Financial Independence Daily FI discussion thread - Tuesday, March 02, 2021 |
- Daily FI discussion thread - Tuesday, March 02, 2021
- Pre-Retirement Glidepaths: How crazy is it to hold 100% equities until retirement? – SWR Series Part 43
- Anyone made a moved to a LCOL state to plan for long term financial goals?
- Simple Strategy to Minimize Taxes
| Daily FI discussion thread - Tuesday, March 02, 2021 Posted: 02 Mar 2021 02:00 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]  |
| Posted: 02 Mar 2021 05:28 AM PST Part 43 of Big ERN's SWR series is out now. Here is the conclusion: To answer the question from the post title: It's not crazy at all to keep 100% equities right until you retire! At least if you're planning an early retirement with 1) high contribution rates and 2) some flexibility about your retirement date. The 100% equities throughout would certainly be defensible if you find yourself in the middle of a bear market a few years before retirement. Then just keep the 100% equities and ride the subsequent bull market until you retire! Even if you apply some more risk aversion, you will certainly still start with a 100% equity allocation, but you'd likely walk that down over the last 5 or at least 2.5 years before retirement. Also quite intriguing is that the high initial equity weight is defensible even when considering that the S&P 500 is at or close to its all-time-high. So, for all of the folks out there who regularly make fun of me as the über-conservative retirement blogger and call me the Grinch of the FIRE movement, you all should take a positive and uplifting message away from today's post: Before retirement, I certainly endorse a very gutsy and high-risk approach to investing. Only when you get close to retirement you want to take it down a notch and walk down the equity portion to well below 100%. And when retired you definitely want to lower the withdrawal rate when equities are expensive! Full post here: https://earlyretirementnow.com/2021/03/02/pre-retirement-glidepaths-swr-series-part-43/ [link] [comments]  |
| Anyone made a moved to a LCOL state to plan for long term financial goals? Posted: 02 Mar 2021 02:55 PM PST Wife and I just moved back to Southern California from Houston, TX we were there for 5 years and now we are realizing that staying in CA will not enable for us to reach our long term financial goals. We've only been back in CA for 1 year and I just recently got laid off. The reality hit us, I'm in my late 40's and wife is mid 30s, we have two small kids. At this rate even after I am employed again, I don't think we could enjoy a reasonable life in CA at the same time save enough for the kid's college and MY retirement. So we're looking at moving back to Houston, TX where my wife's family is based. My family is here in CA. It's a difficult decision to make as we both love the lifestyle in CA (it's my home state) but on paper it makes more sense to move back to Texas. Maybe live in Austin instead of Houston. Just wanted to see if others here have gone through this sort of experience, maybe share some wisdom. [link] [comments]  |
| Simple Strategy to Minimize Taxes Posted: 01 Mar 2021 06:40 PM PST I (32M) wanted to check that my simple strategy for minimizing taxes will work. Right now wife and I have high income and only $30K annual expenses. We do not plan to have kids, and if we ever took a mortgage is would be on a small house in a LCOL area. We therefore expect annual expenses to stay well below $80K throughout our life. We are maxing our retirement accounts (401K and IRA) and investing an additional amount in index funds. We also have committed to donating, on average, more than we spend. Our basic tax strategy pre-FIRE: bundle donations and contribute to Traditional IRA over Roth From now on we are maxing our Traditional IRA rather than rolling over into a Roth IRA, so as to reduce taxes during our high earning years. We plan to bunch donations every 4-5 years and itemize, but will take standard deduction the rest of the time. Toward the end of our FIRE journey, if we enjoy our work enough to keep going, we may donate 60% of AGI to stay in a low tax bracket. Our basic tax strategy after FIRE: stay below the $80K income to get 0% long term capital gains tax After hitting FIRE, we plan to tap into our non-retirement account investments as needed but will pay 0% on long term capital gains since our total income should be well below the $80K threshold. Some of that income may be from hobbies or limited contract work. By staying well under $80K we could benefit from ACA healthcare subsidies. After we are ~62 and on Medicare, we may withdraw closer to $80K and use whatever is leftover after expenses to rebalance or donate. I ran the numbers and our RMD + SS after we are 72 shouldn't be higher than 80K. With no capital gains tax, we wouldn't normally benefit from a Roth IRA. We currently have ~$50K in Roth IRA, which we will save for later years. If we have a few expensive years later in life (e.g., high medical out of pocket, assisted living, etc) we can pull from our Roth (which should have grown 10x) without a tax burden. At death, we plan to leave our estate to charity. We shouldn't have over the 11M estate tax exemption limit since we will be donating to charity throughout our lives. Now that I've written it all down, it seems more complex! But it's simpler than a lot of the strategies that come into play if you need more than $80K a year. Thanks for any feedback. https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates [link] [comments]  |
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