2017 retirement plans

[quickpic007]

What are your retirement plans as of 2017?

I would like to at least scale back to 30 hours retail but am unsure of when to do it.
I sway between setting the date using age/networth/child situation.

Id like to scale back when I hit 1 million net worth but I think lots of rph here have passed that and still work full 40 hrs.

Also what are most of you thinking for college fund? I am a staunch proponent for covering child full tuition.

How are y'all looking at this

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[BMBiology]

What is your age? Networth? Child situation?


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[quickpic007]

What is your age? Networth? Child situation?


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30 yrs old, close to 800K, No kids currently but will have 1-2 within 3 yrs.
Live in rural low tax area, probably will keep it that way

Please share your wisdom, you have been right on so many other issues on here!! What is the BMB plan for retirement ?

 

[bulldog1123]

30 yrs old, close to 800K, No kids currently but will have 1-2 within 3 yrs.
Live in rural low tax area, probably will keep it that way

Please share your wisdom, you have been right on so many other issues on here!! What is the BMB plan for retirement ?

What age did you become a pharmacist and do you mind me asking what did you do to get your net worth that high? I would be highly surprised if you got there with just your salary alone.

 

[quickpic007]

What age did you become a pharmacist and do you mind me asking what did you do to get your net worth that high? I would be highly surprised if you got there with just your salary alone.

Became Rph 4 yrs ago. I graduated with no debt and my family gave me a head start-my rx school total was like only 70 K. It is surely not from salary alone. I will admit I got a sizable sign on bonus in 2013 (retail). In 2015 and 2016 I worked a lot of overtime (non-CA) 160K+ income those yrs. The usual investments and not wasting money on stuff. I was also working in a decently paid industry before and during RX school

 

[BMBiology]

30 yrs old, close to 800K, No kids currently but will have 1-2 within 3 yrs.
Live in rural low tax area, probably will keep it that way

Please share your wisdom, you have been right on so many other issues on here!! What is the BMB plan for retirement ?

I am also thinking about retiring early! Before I do, I must accomplish these goals:

(1) stay healthy (your health is your most important asset)
(2) have paid off the house (peace of mind)
(3) income generated from the stock market = yearly expense

This should buy a smile to your face:

You can make up to $75 k a year from work (married couple) and pay zero long term capital gain tax. So if you have $500 k in the stock market and assuming historical 7% return rate, you would make $500 k x 0.07 = $35 k a year, tax FREE (may have to pay state income tax in states like California but not much).

You can also work part time and max out your 401 k ($18 k in 2017). This would reduce your tax liability. Also, state income tax and property tax = tax deduction (not if you make a lot of money).

If you want some safety net, I would save 5-7 years in expenses just in case the stock market crash (and it will).

There is so much more to life than just working 8 to 5. How about hiking on a Monday morning and going to the beach on a Friday afternoon? There are so many things you can do for free. Screw the big house, the nice car, the fancy vacation. You got time and that is something you can't just buy.


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[Momus]

30 yrs old, close to 800K, No kids currently but will have 1-2 within 3 yrs.
Live in rural low tax area, probably will keep it that way

Please share your wisdom, you have been right on so many other issues on here!! What is the BMB plan for retirement ?

There is a difference between having 800k networth (all asset- all liabilities) all in stocks and 500k house paid off + 300k stocks. The latter, you have to work longer before you can retire. General rule is you can withdraw 4% in perpetuity without reducing principal.

So, if you want to withdraw say $80k/yr until you die, you need $2M liquid savings.

 

[ldiot]

I am also thinking about retiring early! Before I do, I must accomplish these goals:

(1) stay healthy (your health is your most important asset)
(2) have paid off the house (peace of mind)
(3) income generated from the stock market = yearly expense

This should buy a smile to your face:

View attachment 217339

You can make up to $75 k a year from work (married couple) and pay zero long term capital gain tax. So if you have $500 k in the stock market and assuming historical 7% return rate, you would make $500 k x 0.07 = $35 k a year, tax FREE (may have to pay state income tax in states like California but not much).

You can also work part time and max out your 401 k ($18 k in 2017). This would reduce your tax liability. Also, state income tax and property tax = tax deduction (not if you make a lot of money).

If you want some safety net, I would save 5-7 years in expenses just in case the stock market crash (and it will).

