Author Topic: How much do you expect to spend?  (Read 8379 times)

Cap_Scarlet

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How much do you expect to spend?
« on: July 20, 2014, 03:18:24 PM »
I have been reading this blog:

http://www.caniretireyet.com/our-retirement-expenses-money-go/

and have seen a number of estimates of annual retirement expenses.  The one above estimates around $4,500 per months for a relatively comfortable retirement.  Comprising the following:

Food $850
Health Insurance $600
Health Other $500
Recreation $900
Transportation $370
Home / Office / Phone / Internet $500
Personal contributions and gifts $500
Misc $100-200

The above excludes household expenses which I expect would amount to around $500 per month excluding mortgage payments.

The food budget looks a little high to me and I would expect to be around $200-300 less and the medical insurance also a little high.

How do people feel about the budget?

gimp

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Re: How much do you expect to spend?
« Reply #1 on: July 20, 2014, 04:26:28 PM »
$850 for food... is that for two people? Because I spend literally ten times less. You can split the difference and still spend half of that... or a quarter of that.

Recreation - you tell me. How much do you go out, have fun, drive places?

Home / office / phone / internet - $500 my ass. Smartphones can be done for 20/month plus maybe 200  or 300 per two or three years; internet can be done for 50/month each location.

griffin

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Re: How much do you expect to spend?
« Reply #2 on: July 20, 2014, 04:33:53 PM »
That food budget seems extremely high! It looks like this budget is just for 2 people w/out kids, and the $850 doesn't include eating out. This seems like it could comfortably sit at $400, especially if neither of them have physically demanding hobbies that require eating a lot (they do mention that it includes paper towels/soap/etc, so maybe $450?). Transportation could pretty easily be lower; bike more :) Even w/ car insurance, $200 seems doable! Recreation is a lot!
 
Quote
Those “other” expenses include outdoor gear, books, movies, shows, and classes
Outdoor gear is a one-time purchase and books are free at libraries (as are lots of movies!). Seems pretty hard to justify $450/mo per person on shows and classes...
Not sure what they're doing with an office while retired, but regardless that $500 is insane. $100 seems more reasonable.
Quote
Personal contributions and gifts $500
Looks like this should read "Personal / contributions / gifts $500"; the personal category includes clothing and hair (massages fall under health category though). Again, this number seems a little high; if you spend $100/mo on gifts for friends and another $100/mo on contributions, you're spending nearly 4k a year on your hair and your clothes...
Misc seems a bit high, but can't really argue with it too much.
It seems like it wouldn't take much work to cut this budget in half and have a pretty comparable lifestyle.

Exflyboy

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Re: How much do you expect to spend?
« Reply #3 on: July 20, 2014, 08:38:10 PM »
I think the health insurance thing is still highly debatable as well.

When I was looking at the ACA with a couple living off their savings (i.e not getting very much income).. well the subsidies made the monthly payment on a Silver plan to be about zero dollars with a max out of pocket of about $1200 a year.

These numbers are not accurate but I didn't remember the detail cus the cost was so low... At least for this year.

Frank

Cap_Scarlet

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Re: How much do you expect to spend?
« Reply #4 on: July 21, 2014, 02:03:02 AM »
Although I'm in europe which means different mix of expenses I also had some thoughts that this might be simply too high.

1. The food budget at $850 a month equates to just under $40 per day.  Thinking about retirement I realistically expect that in "normal" conditions we would spend around €10 a day on food which equates to around $13.50.  I would then probably splurge occasionally on a meal out but I see that he has that in another category.  In any event I imagine that €30-40 one or twice a month would be realistic.

So overall that gives me around €4,650 per annum or around $6,277

2. Health insurance is a bit of a black box for me at the moment.  Once we move to our retirement home in Austria we will join the public health system paying voluntary contributions.  What I don't yet know is whether there are deductibles we will need to factor in or additional insurance for things like dentistry etc.  anyway the voluntary public insurance costs around €475 per month ($620) but I am going to day that the max deductible will be around €500 per annum which is typical for Europe and extra costs like prescriptions etc say max another €300.

So overall my total annual cost is around €6,500 or around $8,775

3. I will come back to recreation

4. Transport, we expect to continue to have two cars at least in the short term and once we retire we will buy a new or relatively new small car which should then last us for around 10 years.  I expect the car to cost around €25,000 but I do not count depreciation as I will buy another our of cash when a policy I have matures after 10 years.  So running costs will be around €200 per month for petrol and €50 each for insurance and maintenance.

