Do you keep investing post-FI?

[4tify]

I recently left my day j.o.b. and am wondering how those of you ahead of me have handled additional income once you're past your FI number and retired. I'm thinking there's a good chance once I'm beyond the decompression mode I may do some kind of work, which has me wondering:

For those of you who have done this, do you just use the income as it comes in and not sell shares? Or do you invest it and continue with your regular payout plan as if you didn't earn anything?

And what about larger sums? Say you earn 2x what you'd normally spend in a year...same plan?

Curious as to your experience, thanks!

[Goldendog777]

My husband and I make a tiny bit of income with easy very, very part time jobs.  We fund our spending with our taxable accounts and invest all of our part time earnings in our Roth IRAs where it can grow tax free.

[ixtap]

The second question is the easy one: if I earn more than I need, I do my best to balance the cash flow so that I am not selling. This is less important if you are sure you will be in the 0% capital gains, but if I am earning 2x what I need, then I am going to at least be close to the 15% LTCG rate.

Actually, even earning less than 2x, I try to manage cash flow to minimize buying and selling. If I were low on cash, I would invest in tax sheltered and sell in taxable, but I would not invest in taxable knowing I would just have to sell in a month or two.

[Rubic]

One advantage with doing some part-time work is that you can max out your
Roth IRA contributions every year, since you can only contribute based on
earned income.  So assuming you don't need the extra income (and why
would you if you're FIRE'd?) you can contribute up to $6000-7000 each year,
depending on your age.

[Dicey]

One advantage with doing some part-time work is that you can max out your
Roth IRA contributions every year, since you can only contribute based on
earned income.  So assuming you don't need the extra income (and why
would you if you're FIRE'd?) you can contribute up to $6000-7000 each year,
depending on your age.

My BIL does this. He has plenty of money, but he loves tax-free money. He only works enough to make his full Roth contribution. DH just retired, so we're set for this year, but we may consider doing this next year, or not. We shall see.

[4tify]

One advantage with doing some part-time work is that you can max out your
Roth IRA contributions every year, since you can only contribute based on
earned income.  So assuming you don't need the extra income (and why
would you if you're FIRE'd?) you can contribute up to $6000-7000 each year,
depending on your age.

Great tip thank you! Also @Goldendog777

I’ve also been considering deploying extra earnings to help others. I recently read Die with Zero and he suggested that giving money away while alive is more beneficial to those in need as well as for a boost to our ego. I’m often on the fence about charities, though I know there are some very good ones.

The second question is the easy one: if I earn more than I need, I do my best to balance the cash flow so that I am not selling. This is less important if you are sure you will be in the 0% capital gains, but if I am earning 2x what I need, then I am going to at least be close to the 15% LTCG rate.

Actually, even earning less than 2x, I try to manage cash flow to minimize buying and selling. If I were low on cash, I would invest in tax sheltered and sell in taxable, but I would not invest in taxable knowing I would just have to sell in a month or two.

And thanks for this. The tax implications are definitely worth considering. No issue if I go the charitable route either.

[Mr. Green]

My wife and I retired pretty early (33 and 32). The backbone of our long-term spending strategy is the Roth conversion pipeline. Because we expect to maximize Roth conversions to our desired tax rate every year until age 55, making Roth contributions with additional income is actually a hindrance to the process. We make more of our dollars available by spending that extra income and leaving the corresponding dollars in our brokerage accounts that we would have had to withdraw. Now that the US has largely returned to normal, my post-FIRE "side gig" working a couple conferences fory BIL has picked back up. I anticipate $5,000-10,000 in income from this annually until I decide to stop doing it. Not enough to cover all our living expenses and need to invest the money but it allows me to leave some of that brokerage money alone each year. I don't anticipate any large income events until my mom passes, which with any luck will be another 30 years away. If I did have some type of windfall event though I would absolutely invest it.

[secondcor521]

It ebbs and flows, on both the income and the spending side.

I spend any money that comes in from a variety of sources - part time gig, tax refunds, gifts, taxable dividends.  Since those are all taxed income anyway and money is fungible, it's simpler to just spend it rather than invest those dollars and sell other dollars to spend.

If income is more than what I need for the next few months, then I invest the extra.  If income is less than what I need, which is the more frequent case, then I sell some stock in taxable.  I could also draw from my Roth pipeline if I wanted to.  And next fall I might start an SEPP for tax reasons.