There is so much more to life than just working 8 to 5. How about hiking on a Monday morning and going to the beach on a Friday afternoon? There are so many things you can do for free. Screw the big house, the nice car, the fancy vacation. You got time and that is something you can't just buy.


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Lol he's a pharmacist and wife is an MD, they will pass the 75k income even if he completely retires.

 

[PAtoPharm]

For the kid's college tuition, just tell them to apply for the Pell grant. Virtually everyone here in GA (even people from families who can afford to pay for it) applies for it and apparently receives it. Students also get living expenses money every semester and can fail multiple classes at no penalty (I.e., gov't pays for them to retake them). None of this money ever has to be paid back

 

[pezdispenser]

- I probably won't quit pharmacy completely because I like my jobs. I have a very easy full time job reviewing prescriptions from home, no customer contact, full benefits. And a per diem job at a hospital to get out and meet people, and keep my clinical skills up to date. In total I gross about $165k which is too much to give up. But I have been trying to reduce my FT job to 30 hrs/wk while retaining full benefits, but the company has been too busy to do it.

- A big expense is health insurance. My parents had to buy it when they were 64 due to the ACA and it was $400-600/mo per person for pretty crappy $5k deductible plans.

- I definitely recommend having a paid off house. It takes care of your biggest expense and 'need'. Now I just pay about $450/mo for property tax and insurance, and $550 for HOA and utilities.

- NW 450k house, 400k stock, bonds, cash = 850k. Now looking to invest about 50-70k/yr in the stock market, and spend the rest to have some fun.

 

[Nguyen2017]

I am also thinking about retiring early! Before I do, I must accomplish these goals:

(3) income generated from the stock market = yearly expense

If you want some safety net, I would save 5-7 years in expenses just in case the stock market crash (and it will)


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So when stock market crash, you'll have go back to work to earn enough money to put in stock market to generate an amount = yearly expense!?
I wonder how long it'll take.

 

[BMBiology]

So when stock market crash, you'll have go back to work to earn enough money to put in stock market to generate an amount = yearly expense!?
I wonder how long it'll take.

No.

You don't have to totally stop working. You can work 2 days a week ($55 x 8 x 2 x 52 = $46 k annual salary). You and your wife can also max out your 401 k/IRA which further reduce your tax liability.

When the stock market crash, you still have your salary and your 5-7 years of living expenses. Gains from the stock market is just extra gravy.

I don't think many people get it especially working professionals. We don't need that much money to live somewhat comfortable once the house has been paid off. Reduce your tax liability and living cost is the key to an early retirement.


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[Nguyen2017]

Oh, I thought retirement = stop working totally.
If you can reduce working hours, meaning work part time, you should do it at any age, especially when the house is paid off.
You should never stop working totally if you're not 67 y/o yet IMO because it may affect your health when you're so free every day and don't have any schedule to stick with at all.

 

[Incis0r]

30 yrs old, close to 800K, No kids currently but will have 1-2 within 3 yrs.
Live in rural low tax area, probably will keep it that way

Congrats on your awesome success!

You should never stop working totally if you're not 67 y/o yet IMO because it may affect your health when you're so free every day and don't have any schedule to stick with at all.

This is an important and very valid point you brought up. There are lots of stories of people who retire but they don't plan out what they want to retire TO.

Their entire social lives, etc. was built around work, so when they take that away from their schedules, it becomes an issue as they get bored sitting at home.

I like what was said earlier in the chat about hiking on Monday mornings, etc. if you have a plan for what you're retiring to, then you're in a good position.

 

[quickpic007]

I am also thinking about retiring early! Before I do, I must accomplish these goals:

(1) stay healthy (your health is your most important asset)
(2) have paid off the house (peace of mind)
(3) income generated from the stock market = yearly expense

There is so much more to life than just working 8 to 5. How about hiking on a Monday morning and going to the beach on a Friday afternoon? There are so many things you can do for free. Screw the big house, the nice car, the fancy vacation. You got time and that is something you can't just buy.

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Lots to think on for me here, I'm renting as not 100% sure will stay in this city. Can easily buy cash home in all cities I am debating moving to (Max 300 K, more likely 150-200K). Been traveling and yes, screw fancy vacation unless its subsidized from cc points. I feel most retail jobs wear on the health so part time is needed!!