That gives me a total annual cost of around €3,600 or $4,860

5. Home office / Phone / Internet

I am going to cheat a little here as this is where I would include my house running costs including property taxes, satellite TV, Phone, Light & heat etc.  I want to say that all in I expect that to cost around €500 per month but at the moment I don't know (as I have not yet fully researched the costs in the area where we have bought our new home - I know, shoot me!).  So we will leave that one a little soft for now.

Total cost therefore around €6000 or $8,100

6. Personal contributions and gifts

This is a tricky one.  I have the buzz cut so hair cutting cost me nothing.  I imagine my wife spends around €60-70 every two months and gifts for the family would be around €1,500 per annum.  I don't think there is much else I would put in here.

Total cost around €2,000 or $2,700

7. So coming back to entertainment / recreation

I can imagine the following costs:

Ski pass (for the season) - 2 x €550 = €1,100
Other life passes during the rest of the year - 2 x €150 = €300
New ski's / ski servicing - 2 x €250 = €500
Flights short haul - 2 x €500 = €1,000
Flights long haul - 2 x €1,000 = €2,000
Hotels = €2,000
New equipment (Other) = €1,200

All very rough but makes a total of €8,100 or $10,935

I think there must be something missing from my budget so I will drop in an estimate €500 per month to cover miscellaneous costs as well as the replacement of household fixtures and appliances

Gives me again a very rough total of €6,000 per annum or $8,100

So that's my retirement budget on the back of an envelope so to speak and gives me a annual spend of €36,850 or $49,747 (2 people).  To be honest that feels quite comfortable to me and is broadly in line with the blog author (although the mix is different).  Its actually quite difficult to compare with our current spending as we expect our lifestyle to change quite significantly.

We are quite active and I can see that we could easily spend more money in the recreation section but then I have included quite a substantial "buffer" in the misc category.

Comments welcome!

Nudelkopf

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Re: How much do you expect to spend?
« Reply #5 on: July 21, 2014, 03:59:56 AM »
Home / Office / Phone / Internet $500
HOLY crap batman. My 'office' expenses (school supplies, essentially) are $40/month, my phone is $15/month, and internet is $30/month = $85 (for one person), so $170 per month for two people. What else comes under 'home'?

Fishingmn

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Re: How much do you expect to spend?
« Reply #6 on: July 21, 2014, 05:06:43 AM »
Home / Office / Phone / Internet $500
HOLY crap batman. My 'office' expenses (school supplies, essentially) are $40/month, my phone is $15/month, and internet is $30/month = $85 (for one person), so $170 per month for two people. What else comes under 'home'?

It would seem to me that "home" might include all utilities like gas, electric, water & garbage in addition to cable, internet & phone. If that's the case the $500 seems much more reasonable.

MakingSenseofCents

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Re: How much do you expect to spend?
« Reply #7 on: July 21, 2014, 08:52:42 AM »
To me, it seems like the food, recreation, and personal contributions seem very high. I don't spend those amounts now, but I guess I could see that if I was traveling more.

Zikoris

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Re: How much do you expect to spend?
« Reply #8 on: July 21, 2014, 10:25:56 AM »
It seems incredibly extravagant - literally triple what we spend. I can't even pinpoint a specific line item to criticize - it's all nuts.

dude

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Re: How much do you expect to spend?
« Reply #9 on: July 21, 2014, 11:56:55 AM »
Sure some things could be cut, but I just don't see anything extravagant about a $54,000/year annual burn.  Assuming no pension, no Social Security, you'd need $1.35 mil to cover it with 4% SWR.  Assuming $15K/year SS at 62, the amount funded by portfolio drops to $39,000 (now you're down to needing only a $975,000 portfolio).  Factor in rental income, if any, or part-time work, and that number could come down considerably more.  So I don't see a $54K annual burn as that outrageous.  Then again, DW and I are a pretty high-earning couple, so my perspective is skewed.  I love MMM and all he stands for, but I have no desire to ever follow in his footsteps w/r/t his $25,000/year living expenses.

Cassie

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Re: How much do you expect to spend?
« Reply #10 on: July 21, 2014, 12:15:52 PM »
I don't see it as extravagant either. Last year we lived off of 68,000/yearly. We took a nice vacation, some weekend trips, high vet bills for 4 dogs,  home repairs of 7,000 and 10,000/health insurance.  For some of the younger people who plan to live on very little I do wonder if they will get tired of it in the long run. 

oldtoyota

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Re: How much do you expect to spend?
« Reply #11 on: July 21, 2014, 12:17:05 PM »
I have been reading this blog:

http://www.caniretireyet.com/our-retirement-expenses-money-go/

and have seen a number of estimates of annual retirement expenses.  The one above estimates around $4,500 per months for a relatively comfortable retirement.  Comprising the following:

Food $850
Health Insurance $600
Health Other $500
Recreation $900
Transportation $370
Home / Office / Phone / Internet $500
Personal contributions and gifts $500
Misc $100-200

The above excludes household expenses which I expect would amount to around $500 per month excluding mortgage payments.

