Financial Independence Daily FI discussion thread - October 06, 2019 |
- Daily FI discussion thread - October 06, 2019
- Any stories about reaching FI under 40?
- Moderate Income in VHCOL area -- strategy?
- We make $150k/year, yet our Effective Federal Tax Rate is 6.34%. How is this possible?
- How much to leave for kids?
- 23 year old - one year after graduating university and getting first job ($50k net worth)
- Should I sell my properties?
- SWR game changer?
| Daily FI discussion thread - October 06, 2019 Posted: 06 Oct 2019 01:06 AM PDT 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]  |
| Any stories about reaching FI under 40? Posted: 06 Oct 2019 05:27 AM PDT 24 and slowly working towards FI. I've maxed out my savings rate (currently saving ~1,500 per month on a 32k salary) and it seems like I'm still a very long way off from FI unless I get a massive pay bump. I have a 40k net worth with no debt which I'm thankful to have achieved but I still feel so far away. I'm looking to get my first investment property soon so that should help but I just want to hear any unicorn stories of people hitting (or working towards) FI at a youngish age. [link] [comments]  |
| Moderate Income in VHCOL area -- strategy? Posted: 05 Oct 2019 10:04 PM PDT My SO and I, who are ~30 years old, live in the SF Bay Area and make a combined income of about $175k. (These are salaries; we don't work in tech and don't have bonuses/RSUs, unfortunately.) Many people on Reddit see incomes like this in Bay Area and advise that "you don't make enough to live there comfortably; why don't you move somewhere else?" So I want to say at the outset that we CHOOSE to live in the Bay Area not specifically for work, but because we love it here (weather, culture) and want to stay here for the long term. We live frugally and are maxing 401k / Roths at the moment, have about $80k in savings so far plus emergency funds. After this, we have ~4000 a month between the two of us in additional savings we can be doing. My big finance question is what to do about housing vs index investing as a long-term wealth building strategy. Do we give up on the idea of buying a house in this crazy market, plan to rent for life (even if we decide to have a kid), and load it all into VTSAX? Or do we funnel all the savings we can, buckle down for several years, and take the plunge into a downpayment, even if it's on a 1MM home at our salary level? And if the latter option, is cash savings the best bet, or should we take a longer-term stock investing approach to try to grow said house fund over a 10+ year period? Lastly, I'll say that we like our careers and may have something like 3-4% annual salary growth but are not planning to take steps to drastically increase our income, as we feel comfortable with where we are. So this thread is about how to make the most of living in the Bay Area, financially, at this income level. Thanks in advance for your help :) [link] [comments]  |
| We make $150k/year, yet our Effective Federal Tax Rate is 6.34%. How is this possible? Posted: 05 Oct 2019 11:07 AM PDT My wife and I make $150,000 combined. The standard deduction for married filing jointly is $24,400. And together we put in $38,000 to our Traditional 401(k)s and $7000 into our HSAs. This means $69,400 ($24,400+$38,000+$7,000) is shielded from federal taxes, which leaves $80,600 ($150,000-$69,400) left to be taxed normally. According to 2019 Tax Brackets we are taxed at 10% on the first $19,400 ($1,940), 12% from $19,400 to $78,950 ($7,080), and 22% from $78,950 to $80,600 ($484). Which means that for 2019 we will only pay $9,504 ($1,940+$7,080+$484) in federal taxes. Which means that our Effective Federal Tax Rate for 2019 will be 6.34% ($9,504/$150,000). Is this legit?! How is this possible?? That seems so low. But I understand this isn't taking into account FICA (Social Security and Medicare) payroll deductions, so just looked it up and apparently FICA is 7.65% for 2019 (up to $132,900 in income per individual and neither of us come close to that). So that would be the true total tax rate of 13.99% (6.34%+7.65%), which is INSANE! I had no idea our effective federal tax rate would be so low. I was just playing around with my FIRE spreadsheets and wanted to share my findings and possibly get a second opinion in case I was missing something major. Up to now I've just put a very conservative tax rate of 20% in my spreadsheet, but when I adjusted the formula reflect the actuals, it moved up our FIRE date by two years - which is definitely significant. [link] [comments]  |