There is a difference between having 800k networth (all asset- all liabilities) all in stocks and 500k house paid off + 300k stocks. The latter, you have to work longer before you can retire. General rule is you can withdraw 4% in perpetuity without reducing principal.

So, if you want to withdraw say $80k/yr until you die, you need $2M liquid savings.

Been thinking I want to do a mix, get to 1 mil plus house paid. Should be quick if I go to Yuma!!!!!

Making me feel bad haha. Not sure of my exact net worth, but have probably 100K in retirement, own my car, 30K emergency fund, and 10K in checkings 15K in stocks, No kids, only debt is spouses medical school loans and house.

Granted, we had a lot of major expenses (buying first house and wedding last year) that slowed my cash accumulation.

Shoot medical school will blow past me haha dont you worry!

Congrats on your awesome success!



This is an important and very valid point you brought up. There are lots of stories of people who retire but they don't plan out what they want to retire TO.

Their entire social lives, etc. was built around work, so when they take that away from their schedules, it becomes an issue as they get bored sitting at home.

I like what was said earlier in the chat about hiking on Monday mornings, etc. if you have a plan for what you're retiring to, then you're in a good position.

Thanks! Good to see new opinions over here on RX forum!!

 

[BMBiology]

Oh, I thought retirement = stop working totally.
If you can reduce working hours, meaning work part time, you should do it at any age, especially when the house is paid off.
You should never stop working totally if you're not 67 y/o yet IMO because it may affect your health when you're so free every day and don't have any schedule to stick with at all.

You can totally stop working if you have a high risk tolerance. Depending on the stock market for your income is nothing new. That is the same thing as depending on your 401 k during retirement. I do think you should have 5-7 years of living expenses if you do so you wouldn't have to sell your stocks when they are down.

Most people retire in their 60s so they don't have the energy to be active and to travel. If you retired in your 30s, you can pick up a side gig here and there. You can do things that you enjoy because making money is no longer your primary purpose. By staying active and by not constantly working, you would reduce your healthcare cost and you may add 5-10 years to your life.

Just think about posting pics on FB of you hiking, surfing and enjoying life while your friends are at work! That is worth something right?! Lol


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[wagrxm2000]

I am also thinking about retiring early! Before I do, I must accomplish these goals:

(1) stay healthy (your health is your most important asset)
(2) have paid off the house (peace of mind)
(3) income generated from the stock market = yearly expense

This should buy a smile to your face:

View attachment 217339

You can make up to $75 k a year from work (married couple) and pay zero long term capital gain tax. So if you have $500 k in the stock market and assuming historical 7% return rate, you would make $500 k x 0.07 = $35 k a year, tax FREE (may have to pay state income tax in states like California but not much).

You can also work part time and max out your 401 k ($18 k in 2017). This would reduce your tax liability. Also, state income tax and property tax = tax deduction (not if you make a lot of money).

If you want some safety net, I would save 5-7 years in expenses just in case the stock market crash (and it will).

There is so much more to life than just working 8 to 5. How about hiking on a Monday morning and going to the beach on a Friday afternoon? There are so many things you can do for free. Screw the big house, the nice car, the fancy vacation. You got time and that is something you can't just buy.


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Where were you when I had those idiots arguing with me that this wasn't real.

 

[BMBiology]

Where were you when I had those idiots arguing with me that this wasn't real.

What thread? Post link


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[MatCauthon]

Stock and options market is my avenue so far. Tripled my account last year and did very good the year before that. Options are very good as well because you can make money in a down market or a non-trending market. I'm super aggressive as a momentum trader, but I'm also trading conservative options strategies that can net 15% annually.
Want to get at least 1 million in my trading account before I consider semi-retiring-- Once I get my account size close to 1 million I'm going to be much more conservative. As Cramer says,'You only need to make your money once.'

Also diversify-- we have 2 side businesses, are invested in some real estate, and I'm working two pharmacy jobs.

 

[Incis0r]

Thanks! Good to see new opinions over here on RX forum!!

Thank you for your warm welcome

Lots to think on for me here, I'm renting as not 100% sure will stay in this city. Can easily buy cash home in all cities I am debating moving to (Max 300 K, more likely 150-200K). Been traveling and yes, screw fancy vacation unless its subsidized from cc points. I feel most retail jobs wear on the health so part time is needed!!

This is an awesome plan. You've done a fantastic job cutting your expenditures (usually, housing is one of the largest bills, but by paying cash, you eliminate most of the bill excl. utilities, property taxes, etc.).

