Financial Independence New Tax Plan May Force FIFO (First in first out) Method |
- New Tax Plan May Force FIFO (First in first out) Method
- Seeking life advice, especially related to finding enjoyment in work..
- Daily FI discussion thread - December 04, 2017
- How do you guys deal with variable income in your FI calculations?
- Where my money goes to save $30,000 on $56,000 total income in a HCOL in 2017 (Spoiler: Sankey)
- real estate F.I. question (take $100k now or later)
- My High(er) income flowchart for the last 12 months, YASD (Yet Another Sankey Diagram fad post)
- Weekly FI Monday Milestone thread - December 04, 2017
- Mega-backdoor Roth 401k vs Roth IRA
- A month of expenses on the road to FatFI [Sankey]
- International Investment Options
- In defense of home ownership
- Campaigning for 403(b) + 457(b) at Work
- SEP IRA strategy after potential tax reform
- Advice on opening 529 college savings plans in multiple states?
- Got in on the Sankey diagram fad to show a month's income and expenses (6 years away from FIRE)
- On the path to FI. Here are my numbers. Critique me?
- Why 'Shark Tank' investor Kevin O’Leary refuses to spend $2.50 on a cup of coffee (he invests the money instead)
| New Tax Plan May Force FIFO (First in first out) Method Posted: 04 Dec 2017 03:34 AM PST Haven't seen this specifically mentioned, so if it's a repost feel free to remove. I saw this over on /r/investing and thought this would be a significant hit for us on this sub. For those that don't know what this means: it would force us to sell our shares in the order they were purchased. This would make tax planning much more difficult and could force us to incur capital gains taxes since our oldest shares are most likely to have appreciated most. Specific ID (what is often recommended) allows us to pick exactly which purchases to sell, giving us greater flexibility in avoiding capital gains taxes. The only method allowed would be FIFO. Time will tell if this remains in the finalized version of the bill, but it would suck if this got through. [link] [comments]  |
| Seeking life advice, especially related to finding enjoyment in work.. Posted: 04 Dec 2017 11:06 AM PST Essentially in recent times, I've noticed an increased and perhaps OVER focus on increasing net worth. I've always been a saver but what pushed me towards the financial independence movement was around 8 years ago, my now wife becoming chronically ill. It essentially made me crap myself a bit and I took the stance that I would need to assume she would never never work a day in her life, there may also be huge medicial expenses. Now, we're in a fairly good place, own 25% of a house worth at least £140k and around another £140k in cash and investments. Realistically, we should be fine going forward if we just keep pace. However, I struggle to relax about it and seem to have an overwhelming feeling that it'll only be okay when I have £500k slowly accumulating more interest. I cannot seem to shake this. I guess I wonder if anyone has also suffered from this going on in their head? I could only imagine the pressure intensifying with children involved. With the above and also a bit because of my wife's illness, I feel like we've lost a little joy? I've cut back on a number of 'fun' things to try to increase focus and pursue excellence in my career path amongst other things. But this all seems a little confused if I'm chasing FI? I must admit I don't LOVE my job but I'm pretty good at it, I also see myself working always in some regard. Has anyone felt like you reached a point of a bit too much focus on FI, at the expense of life? I mean I'm very far away from crazy territory, for example, we just bought and are fixing up our first home. We also do some swimming lessons and enjoy getting creative in the kitchen. Outside of that though, I feel like I'm dealing with a never-ending list of errands and like I'm not improving at much else other than gaining more money? The last line is probably coloured a bit too much by my current headspace, I'm very growth-oriented in several aspects and strive to better myself on a daily basis. I just worry I've cut out some of the more normal things like TV and video games, without replacing them with something else that entertains us and brings us fun? My normal outlet is the outdoors and sports but this needs to be very limited given my wife's illness. Ultimately I'm curious if anyone has battled some of the same demons yourself and if you've managed to find a way to conquer them? Apologies for droning on so much, as you can perhaps tell it's something I've struggled with and not come to much of a conclusion yet. I should mention I've read MrLlama's post and found it really good, though I feel like my problem is slightly different. [link] [comments]  |
