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@mathjak107 - this is off topic here, but glad to hear you are enjoying Bermuda. It is a wonderful place. My H grew up there and still has family so we visit often. April can still be a bit cool, but since you are from the east coast the weather is probably fine for you! What part of the island are you staying on?
We are staying near st george at a an all inclusive resort. All food and all the drinking you could want . To bad i hate the taste of drinks i stick to bloody mary's lol.
The weather is perfect . We did the crystal and fantasy cave tour earlier . Just amazing
So that means you either have a ton of money saved for retirement that is after tax, or there is a huge drop in retirement income from what you were making, right? My mistake was not saving enough in after tax accounts. It all went to tax deferred. I should have paid more in taxes when younger and at a lower rate, which was way before Roths came out.
Yes, our gross income will be less, but spending should be same or more if everything goes to plan.
The whole point is that contributions come off the top. If a person's "tax bracket" is 28%, either all of that contribution is getting a 28% deduction, or some is at 28% and the rest is at 15%. On the other hand, withdrawals start off at the bottom in years where there is no other income, so some of it is taxed at 0%, some at 15% (12% under new law), etc. So let's say a person who only has 401k money retires at 65 and defers SS until 70. All of their income will be pulled from the 401k for those five years. A couple could pull half a million over those five years and pay only about $44k in federal taxes, under the new law.
Of course, the whole ACA thing really muddies the water. Someone who wants to retire before Medicare should consider this. Currently Roth withdrawals don't count in calculating the credits, FWIW.
You have a pension, as I recall, which puts this tradeoff in an entirely different light. Unless you retire before your pension checks begin, none of your 401k withdrawals start off at the bottom.
We are staying near st george at a an all inclusive resort. All food and all the drinking you could want . To bad i hate the taste of drinks i stick to bloody mary's lol.
The weather is perfect . We did the crystal and fantasy cave tour earlier . Just amazing
My husband's family is on the other side of the island in Somerset. My daughter and her bf did the caves last summer (H and I have been many times before) when we were there for the America's Cup races. If you want an amazing fish sandwich the little cafe at the caves has the best ones on the island! Glad you are having nice weather.
Yes, our gross income will be less, but spending should be same or more if everything goes to plan.
The whole point is that contributions come off the top. If a person's "tax bracket" is 28%, either all of that contribution is getting a 28% deduction, or some is at 28% and the rest is at 15%. On the other hand, withdrawals start off at the bottom in years where there is no other income, so some of it is taxed at 0%, some at 15% (12% under new law), etc. So let's say a person who only has 401k money retires at 65 and defers SS until 70. All of their income will be pulled from the 401k for those five years. A couple could pull half a million over those five years and pay only about $44k in federal taxes, under the new law.
Of course, the whole ACA thing really muddies the water. Someone who wants to retire before Medicare should consider this. Currently Roth withdrawals don't count in calculating the credits, FWIW.
You have a pension, as I recall, which puts this tradeoff in an entirely different light. Unless you retire before your pension checks begin, none of your 401k withdrawals start off at the bottom.
You are assuming rates are going to stay the same, which is unlikely. I suspect they will be headed up when Trump's term is over..
You are assuming rates are going to stay the same, which is unlikely. I suspect they will be headed up when Trump's term is over..
Sure, it's anybody's guess. How high do you expect tax rates could go? Will they double from 2018? Triple? Rates would probably need to double (and then some more) for my deductible contributions to be a poor choice, and I think that's well beyond anything we should reasonably expect.
Granted, for a lot of people it's not an either/or decision. As I mentioned earlier, I switched over to Roth 401k recently because I expect we already have enough in deferred accounts to "fill up" the lower brackets during retirement. It's a bit of a guessing game, of course.
Through careful saving and planning, we managed to accumulate enough wealth to make us financially independent which allowed us to retire at age 37 and 34. When we retired we expected to have fun, but not this much fun!
We currently live in Port St. Lucie, Florida with our three wonderful children.
My wife and I had regular jobs working roughly 9 to 5 each day and we saved most of our paychecks. When we first started working after college, collectively we made well under $100,000 annually. When we quit working, our household income topped out around $150,000 annually. While working, we consistently pumped our savings into 401k’s, IRA’s, HSA’s, 529’s, and regular brokerage accounts. These investments grew enormously over roughly ten years and made us financially independent today.
I am wondering if anyone else on here retired much earlier than the traditional age.
Good for you, but hope you have at least 5 million in the bank?
Good for you, but hope you have at least 5 million in the bank?
Figure $100,000 x 50 years = 5 million.
As shown in his follow up post he has a 1.4 Million investment portfolio, paid off home, car, and no childcare expenses. I do not see their money running out since they only spend a fraction of their portfolio each year and seems to be keeping up to date in their in demand fields of IT and Accounting. I ran some simulations on the FIRECalc retirement calculator and do not see them ever running out of money with their annual spending adjusted for inflation each year and portfolio size.
Last edited by PSLCarPool; 04-17-2018 at 07:37 PM..
My wife and I retired at 53 and 55. We did pretty much the same thing. Until about 2000, we never made a lot of money but saved what we could. We sold our stock holdings in 2000 right before the dot.com collapse and paid off the house which worked out well.
Since we retired in 2013, everyone has told us that it cannot be done unless we had a trust or a rich uncle and the like. Of course, those folks never worked two jobs or lived a simple lifestyle.
It can be done. It will be five years since i retired in May.
Congrats. The market correction, recovery from 2008-9 has helped tremendously (for me at least) - as well as recovery of home values in my area (FL).
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