Been thinking I want to do a mix, get to 1 mil plus house paid. Should be quick if I go to Yuma!!!!!

Would you operate on a 4% SWR, or less since you're so young?

You can totally stop working if you have a high risk tolerance. Depending on the stock market for your income is nothing new. That is the same thing as depending on your 401 k during retirement. I do think you should have 5-7 years of living expenses if you do so you wouldn't have to sell your stocks when they are down.

Absolutely this. Also, I loved your quote - "You got time and that is something you can't just buy."

 

[Nguyen2017]

Stock market is not guaranteed. Your luck depends all on when you have cash available and when you enter the market.
The retirement account is less risky and of course has less return.

 

[pezdispenser]

Where were you when I had those idiots arguing with me that this wasn't real.

What thread? Post link

I'll post the link because I still stand by what I said, and wagrxm2000 is potentially leading people astray with his erroneous argument to forgo the Roth IRA. It starts here:
The Investment Thread (stocks, bonds, real estate, retirement, just not gold)

Everyone said to max out your 401k at $18k/yr. The dispute was over what to do beyond that. Yes, you could buy stocks and hold them until you quit your job, then take 0% long-term capital gains tax up to $75k (married). In fact, I do this with my parents' portfolio and they paid just $1,000 in taxes last year. But the government can change this at any time and I'm pretty sure that if the Democrats get into power at some point in the future before you retire, they will remove or increase the capital gains tax. You will also have to hold on to the stocks and not sell them for 10-30 years while you are working, otherwise if you do, you will have to pay taxes in the short-term (28%) or long-term (15%) tax bracket on top of your salary.

The other option after maxing out your 401k is to put $5,500 in a Roth IRA. This is the same after-tax money that you would've used to buy stocks in the above scenario. You do not pay any additional taxes when you put it into a Roth. But the difference is all gains in the Roth are tax free. You can even setup a brokerage account in your Roth and trade stocks and options, all tax free. So it's pretty much a no-brainer to do this over the above option of putting it in taxable and hoping that the 0% long-term capital gains tax bracket will still be there when you retire. $5,500/yr doesn't sound like much, but I've built up my Roth to $78k so far. And I do plenty of taxable investing on top of all this so if I can get 0% long-term tax, that'll be good. If not, oh well, I used every tax advantaged option available.

 

[Nguyen2017]

You will also have to hold on to the stocks and not sell them for 10-30 years while you are working.

Wow 10-30 years. People can hold on to one stock for that long?
I wonder which stocks can ~80% guarantee a return rate of 7% because I'm planning to put ~30k/year for the next only 3 years in stocks and is thinking of holding it for 20 years (unless I use it to pay my loans.)
I'm new to stock market but have to do it because I don't want to hold the cash.
We're making 70k/year after having 18k in 410k and 11k in our two IRAs . So we can actually need to hold it for one year to avoid tax on short term capital gain. But who knows in the future if we make more than 75k...
I probably will check out your link above to learn more.

 

[Momus]

Wow 10-30 years. People can hold on to one stock for that long?
I wonder which stocks can ~80% guarantee a return rate of 7% because I'm planning to put ~30k/year for the next only 3 years in stocks and is thinking of holding it for 20 years (unless I use it to pay my loans.)
I'm new to stock market but have to do it because I don't want to hold the cash.
We're making 70k/year after having 18k in 410k and 11k in our two IRAs . So we can actually need to hold it for one year to avoid tax on short term capital gain. But who knows in the future if we make more than 75k...
I probably will check out your link above to learn more.

Most people will see this, and thinking stocks aren't going anywhere, don't be that idiot. Which stocks? No guarantee, that's just stupid, but it looks like 10% nominal return for thousands of stocks for 94+ years, one of the oldest mutual fund. That's as much as guarantee you will see. Invest only if you can leave your money 10-30 years+. The only chart you need to keep in mind.