The food budget looks a little high to me and I would expect to be around $200-300 less and the medical insurance also a little high.

How do people feel about the budget?

Does "food" include restaurants?

Just curious….Wouldn't it make more sense to track your own expenses and calculate the above based on your desires, needs, and life?


socaso

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Re: How much do you expect to spend?
« Reply #12 on: July 21, 2014, 12:30:28 PM »
This is what I would expect (my numbers in parentheses)
Food $850 ($400)
Health Insurance $600 ($400)
Health Other $500 ($200- just based on how much we go to the doctor now and the fact that we don't really take any meds)
Recreation $900 (this is over $10k per year!! Even though I'd like to travel more in retirement I think more like $700 as a per month average)
Transportation $370 (we spend $310 with gas and insurance so I think more like $200 or less in retirement)
Home / Office / Phone / Internet $500 (if I consider this to be all bills and utilities we spend $275 now and I think $200 in retirement)
Personal contributions and gifts $500 ($50, if that!)
misc $100-$200 ($100 if that. Some of the things I pay for out of our "other" category are actually covered above like doctor's copays and home repairs)

So about $2250 if we actually spent all the money in each category each month. I tend to have a little left over in my budget at the end of the month.
Misc $100-200

sirdoug007

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Re: How much do you expect to spend?
« Reply #13 on: July 21, 2014, 12:32:03 PM »
If you read through the article, they are not including $1500/month in rent.  So the total spend is not $4500/mo it is $6000/mo or $72k/year!

MMM spends about $2k/month with a paid off house.  These folks could use some of his advice.

Cassie

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Re: How much do you expect to spend?
« Reply #14 on: July 21, 2014, 12:49:17 PM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

daverobev

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Re: How much do you expect to spend?
« Reply #15 on: July 21, 2014, 05:11:31 PM »
$10k. $6k once the mortgage has gone.

That's bare bones. Everything else is luxury.

Of course, no health insurance needed in Canada. This is just my side; my wife will spend a few k more than me. So household $25k perhaps, $18k post mortgage.

A year, btw, not per month.

Cap_Scarlet

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Re: How much do you expect to spend?
« Reply #16 on: July 22, 2014, 02:40:30 AM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

I think that's right.  You simply can't take one persons lifestyle and overlay it onto your own therefore the MMM lifestyle I see as ONE good example of how to retire early.

My attitude is that I want to apply MMM concepts but without materially reducing my perception of satisfaction.

In essence there are three ways to reduce outgoings:
- Cut out "unnecessary" expenditure.
- Increase risk tolerance.
- Make more informed decisions.

Now the key here is that items 1 & 2 make the biggest difference.

For example, a person may decide to run a 10 year old car with the risk that it breaks down and leaves them stranded somewhere unpleasant.  For me that's something that would materially reduce my satisfaction so I'm not prepared to do it.  Another perhaps more relevant example is as regards medical insurance with a high deductible or low coverage or both, which is absolutely fine when you are young but probably not as you get older!

In addition, what's necessary is subject to the same criteria i.e. what would materially reduce your perceived quality of life (and here the perception piece is key, it doesn't have to be real quality or what others tell you should be quality.

Finally though the true MMM lifestyle is about making more informed choices and to me this is where making informed decision and not being lazy (!!) can make a difference but - and this is the important point - with absolutely no difference in quality of life!  I will give you one example - my local garage charges 10c more per litre for gasoline in the mornings than it does in the afternoons - why? - because they know that people will buy gas on the way to work rather than on the way home.  Ridiculous but true.

Anyway the key message here is that you have to live your own lifestyle and make informed choices - don't try and live someone else's life.

However even when we make the same choices there is generally

deborah

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Re: How much do you expect to spend?
« Reply #17 on: July 22, 2014, 03:27:28 AM »
In Australia there is the ASFA Retirement Standard http://www.superannuation.asn.au/resources/retirement-standard which itemizes what people would need when they are retired for a "basic" and a "comfortable" retirement. This has been around for a number of years now (10?), so is somewhat tried and true. Of course, it is an Australian benchmark, but as we are supposed to have a slightly higher COL than the US, it might be of interest to others. You will note that even the "comfortable" retirement is less than $60,000 for a couple - so $75,000 from the article quoted by OP appears inflated, especially as this is for normal people rather than MMM types.

