Financial Independence Daily FI discussion thread - Sunday, August 01, 2021 |
- Daily FI discussion thread - Sunday, August 01, 2021
- [META] This is /r/financialindependence, not /r/highsalarysaltiness
- 494k at 27, and Slowing Down on FI
- I missed out on $1.5 million in gains…
- Confused on when backdoor Roth IRA is worth it or not
- Covered-call ETFs completely changed the game for me when it comes to FIRE. Why aren’t they talked about more here and in other FIRE communities?
- 18 year old who has no idea about finances
- Should I rent or save up for a house? (RENT PRICES ARE INSANE)
- Need a sanity check on old 401k Rollover options - Roll to Roth now or new employer plan?
- 26M who just hit 150k. What now?
| Daily FI discussion thread - Sunday, August 01, 2021 Posted: 01 Aug 2021 02:02 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]  |
| [META] This is /r/financialindependence, not /r/highsalarysaltiness Posted: 01 Aug 2021 07:36 AM PDT TL;DR: We're all outliers for working towards FIRE, stop gatekeeping FIRE because of another person's salary/life not being realistic/relevant/representative for the general population.
All joking aside, we all know that there's been a lot of push back against the common techbro path to FI and milestone posts where people don't have college loans. But it's to the point where this is the top comment on a post right now: "My story is common and pretty straightforward" Has half a million dollars at 27. Lmao this sub is such a joke in response to "TLDR; Didn't pay for college. Good income for 4 years with <20k a year spend due to job perks and LCOL. Early investing and the recent bull market means I've pretty much doubled every dollar I've saved already." And where people have to put trigger warnings on their threads like "Disclaimer/Warning – I made my money in the tech industry with a higher than average wage. I know this is not fair and this triggers some people, please move on if you are not interested in on progress of a high wage-earner executing FIRE." A lot of criticism I've seen over the years is that these stories aren't realistic/relevant for the general population, incomes are unachievable/multiples higher than average incomes, that OPs had their college paid for... But retiring early itself is not something the average person does in the first place. FIRE isn't realistic/relevant for the average person. The average retirement date in the US is around 65 years old. A lot of users here are outliers just by our goals. So why criticize the validity of user's content due to their salary? Why gatekeep FIRE to only below X salary and X careers? Other people's successes don't diminish your own; the world isn't a zero sum game, their salary doesn't detract from yours. We're all just waging and saving for our own FIREs. Even /r/leanfire agrees: If you don't think a post is relevant or interesting, just ignore it. No need to post a comment to diminish another person's journey, even if you don't think it's an achievement. Disclaimer: I make $72k as a civil engineer. My FIRE journey is boring AF and will take a long ass time. I like reading other people's journeys as long as their charts are nice. [link] [comments]  |
| 494k at 27, and Slowing Down on FI Posted: 31 Jul 2021 10:18 PM PDT I was going to write this at the 500k mark but I have some free time now so why not. My story is common and pretty straightforward. My parents lived the American dream; they grew up poor in developing countries and found success through education and hard work in the US. As they were still poor when I was born, they instilled in me a lot of their values such as sensibility with money. I did well academically at school. For college, I had the opportunity to go to a big state school with a full ride scholarship that covered tuition, room and board for all 4 years. During college, I was the stereotypical shy engineering nerd with who played a ton of computer games, so living expenses were extremely low. I found an internship every summer as well so I graduated with ~20-25k net worth. I didn't know about FI until after college, so unfortunately before this point I had just been putting money in a savings account, with no IRA or brokerage. Post college, I wanted to do something more interesting, so I got a job with a company in oil and gas. I would spend two weeks on a drilling rig working 12 hrs a day, and then get two weeks off. I got a company truck/free gas, free phone/cell plan, housing, and an expense account for my food, office supplies, treating the rig crew to dinner etc while at work. There was almost no way for me to spend my own money at work. The pay was pretty good (90-100k a year), and I often volunteered to work during my two weeks off for extra pay. While the official schedule was 50% work days, 50% off days, I calculated I was working closer to 66%-75% of the year. For my two weeks off every month, I started traveling a lot. I wanted excitement and to see the world beyond the typical barren wasteland we were drilling for oil in. Although some months I had company training, or I visited my parents, I tried to travel as much as I could. I went mostly internationally; I'd look for cheap flights, or fly free with points. I'd even bank my days off to do 3-4 week trips. Traveling was pretty cheap since I stayed at hostels; $50 a day is more than enough for cheap destinations. Most trips were ~1-2k, although I did go to some expensive places like Hawaii and Switzerland. While I didn't track my finances that closely, I'd estimate annual spending at $15-20k a year during this period.