 

[BMBiology]

I'll post the link because I still stand by what I said, and wagrxm2000 is potentially leading people astray with his erroneous argument to forgo the Roth IRA. It starts here:
The Investment Thread (stocks, bonds, real estate, retirement, just not gold)

Everyone said to max out your 401k at $18k/yr. The dispute was over what to do beyond that. Yes, you could buy stocks and hold them until you quit your job, then take 0% long-term capital gains tax up to $75k (married). In fact, I do this with my parents' portfolio and they paid just $1,000 in taxes last year. But the government can change this at any time and I'm pretty sure that if the Democrats get into power at some point in the future before you retire, they will remove or increase the capital gains tax. You will also have to hold on to the stocks and not sell them for 10-30 years while you are working, otherwise if you do, you will have to pay taxes in the short-term (28%) or long-term (15%) tax bracket on top of your salary.

The other option after maxing out your 401k is to put $5,500 in a Roth IRA. This is the same after-tax money that you would've used to buy stocks in the above scenario. You do not pay any additional taxes when you put it into a Roth. But the difference is all gains in the Roth are tax free. You can even setup a brokerage account in your Roth and trade stocks and options, all tax free. So it's pretty much a no-brainer to do this over the above option of putting it in taxable and hoping that the 0% long-term capital gains tax bracket will still be there when you retire. $5,500/yr doesn't sound like much, but I've built up my Roth to $78k so far. And I do plenty of taxable investing on top of all this so if I can get 0% long-term tax, that'll be good. If not, oh well, I used every tax advantaged option available.

Here is my take:

First, max out your 401 k and HSA.

If you are planning to retire within the next few years, use your money and buy after-tax index funds. The major disadvantage of a ROTH IRA is you need to hold on to it for a long time before you can cash out without paying any penalty. Since you are not working, you can sell your after-tax index funds any time and still pay zero tax (just like ROTH IRA).

Just a side note....nothing is certain. If you are looking for certainty in life then early retirement is not for you. It takes a lot of balls to walk away from a $130,000/year plus benefits career.


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[wagrxm2000]

I'll post the link because I still stand by what I said, and wagrxm2000 is potentially leading people astray with his erroneous argument to forgo the Roth IRA. It starts here:
The Investment Thread (stocks, bonds, real estate, retirement, just not gold)

Everyone said to max out your 401k at $18k/yr. The dispute was over what to do beyond that. Yes, you could buy stocks and hold them until you quit your job, then take 0% long-term capital gains tax up to $75k (married). In fact, I do this with my parents' portfolio and they paid just $1,000 in taxes last year. But the government can change this at any time and I'm pretty sure that if the Democrats get into power at some point in the future before you retire, they will remove or increase the capital gains tax. You will also have to hold on to the stocks and not sell them for 10-30 years while you are working, otherwise if you do, you will have to pay taxes in the short-term (28%) or long-term (15%) tax bracket on top of your salary.

The other option after maxing out your 401k is to put $5,500 in a Roth IRA. This is the same after-tax money that you would've used to buy stocks in the above scenario. You do not pay any additional taxes when you put it into a Roth. But the difference is all gains in the Roth are tax free. You can even setup a brokerage account in your Roth and trade stocks and options, all tax free. So it's pretty much a no-brainer to do this over the above option of putting it in taxable and hoping that the 0% long-term capital gains tax bracket will still be there when you retire. $5,500/yr doesn't sound like much, but I've built up my Roth to $78k so far. And I do plenty of taxable investing on top of all this so if I can get 0% long-term tax, that'll be good. If not, oh well, I used every tax advantaged option available.

I'm glad you agree with me now. However, you still should be converting tax free. It seems what you are missing is the whole you invest your last dollar earned but you take out your first.

The Great Roth Controversy - Go Curry Cracker!

Never Pay Taxes Again - Go Curry Cracker!

Stocks — Part XX: Early Retirement Withdrawal Strategies and Roth Conversion Ladders from a Mad Fientist

I don't have my links anymore so I hope these are correct.

The point is you live off your dividends and slowly convert to a roth. Yes things can change but you should be investing the extra money anyways so you'd still break even if the rules change.

Side note, anyone who thinks a dollar invested today will earn 10% annually in the next forty years is a fool. Try 4 to 5%.

 

[Momus]

I'm glad you agree with me now. However, you still should be converting tax free. It seems what you are missing is the whole you invest your last dollar earned but you take out your first.

The Great Roth Controversy - Go Curry Cracker!

Never Pay Taxes Again - Go Curry Cracker!

Stocks — Part XX: Early Retirement Withdrawal Strategies and Roth Conversion Ladders from a Mad Fientist

I don't have my links anymore so I hope these are correct.