| Daily FI discussion thread - December 04, 2017 Posted: 04 Dec 2017 03:09 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| How do you guys deal with variable income in your FI calculations? Posted: 04 Dec 2017 11:48 AM PST First, let me say that I don't intend this to come off as a humblebrag. I'm genuinely curious how you guys deal with the issue of variable income. I'm 39 years old and fortunate enough to own a small consulting firm with a partner. I take a partner draw of $10k per month, but in addition to that, when times are good, my partner and I take periodic bonus draws. This year, I have been able to take an additional $150k over my base $10k monthly. The past few years we have also maxed out our SEPP contributions, which tends to be around $45-50k per year. However, not every year has been like this, and sometimes we end up taking much smaller draws. In playing around with FI calculators, I have found that most ask how much you will contribute to your retirement annually. Because I don't have a set amount withdrawn from my pay every month (like someone who has a 401k for example), I don't really know how to answer this. Obviously, I'd love for things to keep going the way they are, but if things take a downward turn for the business, who knows if I will still be able to max out my SEPP, take bonuses, etc. Is there some rule of thumb for this, or do I just sort of have to guess, or map out different scenarios? Thanks. [link] [comments]  |
| Where my money goes to save $30,000 on $56,000 total income in a HCOL in 2017 (Spoiler: Sankey) Posted: 04 Dec 2017 09:21 AM PST I've enjoyed seeing the recent flood of Sankey visualizations of budgets and wanted to take advantage of the data that I've been collecting all year to create my own. This is a visual representation of my income, expenses, and savings from January 1 through yesterday. Some notes: -This chart does not include any income or expenses outside of 2017, nor does it represent my net worth or any capital gains from investments during this time -I've tried to make all flows accurate from an input > output perspective but there are some things that I couldn't/didn't want to bother to account for, like the portion of my churning that is taxable bank account bonuses for which I do pay income tax -Streams that end before the end of the chart (right side) are expenses, and streams that stretch out to the end of the chart comprise my annual savings (except for the Cash Floats category -- see below) -I am getting married next year, so the listed wedding expenses only represent what I have spent thus far, not all anticipated wedding expenses -Cash floats are cash equivalents that I have purchased in 2017 which will eventually zero out as I use them in 2018 (and apply to corresponding expenses to my 2018 finances sheet) -I share a 1-bedroom apartment and a car with my fiancee, as I typically bike to work and so we only drive on the weekends -My fiancee and I split all shared expenses, so the figures displayed for things like rent, utilities, car insurance, and gas represent my half of these costs only -I tried to capture all income and expenses that I either can actually track or have actually realized in 2017. Additional income that I do not track is the percentage of my health insurance premium that my employer pays, and anything else that I've overlooked (i.e. does not show up in my pay summary or accounts activity) [link] [comments]  |
| real estate F.I. question (take $100k now or later) Posted: 04 Dec 2017 11:37 AM PST So I've got a full-time W2 job in a mid-size city that pays relatively well ($135k/yr). I do some real estate investing on the side to supplement that. I recently purchased a property off-market and got a pretty good deal on it (let's say $400k). It's bringing in close to $3,800/month in rent. Expenses are about $3,000/month all-in, and that's with me self-managing. The property needs a fair bit of work, and that's why rents are so far below market. Once fixed up it will bring in close to $6,000/month in rent. To fix it up, I'd have to put in about $100k. Expenses would probably stay flat or even drop if I did that, creating about $3,000/month in cash flow. A neighbor approached me about selling it, even though I've only owned it a few months, and I told him I'd be open to selling it for $535k. I'd incur short-term cap gains if I sold it now, so for rough math let's say I'll walk away with $100k profit on this for a few months work. If you're FI motivated, what would you do if you were me? Take the money and run? Leave it as is and sell after 1 year (long-term gains)? Fix it up and have the cash flow stream? [link] [comments]  |