The rest of the money I made went into maxing out 401k/IRA/brokerage. I bought mostly VOO and VTI, with some smaller positions in a couple tech companies. I started getting bored around 2-3 years in. While I wasn't unhappy with my job, I also wasn't happy with it either. The novelty of traveling and meeting new people around the world started wearing off. I started wanting things money couldn't buy, like stability, permanence, a social life, relationships, and fulfillment. I wasn't learning anything new, or developing myself as a person, just doing the same things over and over again. I had estimated I could reach ~$1 million around 35 years old, which I considered the minimum "FI" number, but I didn't see the value in rushing so quickly towards FI at the cost of stagnating my life. I realized that for me, financial independence is not the end destination, but just something I want to achieve along the road to something greater. I ended up applying and getting into grad school, fully funded with a ~30k stipend, which I accepted. In a twist of fate, COVID hit, and I got laid off, just before the 4 year mark. Due to the layoff, I was fully vested in my 401k, and received a nice severance package a few months before I was due to resign anyways. Been in grad school for over a year now, it's way more work for a fraction of the pay, but I think it's the right decision so far. Continuing some slower progress towards FI while working on other parts of my life. Numbers: https://i.imgur.com/vN0OWYp.png Roth IRA: 55k Traditional IRA: 105k HSA: 2k Checking: 15k Brokerage: 315k TLDR: Didn't pay for college. Good income for 4 years with <20k a year spend due to job perks and LCOL. Early investing and the recent bull market means I've pretty much doubled every dollar I've saved already. [link] [comments]  |
| I missed out on $1.5 million in gains… Posted: 01 Aug 2021 08:35 AM PDT Over my 12 year career and on my path to FI, I have averaged around a $90,000 salary. I recently calculated how much I missed out on by paying off my student loans, saving up cash for a house, spending money on things I shouldn't have, etc. While we have done well, and we have been relatively diligent about investing early and often, I calculated how much we missed out on by not investing as aggressively as we could: We would have $1.5 million more in our portfolio! The recent bull market has been insane, and I could have put in a few hundred thousand more early on instead of paying down around 200,000 in student loans and saving up cash for a house (which we didn't end up buying). Sometimes kick myself for not pushing harder because I would already be financially independent. All in all, we are thankful for how things have turned out, and one can't change the past, but I can provide this information to help you young investors in the future. I base my benchmark against VTI/VXUS which is my portfolio (i'm not concerned with BTC or picking Amazon in 2010). This might be good motivation for those you investors who are thinking about buying a new car instead of investing. Today is very likely the best day to start investing aggressively. Time in the market gets the results. Best wishes on your path to FI! If you are young and reading this, the decisions you make now have a huge impact on your future. Invest early and often! Your future financially independent self will thank you 😊 [link] [comments]  |
| Confused on when backdoor Roth IRA is worth it or not Posted: 31 Jul 2021 06:45 PM PDT Hi good people of r/financialindependence I am on my FIRE journey, and have read books/etc, and I feel that I have a pretty solid grasp of most of the relevant concepts in pursuing financial independence. I make about 100k, and have the following investment vehicles: maxed out 401k, mandated school employee pension contributions, taxable brokerage account, and a high yield savings account. My wife and I make 300k combined gross, probably about $240k MAGI (as far as income limits on regular Roth IRA. So, my understanding is that my wife and I make too much combined to use the regular Roth IRA, but we can still do a backdoor Roth IRA of course. However, I'm a bit confused if it actually makes sense for me to do the backdoor Roth IRA. While I'll probably have some part-time income in my early retirement, I will almost assuredly be in a lower tax bracket than I am now (eg from 100k now, down to 50k income). My questions are...