The point is you live off your dividends and slowly convert to a roth. Yes things can change but you should be investing the extra money anyways so you'd still break even if the rules change.

Side note, anyone who thinks a dollar invested today will earn 10% annually in the next forty years is a fool. Try 4 to 5%.

Lol still debating on Roth vs traditional... Traditional wins if you HAVE to choose and don't have money invest in both. We don't have to choose. Pez talked about investing in both, not just one vehicle. No one here is talking about choosing which one is better, we do both. I do the same thing for years. Picking one only is for weaklings, I max traditional 401k 18k, Roth IRA 5.5k (in addition to after tax investing).

 

[Nguyen2017]

Lol still debating on Roth vs traditional... Traditional wins if you HAVE to choose and don't have money invest in both. We don't have to choose. Pez talked about investing in both, not just one vehicle. No one here is talking about choosing which one is better, we do both. I do the same thing for years. Picking one only is for weaklings, I max traditional 401k 18k, Roth IRA 5.5k (in addition to after tax investing).

Is there one called traditional IRA, 5.5k, before tax?

 

[Momus]

Is there one called traditional IRA, 5.5k, before tax?

Not, if you max your 401k, you can't take full tax deduction if you do that. The contribution to trad IRA is non tax deductible if you max out your trad 401k.

You can contribute to traditional IRA and take the tax deduction if you haven't maxed out 401k but most people here have jobs so you have access to trad 401k (same as trad IRA just higher limit; it's better so you can defer 18k from taxes vs. 5.5k). We do what's called $5.5k backdoor ROTH IRA on top of maxing 401k.

 

[Nguyen2017]

Not, if you max your 401k, you can't take full tax deduction if you do that. The contribution to trad IRA is non tax deductible if you max out your trad 401k.

You can contribute to traditional IRA and take the tax deduction if you haven't maxed out 401k but most people here have jobs so you have access to trad 401k (same as trad IRA just higher limit; it's better so you can defer 18k from taxes vs. 5.5k). We do what's called $5.5k backdoor ROTH IRA on top of maxing 401k.

Oh I see.
No wonder Turbo Tax recommended that I should open traditional IRA this year. I just did what it recommended and didn't pay attention that I didn't put enough 18k in 401k this year. It didn't recommend this in the previous year since I put 18k in 401k. Hah!
(I tried to practice to trade some stocks and don't want to have the hassle of filing tax so I opened a Roth IRA and put 5.5k there each year. I also like it because I can take the principal out any time I need.)

 

[pezdispenser]

Here is my take:

First, max out your 401 k and HSA.

If you are planning to retire within the next few years, use your money and buy after-tax index funds. The major disadvantage of a ROTH IRA is you need to hold on to it for a long time before you can cash out without paying any penalty. Since you are not working, you can sell your after-tax index funds any time and still pay zero tax (just like ROTH IRA).

You can withdraw your original contributions to a Roth at any time tax free and penalty free. You can also make penalty free, but taxed on earnings, withdrawals for certain reasons such as:
- $10k for first-time home buyers
- medical expenses >10% AGI or insurance when unemployed
- college education expenses for you, spouse, kids or grand kids

Publication 590-B (2016), Distributions from Individual Retirement Arrangements (IRAs)

I started a Roth in college so paid 0% taxes on the contributions, and did in fact cash it out tax free and penalty free to buy my first home. Might sound like a bad idea but it was in 2008 just before the stock market crashed so it worked out ok.

 

[pezdispenser]

Is there one called traditional IRA, 5.5k, before tax?

It's not just if you max out your 401k. If either you or your employer make ANY contribution to a 401k, then you don't get the tax deduction for a traditional IRA if your income is above these phase-out ranges: single $61-71k, married $98-118k.

You can still make a non-deductible contribution to a traditional IRA and then convert it to a Roth IRA tax free, which is commonly known as the 'back door Roth' procedure.

 

[wagrxm2000]

How is my point not getting through? You are paying at the highest bracket now compared to converting at 0 or a very low bracket later. You are losing a ton of money in the long run.

 

[Momus]

How is my point not getting through? You are paying at the highest bracket now compared to converting at 0 or a very low bracket later. You are losing a ton of money in the long run.

Damn you have a thick skull, backdoor Roth you don't pay tax when you contribute, compound for 30 yrs and you just enjoy the benefits of tax free money when you withdraw.

