Author Topic: Travel nurse to semi-retirement advice needed  (Read 692 times)

advRN

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Travel nurse to semi-retirement advice needed
« on: May 09, 2020, 12:18:32 AM »
Hey everyone! First post here...looking for some advice/optimization.

I'm a 27 year old travel nurse who just discovered FI/RE a few months ago. I started investing 5 years ago when a parent passed away and I received a six figure inheritance. I invested the majority of it over a year period into dividend growth stocks. I know this is not a popular strategy in this community, however, it is my preferred strategy. I enjoy researching companies and being part owner. I also index in my 401k though. I'm single. As a travel nurse, my tax residence is in Ohio but I work all over the country.


Gross Salary/Wages:
This is a bit hard to predict due to the nature of my job. I typically work 44-48 weeks per year. My take home pay also varies by location. I generally take home $1,400-1,900/week. The majority of my income (usually ~$1,100 or more per week) is paid as a tax free per diem stipend. The per diem stipend is cost of living dependent. I would get a much higher stipend working in California versus Ohio etc etc. I have been in lower tax brackets due to the majority of my income coming from this tax free stipend over the last couple years. I also have taken several months off each year to adventure. I've been in the 12/15% bracket the past couple years. Very important for my qualified dividends.

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc.:
I just now started contributing 86% of my gross income to a 401k. My company matches 50% up to the 6%. If I keep this up I will max out my 401k before years end. I have maxed out my Roth IRA for the past 5 years. I plan to max out my Roth IRA as long as I can. I also have an inherited Roth IRA. 

Qualified Dividends: I'm generally a buy-and-hold investor. I make 1-2 sells per year (at most) if something gets very over-valued. I reinvest all dividends. Whether into the same stock or pool them to purchase something else that is undervalued.

Taxes: I won't give specifics on this unless asked due to it varying depending on where I'm working. I'm always in the old 15/12% bracket though.


Assets value as of 5/8/2020
Taxable account: $232,247 with a yield of 3.58% throwing off about $8,300 in dividends this year. This is across 26 dividend paying companies. I plan to increase this yield to close to 5% over the next 5 years or less.

Roth IRA: $36,888 with a yield of 4.76% throwing off about $1,800 this year in dividends. 3 companies currently in this account. Will be increasing over time.

Inherited Roth IRA: $61,253 yielding 2.5% and $1,532 this year in dividends. Only 6 companies currently but I will also increase this over time. This Roth has a minimum required distribution. It goes up every year. This year it was about $1,200. I use this MRD to fund my personal Roth or taxable account.

401k: Less than a a grand in it. Broad based index fund.

Cash: I usually only keep a few thousand at most in cash. I have a very in demand job as a travel intensive care nurse. If a contract was to get cancelled, I could be working again somewhere else in three weeks.

I drive a 2015 Ford F-150 with 92k miles on it. It is paid off. I know trucks aren't popular here but everything I own fits inside of it. This helps when moving from state to state to work. I also use it for backcountry travel for outdoor recreation. I have ZERO debt. I do not have a house payment, credit card debt or student loans. I pay my parents a minimal amount of "rent"/storage fee to keep some of my stuff back in Ohio. I rent short term, furnished housing. My contracts generally are 13 weeks at a time. I'm a dirtbag so I try to find the cheapest place I can. This generally ranges from $700-1300/month. I usually work at least 3 months out of the year in Ohio. During this time I stay with family and don't pay much in rent. I plan to keep on renting for at least the next decade. I carry my own health insurance which costs $200/month. I do not qualify for an HSA. Credit card bills vary each month but they are paid off each month. I can easily save and invest more than 50% of my income.

My goal is continue working full time for the next 5 years. All while saving/investing. At the 5 year mark I would like to drop to working 6-9 months a year until I have a dividend income stream from my taxable account of about $20k/year. I don't plan to never work again. Post FI I plan to pursue some passion projects. Mainly building out a van and traveling around in it all while photographing/documenting my journey. I believe I could turn some type of profit with this in the form of a blog. I am also open to looking into other passive income. From being part owner in businesses to possibly real estate. "Worst" case scenario, I go back to work as a nurse part-time. I would like to get out of healthcare over the next 5-8 years, however.

I backpacked 700 miles on the Pacific Crest Trail last year. I learned how little I need to live and be fulfilled as well as happy. I can't ever see needing more that about $40k in income/year.I don't plan being in a higher tax bracket than I am now.