| My High(er) income flowchart for the last 12 months, YASD (Yet Another Sankey Diagram fad post) Posted: 03 Dec 2017 09:16 PM PST Chart: 2017 FI Budget Because there just aren't enough tech engineer posts here/s, here's another. I know that I am very lucky to be born to the right parents, place, time period, and opportunities that got me here, and don't mean to be exclusionary. I think a lot of the FIRE principles stay the same, if at an accelerated pace. I'm starting to near the point where my investment returns are matching my work income. This has become a game changer in terms of thinking of income as passive vs active. I find myself starting to take personal interest in political things like the tax plan, corporate tax etc. Background:
These were the posts that inspired mine, feel free to ask me more about my experiences/plans, thanks! [link] [comments]  |
| Weekly FI Monday Milestone thread - December 04, 2017 Posted: 04 Dec 2017 03:09 AM PST Please use this thread to post your milestones, humblebrags and status updates which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| Mega-backdoor Roth 401k vs Roth IRA Posted: 04 Dec 2017 08:25 AM PST Hey everyone, My 401k plan allows me to to take advantage of the mega-backdoor loophole, and I've been using this to contribute to a Roth IRA. I recently spoke with a representative from our 401k provider who said that doing an in-service withdrawal to an external IRA is unnecessary, and that my plan allows unlimited rollovers from my After-Tax 401k holdings to a Roth 401k (vs. 4/year to the IRA). Has anyone encountered this option, and what did you go with? I'm having trouble finding information online that takes early retirees' considerations into account. The expense ratios in my 401k are lower, but I'm unsure about the rules on early withdrawal here. [link] [comments]  |
| A month of expenses on the road to FatFI [Sankey] Posted: 04 Dec 2017 02:48 PM PST I love Sankey diagrams and since I just wrapped up my spreadsheet day I thought I'd post a diagram of my November expenses. A few notes:
A few demographic bits: I'm 24 and live in New York City with roommates. I'm an engineer at a big tech company. Goals:
Obviously there's lots of room to optimize but since I mostly love my job I'm not desperate to retire anytime soon. As it is I'm on track to be FI by 35 if average expenses don't change (a big if). Happy to answer any questions people have or receive constructive advice. [link] [comments]  |
| International Investment Options Posted: 04 Dec 2017 10:01 AM PST First, thank you all for all the great advice on this subreddit. I am a Jordanian who is looking to invest in some index funds, such as S&P, after some reading I found out that I cannot go that route as I am not an American citizen. Brokers in Jordan are very lousy and greedy mainly because the stock market is very weak and people here almost never invest; I don't actually know a single person who invests in any kind of stocks. Are there any options out there for me either online or some other means that I am currently unaware of to be able to properly invest in some index funds and actually be profitable? Notes: 1. I am a Muslim, and I only want to invest in Sharia complying funds, I know this complicates the matter. 2. I can start now with 3000$ and add 100$-150$ monthly. Salaries also suck here not only the stock market. [link] [comments]  |
| Posted: 04 Dec 2017 03:16 PM PST So I notice in /r/personalfinance there is a pretty persistent meme about how owning a home is the worst, that renting is superior, "opportunity cost" of the down payment isn't worth it, etc... blah blah blah... Well I've come here to shut that argument down completely, that being said... DISCLAIMER: Not a financial advisor or professional in the industry. All people's circumstances are different. I often tell people not to buy because their personal circumstances make it a bad decision. Also homes aren't a get rich quick scheme, and I'm in no way suggesting any of that. I'm just a 32 year old dude who likes to think about things, debate all kinds of subjects, and is slightly interested in FIRE but not quite able to start yet. With that out of the way, I'd like to begin by comparing Mortgage+Maintenance costs and Rent over a 40 year time period for equivalent properties. I'm going to use similar values to my own experience. We bought our home in 2015 for 240,000 with 10% down. Our mortgage payments are about $1,600/month. We could rent our home right now for $1,800/month giving the comparable rentals in our area. This is often the case in every rental situation. The buyer thinks they are getting a great deal because it's cheaper than rent and