 

[BMBiology]

You can withdraw your original contributions to a Roth at any time tax free and penalty free. You can also make penalty free, but taxed on earnings, withdrawals for certain reasons such as:
- $10k for first-time home buyers
- medical expenses >10% AGI or insurance when unemployed
- college education expenses for you, spouse, kids or grand kids

Publication 590-B (2016), Distributions from Individual Retirement Arrangements (IRAs)

I started a Roth in college so paid 0% taxes on the contributions, and did in fact cash it out tax free and penalty free to buy my first home. Might sound like a bad idea but it was in 2008 just before the stock market crashed so it worked out ok.

Do you see how complex it is with all of these rules?

If you know you are going to retire early and you are not going to make much money from work, you can just invest and sell your stock any time you want and still pay nothing in taxes on the earnings. No age restriction. No penalty. No paperwork.

I stopped investing in ROTH IRA last year. I already know of a better way to pay no tax on the earnings without all of the complicated ROTH IRA rules


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[pezdispenser]

Do you see how complex it is with all of these rules?

If you know you are going to retire early and you are not going to make much money from work, you can just invest and sell your stock any time you want and still pay nothing in taxes on the earnings. No age restriction. No penalty. No paperwork.

I stopped investing in ROTH IRA last year. I already know of a better way to pay no tax on the earnings without all of the complicated ROTH IRA rules


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I'm ok with the complexity because at least I fully understand how it works, unlike some people...

Forgoing the Roth and investing in taxable accounts hoping to take 0% long-term capital gains is risky too. It only started in 2008 and they change tax brackets very frequently. Like I said, it's a prime target of the Democrats to eliminate this. Capital gains tax in the United States - Wikipedia

Anyway, I still invest $25-45k/yr in taxable as well, on top of $18k 401k and $5500 Roth, so I will be able to take advantage of the 0% long-term tax too, if it's still there.

 

[BMBiology]

I'm ok with the complexity because at least I fully understand how it works, unlike some people...

Forgoing the Roth and investing in taxable accounts hoping to take 0% long-term capital gains is risky too. It only started in 2008 and they change tax brackets very frequently. Like I said, it's a prime target of the Democrats to eliminate this. Capital gains tax in the United States - Wikipedia

Anyway, I still invest $25-45k/yr in taxable as well, on top of $18k 401k and $5500 Roth, so I will be able to take advantage of the 0% long-term tax too, if it's still there.

I don't think the democrats want to eliminate special treatment of capital gain tax for low income earners and senior citizens.

Anyways, back to early retirement. I still don't get why so many pharmacists in their 50s and 60s who graduated with no student loan debt but can't retire a little early. I see them working hard, standing for 8 hours and being stressed out. Is this the life you want?


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[PumpkinSmasher]

We max out two 457b tax deferred accounts (36k/year), one 403b account (18k/yr, including hospital match in there), 2 backdoor roth (11k/yr), one 529 account ($4500/yr), Dependent care account (5200k/yr), I have a defined benefit pension through employer, grandma gifts us 14k/yr and then we save fluctuating amount in after tax brokerage accounts.

I would like to move to part time in my 40s, we are both in our young 30s right now and enjoy our job/life balance

Both our parents have fairly significant real estate holdings, which may one day transition to us but not planning on it, future is uncertain.

 

[Nguyen2017]

Do you see how complex it is with all of these rules?

If you know you are going to retire early and you are not going to make much money from work, you can just invest and sell your stock any time you want and still pay nothing in taxes on the earnings. No age restriction. No penalty. No paperwork.

I stopped investing in ROTH IRA last year. I already know of a better way to pay no tax on the earnings without all of the complicated ROTH IRA rules


Sent from my iPhone using SDN mobile app

Anyways, back to early retirement. I still don't get why so many pharmacists in their 50s and 60s who graduatedwith no student loan debt but can't retire a little early. I see them working hard, standing for 8 hours and being stressed out. Is this the life you want?

Haha, I don't understand why pharmacists don't work less either. Maybe because they want big house, nice car, fancy vacation or really big networth.
I like to work enough to make 75k when I become a pharmacist.

 

[wagrxm2000]

Damn you have a thick skull, backdoor Roth you don't pay tax when you contribute, compound for 30 yrs and you just enjoy the benefits of tax free money when you withdraw.

Unless something has changed, that's a taxable event.