Specific Question(s):

Since I am trying to increase my dividend stream from my taxable account (to live off of in 5 years) should I be maxing out my 401k? Or just the company match? I know the general consensus is to max the 401k but I do have some concerns. The first of which is that I don't think I will be in a higher tax bracket post FI/RE. The second is that maxing this out would decrease my contributions to my taxable account. Right now I pay no tax on qualified dividends. The next part is that I already have a sizable amount in both my Roths. I plan to continue maxing out my personal Roth and only taking the minimum required distributions from the inherited Roth. Lastly, I couldn't find any similar case studies or articles for someone in my situation in relation to maxing out the 401k or not.

I'm so grateful to be where I am financially at my age but I'm always looking to suggestions. Any other advice or optimization is welcome. Like I said...I just started on the FI/RE journey and I'm so glad I found this site and community. I look forward to reading about others' journeys and sharing mine as well!

Please let me know what questions you have.

Thanks in advance to everyone!
« Last Edit: May 09, 2020, 12:20:04 AM by advRN »

MDM

  • Senior Mustachian
  • ********
  • Posts: 10100
Re: Travel nurse to semi-retirement advice needed
« Reply #1 on: May 09, 2020, 05:10:24 AM »
I'm a 27 year old....I've been in the 12/15% bracket the past couple years.

401k: Less than a a grand in it. Broad based index fund.

My goal is continue working full time for the next 5 years. All while saving/investing. At the 5 year mark I would like to drop to working 6-9 months a year

I don't plan being in a higher tax bracket than I am now.

Since I am trying to increase my dividend stream from my taxable account (to live off of in 5 years) should I be maxing out my 401k?
Yes.  Whether that should be traditional or Roth 401k is a different question.  See Investment Order, including links embedded there.

advRN

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Travel nurse to semi-retirement advice needed
« Reply #2 on: May 09, 2020, 04:36:21 PM »
I will be in the same tax in FIRE... so I won't be getting the benefits of withdrawing in a lower tax bracket. That's what I'm stuck on really

MudPuppy

  • Bristles
  • ***
  • Posts: 439
Re: Travel nurse to semi-retirement advice needed
« Reply #3 on: May 09, 2020, 04:37:14 PM »
You could always split the difference

Aunt Petunia

  • Handlebar Stache
  • *****
  • Posts: 1158
Re: Travel nurse to semi-retirement advice needed
« Reply #4 on: May 09, 2020, 04:59:12 PM »
I will be in the same tax in FIRE... so I won't be getting the benefits of withdrawing in a lower tax bracket. That's what I'm stuck on really

You will have more to invest if you choose traditional and pay less tax now.  Mad fientist has a nice post explaining this. Traditional comes out ahead as long as you are disciplined enough to invest the amount you save on taxes.

https://www.madfientist.com/traditional-ira-vs-roth-ira/

Be careful about maxing out your 401k early in the year. Some of them calculate the match every pay period and only give it to you if you contribute, meaning you lose it for the last few pay periods of the year if you max out early.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10100
Re: Travel nurse to semi-retirement advice needed
« Reply #5 on: May 09, 2020, 07:31:29 PM »
I will be in the same tax [bracket?] in FIRE... so I won't be getting the benefits of withdrawing in a lower tax bracket. That's what I'm stuck on really
You will have more to invest if you choose traditional and pay less tax now.  Mad fientist has a nice post explaining this. Traditional comes out ahead as long as you are disciplined enough to invest the amount you save on taxes.
If the marginal rate now and at withdrawal are the same, and one makes the maximum annual contribution, Roth actually works better.  See Traditional versus Roth - Bogleheads for the explanation.

But with very little in traditional now, that's a big "if."

advRN

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Travel nurse to semi-retirement advice needed
« Reply #6 on: May 12, 2020, 09:06:45 AM »
I will be in the same tax [bracket?] in FIRE... so I won't be getting the benefits of withdrawing in a lower tax bracket. That's what I'm stuck on really
You will have more to invest if you choose traditional and pay less tax now.  Mad fientist has a nice post explaining this. Traditional comes out ahead as long as you are disciplined enough to invest the amount you save on taxes.
If the marginal rate now and at withdrawal are the same, and one makes the maximum annual contribution, Roth actually works better.  See Traditional versus Roth - Bogleheads for the explanation.

But with very little in traditional now, that's a big "if."


Again, I anticipate being in the same tax bracket I am now (12%) or perhaps even getting bumped up one tax bracket. By maxing out the 401k I would be be extending out my anticipated FIRE date goal as well as most likely paying more in taxes upon withdrawal from the 401k. Please point out any holes in my thought process.

Thank you everyone for the thoughtful responses.