And taxes can be a mostly disconnected separate exercise.  As the previous poster implies, the peculiarities of the tax code mean that I generally optimize my taxes and cash flow separately.  I generally realize more taxable income than I need right now because if I don't, I'll pay a higher percentage later.

Overall I also monitor how I am doing on a WR% basis.  For most of my six retired years, that metric has suggested I can spend more.

[ixtap]

My wife and I retired pretty early (33 and 32). The backbone of our long-term spending strategy is the Roth conversion pipeline. Because we expect to maximize Roth conversions to our desired tax rate every year until age 55, making Roth contributions with additional income is actually a hindrance to the process. We make more of our dollars available by spending that extra income and leaving the corresponding dollars in our brokerage accounts that we would have had to withdraw. Now that the US has largely returned to normal, my post-FIRE "side gig" working a couple conferences fory BIL has picked back up. I anticipate $5,000-10,000 in income from this annually until I decide to stop doing it. Not enough to cover all our living expenses and need to invest the money but it allows me to leave some of that brokerage money alone each year. I don't anticipate any large income events until my mom passes, which with any luck will be another 30 years away. If I did have some type of windfall event though I would absolutely invest it.

How do Roth contributions hinder your Roth conversions?

[Libertea]

I do keep maxing out my retirement accounts since I'm still working and earning more than I need to live on.  And also donating more to charity.  It's a good problem to have. :-)

[Car Jack]

I'm way past FI but still working.  DW just retired a week ago.  You can certainly develop a strategy and excess income can be invested.  If you're not receiving earned income, then doing backdoor Roths up to the top of a bracket is a very common strategy that does several things.  Coming from a tIRA, it, of course gives you future tax free, RMD free assets.  It limits the tax paid as you decide how much to convert based on what tax brackets you cover.  And of course, converting out of a tIRA means that your future RMDs will be lower.

As far as investing, certainly, putting money into taxable and iBonds are easy choices.  While iBonds won't eliminate federal taxes (they do eliminate state taxes), they push them down the road until YOU decide to cash them in. 

[Mr. Green]

@ixtap we anticipate the ACA subsidy cliff returning and remaining in place for the foreseeable future. This sets a hard cap for our yearly income because the tax penalty of going over is extreme and not worth it. Maximizing the amount of money available to us prior to age 59.5 means converting as much money to our Roth IRAs as possible. Choosing to make Roth contributions for earned income means having to pull that much more money from brokerage accounts, which creates capital gains. Adding capital gains income reduces Roth conversions in this case. Doing this repeatedly over 10 or 20 years would have a negative impact on our goal of having as much of our portfolio available to us within reasonable taxation thresholds.

[BlueHouse]

@ixtap we anticipate the ACA subsidy cliff returning and remaining in place for the foreseeable future. This sets a hard cap for our yearly income because the tax penalty of going over is extreme and not worth it. Maximizing the amount of money available to us prior to age 59.5 means converting as much money to our Roth IRAs as possible. Choosing to make Roth contributions for earned income means having to pull that much more money from brokerage accounts, which creates capital gains. Adding capital gains income reduces Roth conversions in this case. Doing this repeatedly over 10 or 20 years would have a negative impact on our goal of having as much of our portfolio available to us within reasonable taxation thresholds.

I'm not following this and I'm trying to learn now that I'm in the post-fire phase.  Can you help explain it like I'm 5?  I'm going to break down what I think you're saying.

1.  ACA cliff is $51,000 (single) so you can't have earned income greater than that.
2.  Your goal is to move money from a tIRA or 401k and convert to Roth Ira.  But what determines "as much as possible"?
3.  withdrawing from taxable brokerage creates capital gains, which you want to avoid.  So you want any withdrawal to be from tIRA for conversion purposes?
4. "Adding capital gains income reduces Roth IRA conversions in this case".  I don't know what this means. 

[MDM]

1.  ACA cliff is $51,000 (single) so you can't have earned income greater than that.
2.  Your goal is to move money from a tIRA or 401k and convert to Roth Ira.  But what determines "as much as possible"?
3.  withdrawing from taxable brokerage creates capital gains, which you want to avoid.  So you want any withdrawal to be from tIRA for conversion purposes?
4. "Adding capital gains income reduces Roth IRA conversions in this case".  I don't know what this means.