 

[pezdispenser]

Anyways, back to early retirement. I still don't get why so many pharmacists in their 50s and 60s who graduated with no student loan debt but can't retire a little early. I see them working hard, standing for 8 hours and being stressed out. Is this the life you want?

I dunno either, but I would guess maybe they were playing too much keeping up with the Jones's. Massive mortgage, kitchen remodel, country club and golf membership, Cadillac lease payments, kid's private school and college, monthly vacations, etc.

Personally, I'm looking for a good work/life balance. Find a nice easy job. I get Fri, Sat, Sun off, plus 6 holidays and 4 wks PTO. Then pay off all your debts and find a good balance between earning, spending and saving/investing.

 

[pezdispenser]

Unless something has changed, that's a taxable event.

No, that's where you're wrong. You make a non-deductible contribution to a traditional IRA and declare this on your tax return Form 8606. Then when you convert it to a Roth it is nontaxable.

Read the form. It comes out on Line 11: "This is the nontaxable portion of the amount you converted to Roth IRAs"
https://www.irs.gov/pub/irs-prior/f8606--2016.pdf

 

[wagrxm2000]

Once your kids are gone and your house is paid off, every pharmacist should be able to retire.

 

[wagrxm2000]

No, that's where you're wrong. You make a non-deductible contribution to a traditional IRA and declare this on your tax return Form 8606. Then when you convert it to a Roth it is nontaxable.

Read the form. It comes out on Line 11: "This is the nontaxable portion of the amount you converted to Roth IRAs"
https://www.irs.gov/pub/irs-prior/f8606--2016.pdf

Interesting, I've seen that wrong for awhile now.

 

[Nguyen2017]

You make a non-deductible contribution to a traditional IRA and declare this on your tax return Form 8606. Then when you convert it to a Roth it is nontaxable.

Read the form. It comes out on Line 11: "This is the nontaxable portion of the amount you converted to Roth IRAs"
https://www.irs.gov/pub/irs-prior/f8606--2016.pdf

so there are 2 kinds of contributions to traditional IRA, deductible and non-deductible.
Is there a limit of 5.5 k for the latter? Do you have to convert every year? Lol.
I thought everyone can do Roth IRA, meaning no income limit, so that people don't have to do the backdoor Roth, lol
I read somewhere and it said they're removing the income limit for Roth ira. Maybe I'm wrong.

 

[PumpkinSmasher]

What's a 357b account used for ?

403b and 457b work just like 401k. Hospital offers my wife a 403b to max out and then a top hat savings plan for all their physicians. Basically she gets 2 401k type tax deferred plans. Nice for bringing down the tax burden.

Boost Your Executive Benefits with a 457(b) Top Hat Plan | National Benefit Services

 

[quickpic007]

I don't think the democrats want to eliminate special treatment of capital gain tax for low income earners and senior citizens.

Anyways, back to early retirement. I still don't get why so many pharmacists in their 50s and 60s who graduated with no student loan debt but can't retire a little early. I see them working hard, standing for 8 hours and being stressed out. Is this the life you want?


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This is one of the most shocking thing i see as well, cannot be like that, must plan ahead!

Once your kids are gone and your house is paid off, every pharmacist should be able to retire.

Yes surely!!!! I'd like to help with a starter home too...

 

[pezdispenser]

so there are 2 kinds of contributions to traditional IRA, deductible and non-deductible.
Is there a limit of 5.5 k for the latter? Do you have to convert every year? Lol.
I thought everyone can do Roth IRA, meaning no income limit, so that people don't have to do the backdoor Roth, lol
I read somewhere and it said they're removing the income limit for Roth ira. Maybe I'm wrong.

Yes, here are the types and income limits:
- deductible Traditional IRA: single $62-72k, married $99-119k
- non-deductible Traditional IRA: no income limit
- Roth IRA: single $118-133k, married $186-196k

You can only contribute $5,500/yr total across any type of IRA.

The non-deductible Trad IRA is not really worthwhile to keep. You put in after-tax money, get no tax deduction, and earnings (not the original contribution) will be taxable on withdrawal. It is really only used as part of the backdoor Roth process to get around the income limit of the Roth. Yes, you do have to do it every year. But a single pharmacist's Adjusted Gross Income (doesn't include 401k, insurance), or married couple might make it under the limit, so if it is, just make a direct Roth contribution.