Fishingmn

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Re: How much do you expect to spend?
« Reply #18 on: July 22, 2014, 05:38:10 AM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

Totally agree.

Heck, I'm budgeting for $15k/year in taxes and $14k/year in healthcare (no subsidy) when we retire in 2+ years. We are already spending way more before even starting. Fortunately, we've saved and planned well and all the calculators say we should have no problem.

Exflyboy

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Re: How much do you expect to spend?
« Reply #19 on: July 22, 2014, 11:35:39 AM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

Totally agree.

Heck, I'm budgeting for $15k/year in taxes and $14k/year in healthcare (no subsidy) when we retire in 2+ years. We are already spending way more before even starting. Fortunately, we've saved and planned well and all the calculators say we should have no problem.

Yes but of course this is a bit of a circular argument.. I.e the reason your paying so much in taxes (and get no ACA subsidy) is presumably because your investment (plus what ever other income stream you have) makes a LOT of money.

For example, for a couple in the US the fed tax is Zero dollars up to about $20k of income, plus presumably you can still contribute to your IRA ( at $13k after your both 50).

Net result is that fed taxes on the first $33k are zero and the ACA subsidy should mean you have almost zero OOP for the premium at least.

So if you make less than $33k in retirement you live basically tax free.

$33k is enough to live comfortably in a reasonable COL area of course..

Frank

beltim

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Re: How much do you expect to spend?
« Reply #20 on: July 22, 2014, 11:54:56 AM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

Totally agree.

Heck, I'm budgeting for $15k/year in taxes and $14k/year in healthcare (no subsidy) when we retire in 2+ years. We are already spending way more before even starting. Fortunately, we've saved and planned well and all the calculators say we should have no problem.

Yes but of course this is a bit of a circular argument.. I.e the reason your paying so much in taxes (and get no ACA subsidy) is presumably because your investment (plus what ever other income stream you have) makes a LOT of money.

For example, for a couple in the US the fed tax is Zero dollars up to about $20k of income, plus presumably you can still contribute to your IRA ( at $13k after your both 50).

Net result is that fed taxes on the first $33k are zero and the ACA subsidy should mean you have almost zero OOP for the premium at least.

So if you make less than $33k in retirement you live basically tax free.

$33k is enough to live comfortably in a reasonable COL area of course..

Frank

You can't both spend and save that same $13k that goes into the IRA - you have to pick one (in a given year).

Cassie

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Re: How much do you expect to spend?
« Reply #21 on: July 22, 2014, 11:58:23 AM »
Some of the $ we are spending every year is to fix up our house which is important to us.   Actually after this summer we will be done but there will always be ongoing maintenance.  Also we are both professionals that enjoy working for ourselves p.t. - $28,000 of our income last year was from this which we do not want to give up because we love working.  That causes us to have to spend 10k on health insurance instead of being poor & taking advantage of ACA subsidies.  It really is all about choices. 

Exflyboy

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Re: How much do you expect to spend?
« Reply #22 on: July 22, 2014, 12:03:25 PM »
NOt everyone wants to do the same as Mr. MM.  It's all about having the type of life that will make you happy and a life you can easily afford.

Totally agree.

Heck, I'm budgeting for $15k/year in taxes and $14k/year in healthcare (no subsidy) when we retire in 2+ years. We are already spending way more before even starting. Fortunately, we've saved and planned well and all the calculators say we should have no problem.

Yes but of course this is a bit of a circular argument.. I.e the reason your paying so much in taxes (and get no ACA subsidy) is presumably because your investment (plus what ever other income stream you have) makes a LOT of money.

For example, for a couple in the US the fed tax is Zero dollars up to about $20k of income, plus presumably you can still contribute to your IRA ( at $13k after your both 50).

Net result is that fed taxes on the first $33k are zero and the ACA subsidy should mean you have almost zero OOP for the premium at least.

So if you make less than $33k in retirement you live basically tax free.

$33k is enough to live comfortably in a reasonable COL area of course..

Frank

You can't both spend and save that same $13k that goes into the IRA - you have to pick one (in a given year).

Your right of course, but I was talking about the income part.. so if you have an after tax stash.. then you can simply roll $13k of that each year into your IRA, thus sheild that amount of income from tax.. you could of course spend ALL of your after tax savings and not be subject to any tax.

Frank

beltim

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Re: How much do you expect to spend?
« Reply #23 on: July 22, 2014, 12:09:26 PM »
You can't both spend and save that same $13k that goes into the IRA - you have to pick one (in a given year).