it's building equity so the money is "working" for them. Well it's not that simple. There is maintenance to be concerned about. Typical rule of thumb is that you need to take 1% of the original purchase price of the home into account for potential maintenance. So in my home's case, that's 2400/yr. That brings our monthly rate from 1,600 to 1,800 which perfectly matches the rental rate (which is also a good way to help determine your rate at which to rent properties out to people). Next, rent will on average go up along with inflation, which is around 3%. In actuality rent has beat inflation for the past 30 years or so, but I will be GENEROUS to renters and assume that economic stability will keep the rates from going too high. So the first year your rent is $1,800/month, the next year it's $1,845/month. Now let's say you do the long term game. You are 18 and have enough for the down payment, and really know you want to be somewhat reasonably FIRE, and retire at 58 instead of the expected 67-75 for your age group. So you worked from 16-18 to save up for a down payment, got your dream job as a bus driver at 18 or whatever (gotta get that pension and benefits baby), and here we go... https://i.imgur.com/91BNl3x.png This is the horrifying reality. If that 18 year old takes the advice of all the snazzy /r/personalfinance crowd and thinks that renting is cheaper, they are wrong. On the left is the mortgage+2400 dollars per year. It stays almost perfectly the same throughout the years, (although there will be minor fluctuation due to increased land value slightly and the property taxes that go with it, you will likely only see about a 2000 dollar a year increase or so over the entirety, at worst). Rent however increases by 3% each year. By the year 2057, little Jimmy will be paying $5,700 a month to rent the equivalent 2 bedroom, 1 bathroom humble home. How do I know this is true? We can look at history. My grandparents bought their home in California for around 22,000 dollars in the mid 60's. The home now has a Redfin estimate of over 600,000 dollars. The rent for a house like that today is about 2,700 dollars. Back in their day, you could estimate it would have been about 100 dollars a month to rent a property like that. 50 something years later, and the rent price went up about 27 times, whereas they continued to pay their 40 years loan slowly until the mid 2000's, and their mortgage was certainly tiny in comparison to the market rate of rent at the time. Point is, think for yourself, run your own numbers, do your own research, don't just listen to everybody else. Honestly renting can be better if you are unsure of your future, or are new to a location and not sure if you wanna be there. In the short term, no one makes a killing on houses reliably, it's risky business. However, in the long term, the clear winner is buying. [link] [comments]  |
| Campaigning for 403(b) + 457(b) at Work Posted: 03 Dec 2017 11:23 PM PST I posted last week asking how to tell if my organization is eligible to offer both a 403(b) and a 457(b) for its employees. It sort of digressed into a discussion about whether the new tax bill would affect their separate limits and if you would still be able to withdrawal your 457(b) contributions (penalty-free) early. I then saw this post (https://www.reddit.com/r/financialindependence/comments/7hdchk/senate_bill_does_not_appear_to_include_401k403b/) it seems like we don't have to worry about the bill affecting these plans! (though I am personally worried about a lot of the other changes still, but I digress...) After the good news I decided to ask my boss some exploratory questions about our eligibility for both plans. She told me that they used to offer 403(b) which cost them ~$150/month ($100 management fee and $4/person using it) but they cancelled that plan once they came across a free 457(b) provider (ICMA-RC) which we currently have. She said she was open to the idea of also allowing a 503(b) plan that charged no fees if I could find something. So I believe that is pretty close to confirmation that we are eligible to receive both. Obviously, Vanguard was my first choice so I looked up what they charge for their 403(b) plan (https://investor.vanguard.com/403b-plans/low-cost). From the looks of it, they charge $5/month per person. Going by the old number it seemed like 25 people used our old 403(b) which would make the Vanguard 403(b) cost about $125/month for my employer. This is cheaper but is not no fees and probably is not a justifiable cost to my boss. I have a few questions: Would Vanguard charge $5/month for everyone at my work eligible for the plan, or only those who are using it ? If it is the latter, it's possible that since many