| Posted: 05 Oct 2019 08:25 PM PDT One of my goals is to give a good amount of money for kids so that if they find their work life frustrating, I can help speed up their FI journey. We plan to pay for their college and teach them FIRE principles (saving hard, investing early etc.) but along with these would also give them some money (anywhere from 500k to 1million for each of our 2 kids based on how much we can accumulate) by the time our social security kicks in. We plan to keep 1 million for ourselves when SS starts and distribute the rest then equally to kids. The problem though is it will add few more years to my working career and will increase my FIRE target number. What are your plans for leaving money to kids. How much are you planning on passing on? Also what's the best way to pass it; 1) give some every year 2) give as a lump sum 3) leave it as inheritance after you die [link] [comments]  |
| 23 year old - one year after graduating university and getting first job ($50k net worth) Posted: 05 Oct 2019 07:49 PM PDT I decided to do a 1 year update for myself ever since getting my first job and here's the data I found. I graduated from college in 2018 in engineering from a top ~40 school. I then got my first job (in California) in October 2018. I fortunately did not have any student loans as my parents paid for all of it, so I started my career with a $0 net worth. The job I got was also 15 minutes away from my parents house so I got to live there and have no housing costs. My salary was $72k. My paychecks after tax were about $4,300 a month. My average savings rate was 85%. My average monthly spending was $600. Here is a graph my my networth in this one year span My accounts are: Cash in HYSA: $32k
Roth IRA: $12k
401k: $6k
Some notes I gathered:
I got this data for myself, but decided to share with any of you guys who are interested. Feel free to ask any questions. [link] [comments]  |
| Posted: 05 Oct 2019 06:24 PM PDT If I'm lucky and I sell my three houses to a developer I might be able to get 5million dollars. Currently each house is worth a little over one million each, but they are all adjacent lots in a popular and up and coming neighborhood. So maybe a developer or entrepreneur would buy all three for a higher price? If so I'm looking at living off interest. Are my numbers right?? Sell houses for $5,000,000 3% 150,000 real estate agent $50,00 relocation package for current tenants. $500,000 current mortgages. (Estimate) $4,200,000 left over. 8% investment rate $336,000 per year in interest. $236,000 after taxes (could be manipulated) Upon death $4,200,000 divided into two is 2,100,000 per child. 100 grand a year each in interest after taxes into perpetuity. Vs rental income (not selling.) $15,000 per month across three properties. $180,000 per year in rental income. After taxes $126,000 Properties continue to grow in value, but also cost money to maintain. $25,000 per year in maintaince costs. Leaving $101,000 minus mortgage payments. Estimated mortgage payment $4,000 between all three properties for 15 more years. Leaving $48,000 in cash flow from rental income per year after taxes. For next 15 years. After that income jumps to $100,000 per year. Upon death leave $6 - 8 million in property value to my two children. (Estimated future growth based on growth of neighborhood) So maintaining the houses and renting them out will provide more money for my children when I die. But my business is failing and I might have to file bankruptcy I have no savings account as I invested everything into the failing business. So i'd then be dependent on rental income to survive, which isn't that much as you can see from above. I'm still married and my wife brings in no income. I'm 64. What do you guys think about my two options I presented? [link] [comments]  |
| Posted: 05 Oct 2019 03:43 PM PDT Anybody ever heard of 5% bond? I read about worthy bonds today on the passive income subreddit. Basically they hold your investment 36 months FDIC insured, but the 5% interest can be withdrawn anytime penalty free Anyone tried worthy bonds? I dont know if it's legit. Taken to an extreme seems like it could be a game changer. But, i'm a buy 'n holder long termers. Who knows how long this company will be around. I read their faq on worthybonds.com. Thoughts, reactions from anyone else? Is this legit? [link] [comments]  |
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