Financial Independence Daily FI discussion thread - February 26, 2020

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• Daily FI discussion thread - February 26, 2020
• Let’s talk about side hustles
• Questions about Mega Backdoor Roth and and in-plan Roth rollover
• Weekly Self-Promotion Thread - February 26, 2020
• Adjusting the length of time for the 4% rule

Daily FI discussion thread - February 26, 2020 Posted: 26 Feb 2020 12:08 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. submitted by /u/AutoModerator [link] [comments]

Let’s talk about side hustles Posted: 26 Feb 2020 07:56 AM PST I'm very curious about side hustles and do have time outside of normal working hours that I would like to use to earn some extra income, which should help with the whole FIRE goal. I made this post to explore this deeper and so we can have a discussion and learn together. Feel free to post anything about side hustles, regardless if I mention it below or not. Popular side hustles Freelancing (programming, art, consulting, welding, etc) Tutoring Working security at night Bartending Dog walking Baby sitting House sitting Amazon FBA Property management Online tech support Uber/Lyft driving Flipping things (cars, bikes, homes, etc) If your side hustle isn't mentioned, please share! Misc questions Do you report taxes on your side income? Do you legally have to? When should you set up a S-Corp or LLC for your side hustle? For example, let's say I tutor and earn an additional $10k a year. What if I earned $20k or $30k? Which side hustles do you think generate the best $/hour? Which side hustles do you think are most fun? Some employment contracts stipulate that you cannot have another source of non-passive income. Do you just ignore this? Which side hustles are traps and not worth it? submitted by /u/damienthrow [link] [comments]

Questions about Mega Backdoor Roth and and in-plan Roth rollover Posted: 26 Feb 2020 05:52 PM PST I was planning to contribute to a Roth IRA this year but realized that my overtime pay + signing bonus would probably push me over the limit to make Roth IRA contributions. After a bit of googling, I came across the mega backdoor roth which I think I understand, but am not entire sure of. I plan to max out my Roth 401(k) and also make 10% (max allowed by my plan) after-tax contributions to my 401(k). Every quarter or so, I will submit an In-Plan Roth Rollover Request form to move my after-tax contributions into my Roth 401(k). First I went through my plan's documentation to make sure all these steps were possible, and they do seem to be. Here are some relevant excerpts: You may elect to make After-tax contributions to the ________ 401(k) Plan at any time. After-tax contributions generally can be from percent to 10 percent of eligible pay. If your pay consists of regular pay and commission pay, you designate one After-tax contribution rate that applies to regular pay and commission pay combined. While After-tax contributions are not subject to the annual 401(k) contribution limit, they are subject to other IRS contribution limits. Special tax advantages are given to 401(k) plans to encourage you to save. To help ensure that the money is there when you need it for retirement, current tax laws generally restrict withdrawals during your working years. However, you can withdraw all or part of your After-tax contributions (and related earnings) and/or your rollover contributions (and related earnings) if you are still employed by _________. You may make up to four withdrawals of each type per year. The minimum withdrawal is generally $1000. You cannot roll over a distribution to a designated Roth account in another employer's plan. However, you can roll the distribution over into a designated Roth account in the distributing plan. If you roll over a payment from the distributing plan to a designated Roth account in the plan, the amount of the payment rolled over (reduced by any after-tax amounts directly rolled over) will be taxed. However, the 10% additional tax on early distributions will not apply (unless you take the amount rolled over out of the designated Roth account within the 5-year period that begins on January 1 of the year of the rollover). The questions I have are: Is the procedure I laid out for the mega backdoor roth correct? Am I correct in concluding that my company's 401(k) policies will allow me to execute the mega back door roth? Will the amount I rollover from my after-tax contributions to my Roth 401(k) count towards my employee contribution limit? For example, if I contribute 19,500 to my Roth 401(k) and 10,000 as after-tax contributions over the course of the year. By the end of the year, I'd have rolled over all my after-tax contributions into my Roth 401(k) for a total of 29,500 (excluding gains). Would this mean I have exceeded the annual 19,500 employee contribution limit to my Roth 401(k)? I assume not, because otherwise this whole post is pointless but just wanted to check. In the above example, if only 19,500 would count towards my employee contribution limit, how would the IRS know that I have only contributed 19,500 and not 29,500? I assume my plan provider would inform them? Is there a limit to the number of times I can roll-over from my after-tax contributions to my Roth 401(k). I do not see any limits in my plan's documentation but wanted to check whether the IRS imposed any such limits. Are there any other questions I might want to my employer/plan provider before going ahead with the mega backdoor roth? Thanks a bunch in advance for any help. This is my first job so I'm not very familiar with the tax process in general but I'm trying to learn. submitted by /u/MikeDunleavy [link] [comments]

Weekly Self-Promotion Thread - February 26, 2020 Posted: 26 Feb 2020 12:08 AM PST Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. submitted by /u/AutoModerator [link] [comments]

Adjusting the length of time for the 4% rule Posted: 26 Feb 2020 07:37 AM PST I've finally hit a point where I see a flicker of light at the end of the tunnel. I feel pretty confident that I know the age I will be able to move on from work (if I want to). Most info I see about the 4% rule says that it will last 30 years. But if I'm retiring early, isn't it understood that I will need it to last longer than 30 years? A recent bit of info I heard recently is that life expectancy is increasing about 4 months every year. Given that and the thought that I may be retiring at age 50, I'm pretty confident that I will live quite a bit longer than age 80. I realize that I can adjust withdrawals down in percentage to extend the time, but I'm curious of this sub's thoughts. Edit: Curious why the post is being downvoted like mad. Did I trigger some people? submitted by /u/arcarsination [link] [comments]

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