people are already using the 457(b) and it is the better option given the early withdrawal possibility, there will only be a few people electing to use the 403(b) and it would only cost my employer ~$40/month. To make it totally free for my employer, is it legal for the employee pay for the costs associated with the retirement fund (i.e. the $5/month, which I would gladly pay)? This way it would be free to my employer and I would be able to pay ($60/year) for the benefit of saving an additional $18500 pre-tax each year! I'm curious what other things I should be considering. This request exposes that I am able to save a pretty substantial amount of money yearly (at the very least $18500 and possibly $37000) and I don't want my boss thinking that I am overpaid and don't deserve as big of raises in the future (especially because I asked for a pretty small raise last year and didn't get it). In my conversation with my boss, I think focusing on Vanguard's stellar expense ratios (our lowest at our 457(b) is about .95%) is a good strategy, but I don't want to bash our 457(b) too much since I still want to keep it around. If anyone has more information or tips, I would really appreciate it. I found Boglehead's article (https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401(k)_plan) about campaigning for a better 401(k) useful, but my situation is slightly different, since I do want better expense ratios (in the Vanguard 403(b)), but I do not want to get rid of the one with worse expense ratios (my 457) since I still want to take advantage of those savings. Please poke holes in my math! Let me know any flaws in my arguments or things I should watch out for!! Thanks for reading!!! [link] [comments]  |
| SEP IRA strategy after potential tax reform Posted: 04 Dec 2017 08:08 AM PST This is all hypothetical since nothing is set in stone and there are a lot of what ifs. I'm employed, but also have a side business. I just recently set up a SEP IRA with my side business which I can contribute up to 54K (or 25%). If I were to eventually do a Roth Ladder, I would be taxed at ordinary income rates at the time of conversion. If tax reform passes, would it no longer make sense to contribute to something that I will eventually be taxed at ~40% if I can pay tax at the time of only ~20% (pass through entity)? Am I missing something here? [link] [comments]  |
| Advice on opening 529 college savings plans in multiple states? Posted: 04 Dec 2017 10:12 AM PST I'm in a bit of a unique situation and was hoping someone would be able to offer their thoughts... Background
I'm considering opening 529 accounts in my name (with potential to eventually transfer to my kids and/or spouse) in several of the states where I have W-2 income this year and deducting the contributions to each from my taxable income (at the state level) for the respective state (where applicable). Does anyone have any experience doing this kind of thing? Are there any limitations at either the state or the federal level for contributing to multiple 529s? Anything I'm missing here? [link] [comments]  |
| Got in on the Sankey diagram fad to show a month's income and expenses (6 years away from FIRE) Posted: 03 Dec 2017 04:35 PM PST https://i.imgur.com/55epiIO.jpg Just some notes to preempt some questions.
Next step is to do one of these with what I think my projected FIRE monthly expenses will look like. We'll have about $8300/mo from pensions and a lot of our money is locked up in retirement accounts which will be off limits mostly for 15 years after we FIRE. But between our real estate and taxable investments we should be able to generate a bit more income with no issues. I'll be happy for expenses like daycare to go away in the next few years. [link] [comments]  |
| On the path to FI. Here are my numbers. Critique me? Posted: 03 Dec 2017 07:09 PM PST Hi guys, I just finished reading Early Retirement Extreme and I also read some of madfientist and I've decided that FI is definitely for me. Little did I know that I kinda was already doing some of it anyway and I've always been a frugal person living well below my means. Hopefully, I'm not overdoing my first post and providing too many numbers to crunch but I wanted to be as complete as possible. Anyway, here are my numbers and my goals. Age:35
Annual Salary: 138k/year (Bonus ranges from 0-20% Assume 7.5% on average). No state income tax.
Profession: Software Engineer
401k: $216,360.00 (Employer matches 50% so I contribute the max).
HSA: $5,584 (I contribute the IRS limit per year starting about 2 years ago).
Cash: $4,000 (roughly)
Debt: I owe my dad $25k for property (see below).
Current Expenditures Total: $2,150/month. I doubt I can lower this much further.