1. Not in 2022: there is a "mini-cliff" and then a "phaseout" - see Roth Conversion and Capital Gains On ACA Health Insurance for details.  For 2023 and beyond, that depends on what Congress does or doesn't do....
2. See Roth IRA conversion - Bogleheads for considerations.
3. Depends on personal situation
4. If one is already at the desired maximum MAGI for Affordable Care Act purposes, increasing one type of income requires decreasing something else.

[BlueHouse]

1.  ACA cliff is $51,000 (single) so you can't have earned income greater than that.
2.  Your goal is to move money from a tIRA or 401k and convert to Roth Ira.  But what determines "as much as possible"?
3.  withdrawing from taxable brokerage creates capital gains, which you want to avoid.  So you want any withdrawal to be from tIRA for conversion purposes?
4. "Adding capital gains income reduces Roth IRA conversions in this case".  I don't know what this means.

1. Not in 2022: there is a "mini-cliff" and then a "phaseout" - see Roth Conversion and Capital Gains On ACA Health Insurance for details.  For 2023 and beyond, that depends on what Congress does or doesn't do....
2. See Roth IRA conversion - Bogleheads for considerations.
3. Depends on personal situation
4. If one is already at the desired maximum MAGI for Affordable Care Act purposes, increasing one type of income requires decreasing something else.

Thanks @MDM  Now that I've moved from accumulation to spending phase, I have to figure out an entirely new strategy and I feel like I'm starting over from scratch.  I'll read through the articles cited and then I'm sure I'll have many more specific questions for my situation. 
 
You were instrumental in helping me overcome my fears for starting a Roth IRA a few years ago, so I appreciate your help more than you know!

[secondcor521]

1.  ACA cliff is $51,000 (single) so you can't have earned income greater than that.
2.  Your goal is to move money from a tIRA or 401k and convert to Roth Ira.  But what determines "as much as possible"?
3.  withdrawing from taxable brokerage creates capital gains, which you want to avoid.  So you want any withdrawal to be from tIRA for conversion purposes?
4. "Adding capital gains income reduces Roth IRA conversions in this case".  I don't know what this means.

1. Not in 2022: there is a "mini-cliff" and then a "phaseout" - see Roth Conversion and Capital Gains On ACA Health Insurance for details.  For 2023 and beyond, that depends on what Congress does or doesn't do....
2. See Roth IRA conversion - Bogleheads for considerations.
3. Depends on personal situation
4. If one is already at the desired maximum MAGI for Affordable Care Act purposes, increasing one type of income requires decreasing something else.

Thanks @MDM  Now that I've moved from accumulation to spending phase, I have to figure out an entirely new strategy and I feel like I'm starting over from scratch.  I'll read through the articles cited and then I'm sure I'll have many more specific questions for my situation. 
 
You were instrumental in helping me overcome my fears for starting a Roth IRA a few years ago, so I appreciate your help more than you know!

It is a whole different game in a lot of ways.  Thankfully, most people FIRE with slack or with a conservative (i.e. high) estimate of their taxes.  Also, most FIRE people are good at optimizing / gaming their tax situation, so they learn the new environment after a few years.

I've been FIREd about 6 years now and think I'm mostly dialed in but I'm still learning new things.

It's also a lot more difficult game to play I think.  When you're working, usually the name of the game is to tax-defer and take as many deductions as possible.  In FIRE, sometimes you want to voluntarily realize income and voluntarily pay taxes, and it's a little less clear what your target AGI should be.

[4tify]

@BlueHouse I’m right there with you trying to figure out the transition. Been running Roth conversion calculators and tax estimates all week!

I already screwed up my health insurance and will miss subsidies in my first year :/

[BlueHouse]

@BlueHouse I’m right there with you trying to figure out the transition. Been running Roth conversion calculators and tax estimates all week!

I already screwed up my health insurance and will miss subsidies in my first year :/

Gosh, I'm so lost, do you mind if I ask what you mean and how you screwed up? 
I stopped working in 2021, so I had some income (AGI ended up being about 43K).  I know I ended up getting some money back on my taxes (not sure how to tell how much at this point), but this year's premiums are still pretty high.  I'm hoping the premium goes down next year. 

