents earning $80k+/year, your marginal tax rate right now is reasonably high, and FIREing with a $20k annual spend would mean your marginal tax rate in retirement will be quite low.

The exception would be if you don't have enough outside your retirement accounts to meet a sudden unexpected expense or live off of for up to 5 years while you wait for a Roth conversion ladder to fill.

And from one single 35 year old who struggles to find things I'd be motivated to spend money on to another: way to go on hitting this milestone!

Freedomin5

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Re: Coast FIRE, now what?
« Reply #2 on: January 02, 2021, 03:27:34 PM »
Id do the third option. Put in enough into retirement accounts to get to a lower tax bracket, then put the rest in taxable, especially if you might retire in five years at age 40. You also might want to start thinking and reading about ways to mitigate SORR as that will also influence how you split your money across accounts and assets.

CurledMoss

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Re: Coast FIRE, now what?
« Reply #3 on: January 03, 2021, 04:42:32 PM »
What is your current breakdown of net worth between retirement and non-retirement accounts?

Given strategies like the Roth conversion latter that let you move money out of retirement accounts, if you're going to keep working for some years, I'd be inclined to keep putting money into retirement accounts. As a single person without dependents earning $80k+/year, your marginal tax rate right now is reasonably high, and FIREing with a $20k annual spend would mean your marginal tax rate in retirement will be quite low.

The exception would be if you don't have enough outside your retirement accounts to meet a sudden unexpected expense or live off of for up to 5 years while you wait for a Roth conversion ladder to fill.

And from one single 35 year old who struggles to find things I'd be motivated to spend money on to another: way to go on hitting this milestone!

To answer the current net worth breakdown. I make approx 26k a year (after property taxes) passively off land. It will increase with inflation. That can be used now to live, or in retirement, so I guess we won't count that because it can be used for both. So not including that, the tax advantage accounts are at 55% of savings, while taxable brokerage account is 45%.

You make a good point on the taxes, I'm paying plenty now and need to dig deeper into the roth conversion ladder to see how that will work. Maybe that will put me at ease to keep plunging away into the SEP and 457b.

I have a few reasons for not being able to spend money that is not even related to money or FIRE.
A. All the junk feels like it's weighing me down, keeping me distracted, and unnecessary.
B. Low self-worth and feel don't deserve it.
C. It's wasteful to the environment, more trash in the landfill

What is your reason for having problems spending money?

CurledMoss

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Re: Coast FIRE, now what?
« Reply #4 on: January 03, 2021, 04:53:24 PM »
Id do the third option. Put in enough into retirement accounts to get to a lower tax bracket, then put the rest in taxable, especially if you might retire in five years at age 40. You also might want to start thinking and reading about ways to mitigate SORR as that will also influence how you split your money across accounts and assets.

Good point. If markets tank in FIRE and don't want to drain the accounts.
Rented land is stable at 26k
Few roommates 10k
Emergency fund
Side jobs I enjoy doing


maizefolk

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Re: Coast FIRE, now what?
« Reply #5 on: January 03, 2021, 06:06:54 PM »
Fascinating. Is that agricultural land? I'm trying to think what uses of land would throw off significant income that would last a long time (e.g. not oil rights). If your annual expenses are around $20k and your land brings in $26k/year, I'd argue you're not coast FI, you're FI plain and simple. I do recommend reading up on the Roth conversion ladder -- let me know if you need links -- but since if sounds like your base lines expenses are met regardless I'd definitely recommend continuing to contribute to the tax advantaged accounts and then pulling the money using the ladder when you're no longer working and in a much lower tax bracket.

I attribute a lot of my (relatively) low spending to grad school. Moved every year as rents kept going up, so having more physical things would have been a pain. Never had a particular taste for travel which was the way my peers at the time spent any excess money they saved up. Now I live in a relatively LCOL city where I got a house with a yard for less than it was costing me to rent a run down studio apartment in grad school, work a job that pays reasonably well but doesn't have the societal assumption of making a lot of money when you tell people you do it, and there just aren't many things I'd like to spend money on. One of my new years resolutions was actually to try to come up with and test ideas for ways to spend more to see if I'll actually enjoy any of them.

mistymoney

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Re: Coast FIRE, now what?
« Reply #6 on: January 04, 2021, 02:20:16 PM »
timber?

CurledMoss

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Re: Coast FIRE, now what?
« Reply #7 on: January 05, 2021, 04:40:33 PM »
Fascinating. Is that agricultural land? I'm trying to think what uses of land would throw off significant income that would last a long time (e.g. not oil rights). If your annual expenses are around $20k and your land brings in $26k/year, I'd argue you're not coast FI, you're FI plain and simple. I do recommend reading up on the Roth conversion ladder -- let me know if you need links -- but since if sounds like your base lines expenses are met regardless I'd definitely recommend continuing to contribute to the tax advantaged accounts and then pulling the money using the ladder when you're no longer working and in a much lower tax bracket.

I attribute a lot of my (relatively) low spending to grad school. Moved every year as rents kept going up, so having more physical things would have been a pain. Never had a particular taste for travel which was the way my peers at the time spent any excess money they saved up. Now I live in a relatively LCOL city where I got a house with a yard for less than it was costing me to rent a run down studio apartment in grad school, work a job that pays reasonably well but doesn't have the societal assumption of making a lot of money when you tell people you do it, and there just aren't many things I'd like to spend money on. One of my new years resolutions was actually to try to come up with and test ideas for ways to spend more to see if I'll actually enjoy any of them.

Hey Maizefolk. 15k-20k are expenses in Coast FIRE. FIRE would be additional, health insurance, maybe 1 instead of 2 roommates, dental, etc. If this roth conversion ladder is possible then tax advantage seems to be a no brainer. I'll look into it this weekend. The land is just normal black dirt for growing crops (mainly corn and soybeans here). Depending on the area it could go from $100 an acre to over $300 an acre. Every year. The only real costs are property taxes and possibly fixing broken field drainage tile. If you are not farming it yourself or renting it to a family member the property taxes are no longer homesteaded, and they about double. Boo

Haha spending more money is an unusual new years resolution but I hear you. I find renting is a good way to try new hobbies without breaking the bank or making a wrong decision. I recently picked up XC ski package for $340 and love them.