Your right of course, but I was talking about the income part.. so if you have an after tax stash.. then you can simply roll $13k of that each year into your IRA, thus sheild that amount of income from tax.. you could of course spend ALL of your after tax savings and not be subject to any tax.

Frank

I'm afraid I don't see your point.  To contribute to an IRA, you have to have earned income.  So yes, if you had $13k of earned income you could put it in an IRA – but then you don't have the money to live on. 

Exflyboy

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Re: How much do you expect to spend?
« Reply #24 on: July 22, 2014, 12:10:35 PM »
Some of the $ we are spending every year is to fix up our house which is important to us.   Actually after this summer we will be done but there will always be ongoing maintenance.  Also we are both professionals that enjoy working for ourselves p.t. - $28,000 of our income last year was from this which we do not want to give up because we love working.  That causes us to have to spend 10k on health insurance instead of being poor & taking advantage of ACA subsidies.  It really is all about choices.

Absolutely it is.. Just because MMM spends $25k a year certainly doesn't mean he HAS to.. In fact the income he makes from the website now I'm sure far exceeds what he was making when he was earning.

"Being poor" though is a relative term. I have not spent more than about $30k since about 1997, even though our household income has been well into 6 figures. We have never felt poor though even though we were being frugal.. We never went without for sure.

But we had one poster a while back making $75k a MONTH and wanted to know how she might "cut back a bit", No way was she talking about living on $25k a year thats for sure..:)

In fact I am even considering going back to work part time.. maybe..;)

Frank

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Re: How much do you expect to spend?
« Reply #25 on: July 22, 2014, 12:16:27 PM »
You can't both spend and save that same $13k that goes into the IRA - you have to pick one (in a given year).

Your right of course, but I was talking about the income part.. so if you have an after tax stash.. then you can simply roll $13k of that each year into your IRA, thus sheild that amount of income from tax.. you could of course spend ALL of your after tax savings and not be subject to any tax.

Frank

I'm afraid I don't see your point.  To contribute to an IRA, you have to have earned income.  So yes, if you had $13k of earned income you could put it in an IRA – but then you don't have the money to live on.

i confused the issue a little with the glib "anyone can live on $33k a year" statement.

Actually you DO have a the money to live on if you simply move some of your after tax stash into your IRA.

Lets say you have $500k in after tax savings when you retire.. But you have an income of $33k (rent, dividends, PT job whatever)... You don't fancy paying tax and you want to minimise your INCOME to get max ACA subsidies.

Well then you move $13k from your 500k into your IRA.. and magically all of your $33k in INCOME now become tax free and you can spend all of it.

Make sense?

beltim

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Re: How much do you expect to spend?
« Reply #26 on: July 22, 2014, 12:23:12 PM »
You can't both spend and save that same $13k that goes into the IRA - you have to pick one (in a given year).

Your right of course, but I was talking about the income part.. so if you have an after tax stash.. then you can simply roll $13k of that each year into your IRA, thus sheild that amount of income from tax.. you could of course spend ALL of your after tax savings and not be subject to any tax.

Frank

I'm afraid I don't see your point.  To contribute to an IRA, you have to have earned income.  So yes, if you had $13k of earned income you could put it in an IRA – but then you don't have the money to live on.

i confused the issue a little with the glib "anyone can live on $33k a year" statement.

Actually you DO have a the money to live on if you simply move some of your after tax stash into your IRA.

Lets say you have $500k in after tax savings when you retire.. But you have an income of $33k (rent, dividends, PT job whatever)... You don't fancy paying tax and you want to minimise your INCOME to get max ACA subsidies.

Well then you move $13k from your 500k into your IRA.. and magically all of your $33k in INCOME now become tax free and you can spend all of it.

Make sense?

I understand what you're saying, but I don't see the utility.  Especially since the rent and dividends couldn't be put into an IRA - you need earned income (so that PT job would do it)

Exflyboy

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Re: How much do you expect to spend?
« Reply #27 on: July 22, 2014, 12:27:52 PM »
The utility is you reduce your taxes and get a bigger ACA subsidy.. Thats a big benefit.

The 33k you then earn in income is tax free

Rent, dividends are all counted as income.... so why do you think this can't be added to the IRA?

True, that you don't want to take the $33k that you have earned (with no other savings to live on) because that will reduce your spending power. But it you have a substantial separate after tax stash then rolling 13k of that into your trad IRA it has high value.

« Last Edit: July 22, 2014, 12:34:03 PM by frankh »