Family: Not married, no kids
Home: Renting
Passive Income Stream: See below
Medical: Yes, I have a medical condition, see below.
Goal: Retire at 45 at the latest. 42 would be ideal.
Property #1 (Commercial): Loan Remaining: $586,286 Loan type: 10/yr @ 4.91% amortized over 20 years. $4,153.75 per payment (P = $1,743.87, I = $2,409.63 currently) Cash Flow: $1,468 positive (after mortgage, condo fee, property tax, insurance). Ownership: 75%
Property #2 (Commercial): Loan Remaining: $603,314 Loan type: 10/yr @ 4.65% amortized over 25 years. $3,622.83 per payment (P = $1,284.57, I = $2,337.28 currently) Cash Flow: $2,350 positive (after mortgage, condo fee, property tax, insurance). Ownership: 40%
Property #3 (Commercial): Loan Remaining: $688,256 Loan type: 10/yr @ 4.8% amortized over 20 years. $4,503.87 per payment (P = $1,743.87, I = $2,760 currently) Cash Flow: $1,694.30 positive (after mortgage, condo fee, property tax, insurance). Ownership: 75%
Medical issue: I suffer from chronic pain from spinal issues. I'm still functional but this does limit me physically in some ways (and limits me mentally). My pain also interferes with my work and every aspect of my life. Happiness for me is no longer possible. Nothing further to say here because I don't want to depress myself describing my life. I'm not taking any meds and doctors have not been able to help me so there will be no further medical costs (that I'm aware of). Otherwise, I'm healthy and of a healthy weight (could lose 10 lbs though).
So my ticket to FI is mostly in the property I bought recently. It is hard to give you all the numbers in a post so I shared an excel spreadsheet I made here: SpreadSheet (You can download the spreadsheet, bottom right corner).
Essentially, all properties are cash flow positive (after mortgage, tax, condo fee, insurance). If I use 85-90% of the extra cash made and add $750 of my own money per month ($250 for my dad since he is 25% owner), I calculated I can have the entire loan paid off in about 8-10 years for all properties. Note, this implies things go perfectly! No gaps in rent, rent increase of about 2.5% year, condo/property taxes increasing by 2% per year and there is no major repair needed. Obviously, this is probably not going to happen since one of the properties needed $20k for a new ceiling because too much noise was being generated by one of the tenants. :(
If rent increases as planned, taxes/condo fees increase as planned and the ownership remains the same, I predict my monthly cash flow from the rentals will be $12.5 - 15k once the entire loan is paid off. This is when I plan to retire.
BONUS POINTS: My dad manages all the properties for me! I live on the other side of the country from my properties so essentially it takes no work on my end outside of my money. He is retired and lives near the properties so it is all good. Managing it is pretty easy actually. Our leases are for multiple years and since it is commercial there is no kitchen/sink/shower to fix or garden/garage to worry about.
Things I plan to do: 1.) Continue to work (I may take a year off somewhere) for at least 6 years 2.) Pay down the mortgage on my properties ($750 for the ones I'm 75% owner, $400 for the one I'm 40% owner) 3.) Save my money either for a house OR dump it in an index fund 4.) Pay my dad off (12-18 month time frame here) 5.) I could use the money I save up for a house or index fund and increase ownership of the properties. My dad has offered me a chance to buy his part of the ownership of the properties anytime I want. I may do this in liu of step #3.
Question: 1.) Am I missing something? I know 10k+/month seems like a lot according to ERE but I want to have a very comfortable margin of error. I was thinking that I could refinance the loan to some 30 year loan in about 6 years and just retire then even with some mortgage left over. 2.) What other variables am I missing? Wife? Kids? I don't know how to plan for that. 3.) I can't expect my dad to manage this forever. After a few years I'll probably need to start managing it myself. [link] [comments]  |
| Posted: 04 Dec 2017 07:44 AM PST "I drink coffee, one cup every morning," he explains. "It costs about 18 cents to make it, and I invest the rest." [link] [comments]  |
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