: ) THAT’S the importance of asset allocation when you are no longer earning money from your job. Has anybody else done any research on this? Although you should probably keep at least your year’s deductible (or max out-of-pocket amount) in a highly liquid format (money market?). Right now your (approximate/estimated) income is: Regrads, Rebekah Keep in mind, Medicare DOES NOT help with long-term care. Even if you pay the taxes and take the 10% withdrawal hit down the road you will still be in the black because you doubled (or nearly doubled) your money when you made the contribution. Yeah I get it…. So I think I will plan to continue to contribute to the 401k at the max rate to avoid taxes up until I quit… Plus save another $25k to taxable savings. Do that three or four times and you run out of shares. Does anyone know if the ROTH IRA loophole still works? Apprentice; Posts: 42; Karma: +10/-1; Reasons Why Mr. Money Mustache Got A Divorce « on: December 04, 2018, 05:39:32 PM » Hi guys. April 4, 2016, 10:33 am. I’ve arrived at a similar conclusion – a tranche of cash for pre-59 ½ retirement and another tranche thereafter. I think if you have maxed out your other savings and don’t qualify (income to high) for a tax deductible IRA than a Roth is a great place to save. Besides a good buying opportunity, the next stock market correction/crash will provide good writing material for FIRE bloggers such as yourself :) . So by putting in the 5% I will get a 9% total into my 401(k). Matthew Stock market crashes are never permanent. I have also been fit and healthy and have previously been scathing of those who have develop health issues -bad diet! It gave me more empathy for folks who have chronic and expensive health conditions because most are not so privileged that $10,000 wouldn’t be a huge burden. anonymous The reason to have catastrophic medical insurance is to calm fears of a possible medical disaster. But that’s my total tax for the year. I suspect dividend growth investors will do better than index investors in the long run, especially now when the leading index stocks are so overpriced. I saw the 1.43% in your post and assumed that was the withdrawal rate, which is actually closer to ~3% right now, as you correctly pointed out. ** For this calculation, I assumed the stock market delivers a 4% rate of return including dividends, after inflation. i ran my numbers and i am only 5 years away from stashing my old woman money. We would have 300k left in our 401k after paying off our 300k house loan? I agree with your conservative opinion on stock appreciation – except that you’re forgetting DIVIDENDS – your share of earnings, which is the true underlying reason stocks are worth anything. I’m so glad that someone else realizes this is a huge problem- I feel like a voice in the wilderness here. Not to mention the balmy weather makes life so much cheaper in general (less heating, less layers of clothing, less wear on vehicle etc etc). So it would be preferable to have shifted to even less RRSP income by this point and more TFSA or non-registered income. November 30, 2018, 4:11 pm, “If you start with $1.2 million chunk (a 3% withdrawal rate), it is overwhelmingly certain that you’ll have a growing surplus for life.”. Wow it seems like you have actually completely missed the whole point of this post. I’d rather pay 10% now, than 20 – 30% or more later. Third, for folks in high tax brackets (33% and 35%), it may make sense to put the maximum money in 401ks, regardless of if you have enough in it already. etc. Spend the money you earn from your investments in a way that helps people and the planet e.g buy organic produce, and donate some money to charity. This, obviously, assumes that you bought the shares only a year ago. November 30, 2018, 12:52 am. And we can illustrate it with this really simple example: Let’s say you want to be able to spend $40,000 per year, for life, and have that spending allowance continue to grow with inflation. Others, like Pennsylvania, hold children responsible for the care of indigent parents, to the tune of hundreds of thousands. All of those things are not in our future. Because it IS absolutely possible and in fact very easy, to make a chunk of money last through your lifetime. November 11, 2011, 12:40 pm. Third, this exception only applies to funds withdrawn from a 401k. Money Mustache left the working world at 30, and he wants you to, as well. Anyone need their GSM network fixing? This is an interesting topic. December 6, 2013, 1:23 am. This means that our income likely wont be dropping much at retirement. (15% or 0%). Tyler Simpson November 29, 2018, 7:38 pm. I didn’t see it listed. 3, Free money (the company match). Would you confidently be able to say “the market always goes up” and withdrawal that +$40k? But there never have been. November 11, 2011, 11:21 am. No offence, but it’s just not going to happen. Is there a penalty if I make an early withdrawal? I think it is a good point to bring up and know how you are going to deal with that situation in the unlikely event it happens to you. I have some Roth IRA savings as well. Say when I am 40 I have one year I travel a lot and only earn $15K from my consulting business [after deductions] I would take $29.7K out of my RRSP that year and see it taxed at 15% which is much lower than the 22%-29% I would have paid when I put the $$ in the RRSP and when I get to 71 I’ll have less $$ in the RRSP and reach a lower mandatory withdrawal rate. Benefits/Potential benefits: Since the couple has increased their cost basis of their $100K taxable account to $100K, they’ve potentially saved $3K (15% of 20K) with little cost (the actual cost is the state income tax that may be paid, but that’s a matter of paying now vs. paying later). Tax is only incurred when distributions are taken as income. The only limits are those you make for yourself. I have heard that the premiums can vary widely across the US, at least for now. Had I just invested in index funds ten years ago (like MMM recommends), I would have had similar growth to my current portfolio and less than than half the fees. Suze and Mr. Money Mustache are both playing a dangerous game with so many assumptions. When I set one up, I had to do so by getting an employer social security number. I knew I was playing catch-up. Medicaid is a federal/state program so rules/qualifications vary state by state. This version is slightly less optimistic, but still gets us out to almost 20 years in the most probable scenario. Nor is the need for expensive immunosuppressives for organ transplants. However due to market fluctuations and life circumstances changing, this will never happen exactly how you might plan it, so building in some safety margin into your numbers is clearly advised (not too much though! However, in April this year at 55, I was diagnosed with Stage 2 breast cancer . In the event of a crash, I will spend the CD money, but so far I have only sold stocks as the market has been good. Though our new government is obviously dying to bring it in. Thanks for all the great material on your site! You might even get a partial or full employer match, depending on how fancy you are. And to understand the different types of coverage. If you find that you no longer have to work so many hours you will have more time to donate too. – evaluate the income needs for your whole retirement [including CPP + OAS], – project your RRSP value throughout your retirement and calculate the mandatory withdrawal income combined with CPP + OAS. 40k per annum in Toronto (mind you I’m 20-30 mins north of Toronto) but same shite as far as cost of living as far as rent goes. Go ahead and click on any titles that intrigue you, and I hope to see you around here more often. I think most people would go back to work full time or part time if the market severely crashed in the first few years. You use both the current account balance and the current life expectancy each year for the calculation. 1) Money needs to last 30 years Let’s take two examples. I’m not sure how to deal with the tax changes at this point, so they are included in my current expense figure. However, beneficiaries may enroll in a Medicare Advantage plan, replacing their Original Medicare. CapitalistRoader My broker (that I am getting rid of this month) was floored by my suggestion to do this, but he agreed it was a great way to float the land purchases. At 27 I have no idea what kind of tax bracket I will be in when I am in my 60s so it is hard to say if additional contributions will result in a lesser tax liability in the long run. If you change employers (or just find a better HSA plan), you can do a trustee-to-trustee transfer of your HSA balance, similar to moving an IRA. It’s called fromheroestozeroes.com. 28 years old. Subject: Mr. Money Mustache- DC version. This is where Mr. Money Mustache puts a stake in the ground. Here’s an article on taxes in early retirement: I am allowed to take out a loan of up to 50k or 50% of my total 401k balance (whichever is the lesser), and pay it back over 15 years with 4.25% interest which I pay back to myself into my 401k. This is VERY important for those who may later be in a higher tax bracket OR those who may later want sell a good-sized chuck of securities from a taxable account for a down-payment on house or other investment. Wouldn’t smart people do exactly that? But even so, most people choose to insure against surprise medical bills, and people with existing medical needs depend on help with those costs. In the state of Maine, assets do affect Medicaid eligibility for adults but not children. Related: your spending can be more efficient if you channel it through a good rewards credit card. Federated Government Ultrashort Duration Fund Internet anal guy here. It would definitely be a bit of a lifestyle change but I don’t see anything that would force either spouse to go back to work if they didn’t want to. In other words, if the source money was protected from lawsuits, it remains protected if it is rolled over into another retirement account. There’s a place we found called livelyme.com that offers a great FDIC insured rate, as well as an investment option through TDAmeritrade. rollie fingers Best wishes, John. They may only give the option of a full payout. Its FloridaBlue and the costs are astronomical ($1,500+) per month for two people and a $14k deductible. I wonder now that I went part time at a job if I should change my Roth 401K and Roth IRA contributions to traditional now. Okay, you’re 35 years old, you have saved exactly one million dollars, and handed in your resignation. I max out 401k at 40% ($14000/yr) and the roth 401k value is $76000 and $90000 in traditional 401k. How big of a catastrophe are you going to plan for? if no dividends are payed the funds rise 5% in a year). We want for nothing and feel rich and free. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59 1/2, you will lose this exception on those dollars. Quite a difference. I am using Strategy #2 to pay for land. You’ll have more ups and downs to traverse and this one isn’t at all likely to hurt you being all stocks. As always, I suggest that you only need one thing: a generous bucketload of low-fee index funds. I just turned 48 and have $292,000 in the 401k. ‘m not arguing against FI and frugality, but the point of this piece seemed to be that it would be fairly easy to stay solvent following a 3 or 4% withdrawal rate. I’m still looking into to all the details of the 457b before we go down this path but it really seems like it’s better than the 403b or equivalent 401k for early retirees. Assumptions: You are single, have no other dependents. Thank you for taking the time to spell that out – very helpful! Then he wouldn’t be able to touch the money at 30 when he retired without paying 10% more in tax penalties. Il écrit de manière intéressante, et en le lisant on se demande souvent pourquoi on n’y a pas pensé plus tôt soi même. I just wanted to add that the advise to start receiving dividends is highly country specific. If your withdrawal rate was 3% during that time period, indexed to inflation, your balance would be $1,060,000. That is far different than $1.5 million at $50k. Mr. Money Mustache I do have a pension fund here, but the advantages don’t seem as great (very minimal employer match, which I’m already getting), it would still be age-limited, and I’m worried about exchange rates etc. We don’t plan on getting sued or going bankrupt, but those things happen and it is an additional layer of security and piece of mind that I wouldn’t have if I put the money into taxable accounts. But still it just doesn’t seem enough around here in the greater Toronto area, or am i delusional ?52k per year… wife raising child doesn’t work. John Grover In other words, most of us get to the door of financial independence with something like this: A complex financial picture with lots of dollar signs – but can you retire on it? Mr. Money Mustache This is the blog post that shows you how to be wealthy enough to retire in ten years. Neither one got back to its peak nearly as fast as it dropped from it. after expenses and depreciation. This really helps if you sell funds at a loss in your taxable accounts then re-buy similar (not the same or wash rules apply) in your 401k. Thus, your money lasts much longer than it would if you were just keeping it all in a checking account or stuffed in your mattress. Thanks much – don’t know how I ever missed that – ha!
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