Which additional accounts should I hold + tax questions

[Dsurf]

Hello,
I am new to this, so if you end up talking to me like I am 6 years old that will help.

Overview -
I currently have 2 accounts. i401k with 43k in assets at Schwab. 6500 in Roth Ira at Schwab. This year I should be able to put away 18k into i401k and another 5500 into Roth Ira.

I am 33 now, and would like to retire early. I dont know how to answer that question other than find out what my FI number is. On reading other blogs I think this number is around 50k in investment income per year which equates to roughly $600k - $1 million a year

My questions are -
1. What other accounts should I own? (Traditional 401k, Defined benefit Pension Plan (I am a business owner)

2. How do you get your money out early from a 401k if you want to retire early? (I have read about a roth conversion but how exactly does that work)

3. Go Curry Cracker doesnt pay any taxes on 100k from income.  What is the imaginary income?

http://www.gocurrycracker.com/go-curry-cracker-2014-taxes/

4. I am self employed. Had a sole prop but got nailed last year in $14k of Self Employment taxes. I switched to a S-corp and am hoping this will help any advice for business owners? I wont be able to put as much away in retirement accounts as I did with sole prop but should have more left over.

5. I have recently become a high income earner, which means larger taxes. I had the realization that the harder I work, the less I keep. In fact, if I just worked at a lower level of income my quality of life would be better and I would keep just about the same I imagine. Any advice on legal ways to shelter from income?

6. Should I move my accounts from Schwab to Vanguard? I cant quite tell everyone differs in their approach.


Here is what he says

Interest (Line 8a): $7,410
Tax-free Municipal Bond Interest (Line 8b): $1,455
Qualified Dividends (Line 9b): $30,166
Non-qualified Dividends (Included on Line 9a): $3,622
Blog income (Line 12): $1,987
Total income: $44,640
We also had imaginary income of $52,469, as a result of a Roth IRA Conversion of $5,744 and harvesting long term capital gains of $46,725

It feels like i am a long ways away from this goal. However, I just moved out of an expensive apartment into a bedroom in a friends house. I am taking steps and trying to learn as much as I can. Right now I understand that index funds are the best option. To use a blend of US Stocks, International Stocks, and bonds. Go Curry Cracker recommends 100% Equities, its just so hard to know that I am doing the right thing.

[MDM]

I am 33 now, and would like to retire early. I dont know how to answer that question other than find out what my FI number is. On reading other blogs I think this number is around 50k in investment income per year which equates to roughly $600k - $1 million a year

The investment income isn't completely irrelevant, but you should start with your expected expenses (including taxes) in retirement.
Here's a quick equation - put your numbers into Excel and see what you get....

Time in years to FI = Ln((S + i*E/WR) / (S + i*A)) / Ln(1 + i)

A = Amount currently invested in funds you will draw upon in retirement, $
E = Total (including taxes) annual expenses in retirement (today's dollars)
i =  Real return on invested retirement funds, e.g., 3% (conservative - we hope...)
S = Annual amount invested in funds you will draw upon in retirement, $/yr
WR = Withdrawal Rate planned for retirement, using Trinity Study definitions (e.g., 4%)

See http://forum.mrmoneymustache.com/welcome-to-the-forum/early-50s-what-should-be-my-target/ for more discussion.

Also see http://forum.mrmoneymustache.com/welcome-to-the-forum/how-did-you-figure-your-fire-date/msg642786/#msg642786.

My questions are -
1. What other accounts should I own? (Traditional 401k, Defined benefit Pension Plan (I am a business owner)

In addition to the 401k and DB plan, Traditional and/or Roth IRAs (depending on your income), HSA, and taxable brokerage accounts are others that come to mind.

2. How do you get your money out early from a 401k if you want to retire early? (I have read about a roth conversion but how exactly does that work)

http://forum.mrmoneymustache.com/taxes/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-ag-39647/

3. Go Curry Cracker doesnt pay any taxes on 100k from income.  What is the imaginary income?

I might not use the adjective "imaginary", but the "Roth IRA Conversion of $5,744 and harvesting long term capital gains of $46,725" are cases of turning paper profits into actual profits.

5. I have recently become a high income earner, which means larger taxes. I had the realization that the harder I work, the less I keep. In fact, if I just worked at a lower level of income my quality of life would be better and I would keep just about the same I imagine. Any advice on legal ways to shelter from income?

http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/

6. Should I move my accounts from Schwab to Vanguard? I cant quite tell everyone differs in their approach.

If you are using Schwab's low fee ETFs then you are probably ok.  If not, either switch within Schwab to those or go to Vanguard.  What fees are you paying now?

All in all in seems you are doing just fine - keep up the good work and good luck!

[Dsurf]

Thank you MDM.

[G-dog]

As a business owner, you can pay into your 401k as both the EMPLOYER and the EMPLOYEE - this increases the amount you can put in, and I imagine could help with taxes (though I have no expertise here - you need to check that out). It also means you get to decide what sort of accounts you carry - you could vibe doing a Roth 401k, which wouldn't help from the tax perspective, but could help regarding withdrawals before age 59.5.

[Cpa Cat]

If you have earned income, you'll never be totally tax free (due to payroll taxes). Even as an S-Corp owner, you're supposed to pay yourself a reasonable salary and pay payroll taxes on it (both employee and employer portions). You'll have to decide what a reasonable salary for your position is and pay up.

Note that even Go Curry Cracker isn't totally tax free. He has self-employment tax on his small amount of business income.

On his return, he takes full advantage of favorable rates for investment income when you have no/low earned income (in addition to his self-employment tax, he actually had $221 in income tax on his income, but he erased it with a foreign tax credit (he ended up with a foreign tax credit carry over, because he couldn't use it all). Now, I take a little issue with saying that means he paid no tax - actually, he paid more than $500 in foreign taxes. But it's a minor detail!