[MDM]

I know I ended up getting some money back on my taxes (not sure how to tell how much at this point)

See line 34 on your 2021 Form 1040.  That's the amount you gave to the IRS as an interest-free loan and they gave back to you.

See other lines on that form, including lines 24, 25 and 26, and 32.

[4tify]

@BlueHouse I’m right there with you trying to figure out the transition. Been running Roth conversion calculators and tax estimates all week!

I already screwed up my health insurance and will miss subsidies in my first year :/

Gosh, I'm so lost, do you mind if I ask what you mean and how you screwed up? 
I stopped working in 2021, so I had some income (AGI ended up being about 43K).  I know I ended up getting some money back on my taxes (not sure how to tell how much at this point), but this year's premiums are still pretty high.  I'm hoping the premium goes down next year.

Well, my situation is a little unique in that I opened an S corp this year to capture some consulting money. I initially calculated that with my income and Roth conversions I'd go over the ACA subsidy cliff and so decided not to buy my insurance on the exchange. In retrospect I should have, because there's now a chance I'll qualify for some of the subsidy.

Once open enrollment happens I'll switch for next year. It's such a weird gamble to forecast!

[bmjohnson35]

We rebalance/redistribute, but don't add new funds.

[BlueHouse]

I know I ended up getting some money back on my taxes (not sure how to tell how much at this point)

See line 34 on your 2021 Form 1040.  That's the amount you gave to the IRS as an interest-free loan and they gave back to you.

See other lines on that form, including lines 24, 25 and 26, and 32.

Thanks MDM.  I was a bit confused because I had already made a substantial Estimated Tax payment ($16K) before I decided to quit working, and some other deductions are mixed in with that.  But it looks like I may have about $5K refunded due to ACA subsidies based on Form 8962 (which I got to by following your suggested lines above). 

[ca-rn]

I'm post FI but still not RE so yea, still investing with my PT income.

Plus 401k ceiling was increased so I'm going to try to hit the max if I can.   My goal is to get about 100k invested over 3 remaining work years into 401k and rothIRA total. 

[CurledMoss]

If you have more passive income then expense why wouldn't you? Save for that future unknown thing you decide you want 5 years from now... Some CDs pay like 4.5%. Ibonds, etc. If the cash will sit there and get moldy why not.

I have say 50k a year of passive income (if you include dividends) in VTI. I spend like 15k. As of now I keep investing and stashing because I have a few ideas brewing... Some which will take a bit of capital to get going. Solar panels, battery back up, buying a homestead if portugal, putting up a small barn for livestock, etc.

I don't sell shares, I don't even use the dividends. I have other passive income. If I have extra $$ and am finally in a lower tax bracket I may start doing roth conversions (assuming I have working capital) up to a certain ACA amount. I learned recently you can't invest in retirement accounts if no working capital.

[almost]

We live off of our part time income and dividends.  We are trying not to sell any shares for a couple years to keep our investment income low for the EITC, until our kids hit 18.

If the cash balance grows beyond a few months' worth of expenses, we'll invest it.  Not always in a taxable account.  Depending upon where our income falls for the year, we may throw it in a tIRA to hit our AGI target for tax credits and medicaid.

[secondcor521]

We live off of our part time income and dividends.  We are trying not to sell any shares for a couple years to keep our investment income low for the EITC, until our kids hit 18.

If the cash balance grows beyond a few months' worth of expenses, we'll invest it.  Not always in a taxable account.  Depending upon where our income falls for the year, we may throw it in a tIRA to hit our AGI target for tax credits and medicaid.

You may already know this, but if you're in EITC range, you may also be in Retirement Savings Contribution Credit range.  See IRS Form 8880 and instructions.  It's a very nice credit if you can take advantage of it; the primary requirements are a low-ish income and making voluntary retirement savings contributions.

[almost]

You may already know this, but if you're in EITC range, you may also be in Retirement Savings Contribution Credit range.  See IRS Form 8880 and instructions.  It's a very nice credit if you can take advantage of it; the primary requirements are a low-ish income and making voluntary retirement savings contributions.

That is a nice credit and we do qualify for it, but our tax burden is super low and that credit is non-refundable.  All that it does for us is help us get a bigger portion of the refundable child credit.