TIA! [link] [comments]  |
| Posted: 01 Aug 2021 06:24 AM PDT For those of you who don't know what covered-call option ETFs are, they are normal ETFs that track an index but the fund managers write call options on the underlying holdings. They then use the premium they're paid for writing these and pay it back out to the holders of the ETF. This results in massive, but completely legit and consistent dividend payouts. The two most popular covered-call ETFs are QYLD and JEPI respectively paying 11.5% and 7.5% APY. Now it's not all perfect, since they're writing call options they need to sell the holdings every time they end up in the money. So the price of these ETFs while they track an index, do not actually grow in value. QYLD was about $24 seven years ago and is now about $22 today. They also charge higher expense ratios about .35-.65%. They also pay out monthly and the values fluctuate quite significantly. One month you can get a .5% APY and the next month get 1.5%. But the tax situation is really nice as well. The payouts are often considered "return of capital" meaning your cost basis will get reduced by the dividend payout, and you don't actually have to pay taxes on them until you sell or once your cost basis hits 0 then you'll need to pay ordinary income on it. The solution: never sell. The benefit here is you can hold these in your brokerage account since they're kinda tax advantaged already. So the reason these changed the game for me is because I was always focusing on retiring off a modest 3% you'd get from a traditional high dividend ETF. And obviously you can't go all in on these, it would still be good to have some cash to balance out the payout volatility and some growth assets to balance out the decreasing value of these over time. Maybe even reinvest some to keep the payouts increasing with inflation. But ultimately these ETFs have allowed me to cut my FIRE number by 66%. I now would only need a third of my original FIRE number to actually FIRE. Which for me means I've gone from retirement being 10-15 years away to only a couple of years away. I just really don't understand why they're not talked about more in FIRE communities. They're already incredibly popular in dividend/income focused financial areas. [link] [comments]  |
| 18 year old who has no idea about finances Posted: 01 Aug 2021 03:43 PM PDT I grew up in a semi poor environment. My family isn't very good with handling money. I will be receiving $4,500 a year to live off of. I plan on getting a job my sophomore year in college (I'm an incoming freshman). I wouldn't like to be financially independent one day but I have no idea how to do that. Advice? [link] [comments]  |
| Should I rent or save up for a house? (RENT PRICES ARE INSANE) Posted: 01 Aug 2021 03:36 PM PDT Hi all, I'm 21 years old and recently just got a job that'll pay around 100k/year (CAD). I currently only have ~50k saved up and I plan on adding as much as I can from my salary to my long term high conviction investment plays (TSLA, AAPL, PLTR, BNB, etc.) as well as a small portion (~10%) for more speculative cryptocurrencies (NANO, XRP). My goal is to be financially free to control my career/life by the age of 30. I currently have 0 living expenses, as I still live with my parents. I really want to move out, and start living my life without restrictions but I live in Vancouver (Canada) so rent and housing prices are insanely inflated. It would cost me at a minimum 18k-24k/year of rent money alone to move out. I'm seeking some advice on whether I should move out (rent) and enjoy my early 20's or live with my parents for another couple years, and buy a house. I would be grateful for any opinions/advice/tips, thanks in advance! [link] [comments]  |
| Need a sanity check on old 401k Rollover options - Roll to Roth now or new employer plan? Posted: 01 Aug 2021 10:16 AM PDT I'm starting a new job soon and am not sure on their 401k plan details- for purposes of this let's assume reasonable fees and investment options and will allow a rollover. I'm going to a F500 so I'd imagine it'll be fine. Currently a $6.5k pre-tax balance. I'm 25 y.o./single and safely in the 22% tax bracket whether I convert to a Roth IRA or not. I'm still able to contribute to a Roth IRA so I max it each year, but I'm wondering if it may be better to just roll the measly $6.5k of my old trad 401k into my Roth now and bite the 22% bullet? This way if I may have a higher trad 401k balance later, or pass the income thresholds for a Roth, I have less income pushing me into the next bracket on conversion when/if I do a backdoor. I confidently expect to be married and over the Roth threshold in 5-7 years. If I do a Roth conversion now from 401k -> my current Roth IRA would this work without opening me up to the pro-rata rule later? I'd imagine not, just want to make sure I have all the moving pieces right here. [link] [comments]  |
| 26M who just hit 150k. What now? Posted: 01 Aug 2021 02:42 PM PDT I graduated a couple years back, and lived at home through the pandemic. A combination of low expenses, a great job in tech (not development), and a ton of vested company stock have left me with $150k, split between my ETF, stock portfolio, and crypto. Outside of food and my gym, I don't really spend money on much at all. I don't drink, own a car, or have any other monetary vices. I'm moving to a high cost of living city next month (Toronto), and while rent will take a dent out of my income, I should still be able to save 1-2k a month. I've got no plans to buy a house anytime soon, and no idea where I'll end up in the next five years both career, relationship, and location wise. I want to travel a bunch and start a business, but that's all I know right now. Has anyone been in a similar situation where they have money, but have no clue what to do with it? After hitting 100k, I've become increasingly detached to the sum, and I'm not sure if that's normal. Just looking for some advice on what to do next. [link] [comments]  |
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