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You’re missing the point because you’re too self absorbed, he can make it work if he wants to. Getting out of a high COL area is the first step, if that’s the situation the OP finds himself in.
Where does it say he has a family of 5?
He might not have said it in this thread but he does have a wife and 3 kids and just recently bought a more expensive house so moving soon most likely isn’t in the cards. People often live where they live because they like it
So i was thinking over the weekend and came up with this option:
My NW now is at 4.2M with 1.1M in brokerage (still invested in stocks....with about 650k of that tsla) and about 2.2M in 401k/IRAs.
I was thinking this.....what about if instead of quiting right away, or instead of going to part time with the same company, i worked until april or so, in order to save some cash (don't have any cash right now)....and max out the 19.5k 401k and get my 401k match (100% match!)....and then ask for 6 months sabbatical to end at the end of 2021. I would use my 1.5 month of vacation bank that I've built up and get a paycheck for 1.5 month and about another 5.5 month or so after that unpaid.
Then i can evaluate my financial situation at the end of 2021 and decide if it would make sense to go back full time, part time, or retire fully.
If my portfolio at the end of 2021 is significantly more, (up by about 1M-2M) then i would quit all together. If not, I'll decide then.
I would have to time it so that i make just enough to qualify for ACA discounts for 2021.....assuming i make 75k, my monthly aca insurance will be 500 a month which would be managable. I have to find out if the 75k is gross or after deductions like my 401k contributions.
What this plan gives me: time to do the things I'm itching to do (road trips, spend time with the little ones, garden, read, photography, explore a couple of small business ideas, etc)
Worst case scenario: my portfolio shrinks down to 0 and I'll go back to a cushy job making 175k a year.
Plans are evolving.....could use some help.
I'm meeting with a financial planner to give me some more ideas on Friday. Would love to have your thoughts on this plan.
Recap:
Currently 1M brokerage
2.3M IRAs
39. Family of 5.
No debt except mortgage.
College funds set aside for 3 kids and sufficiently funded.
Current salary 175k
Monthly expenses in retirement ~6500.
Current plan/options:
1. Max 401k and save till May 1 2021. Take 7 month sabbatical. To take a break and re-evaluate. If my portfolio is 800k-1.5M more by the end of the year, quit altogether. If portfolio is roughly the same level, go to part time (20 hrs) after jan 1. If potfolio down by jan 1, go back to working full time starting jan 1.
Keep income for the year below 122k to get.ACA healthcare discount.
2. Request to go to part time in May. Use vacation to take 3 months off to do some of the things i want to do. Go back to work part time after long vacation. Re-evaluate portfolio on jan 1 and decide if i can fully retire depending on portfolio size.
Healthcare through work....at about 500 a month (vs the current 250 a month)
3rd alternative??
Key point I've learned:
- if i keep my income below 122k, i can get ACA subsidy
- if income below 78k, long term capital gains and dividends are not taxed at the federal level. HUGE!
- i can definitely keep my income around 78k if inwithdraw about 100k a year (because some of the 100k will be poat tax principle....)
Any other important figures/limits to consider?
Which of the two options above is more logical? I was initially thinking about #1 but i now think #2 is better.
That 78k income limit for the 0% cap gains rate would include all taxable income, meaning capital gains would count towards it as well. So your IRA withdrawals that are taxable plus cap gains/dividend etc would all need to be under that number.
Also have you actually written out a budget? It’s seems odd your need is exactly the figure you quoted for 0 capital gains tax and its 44% of your current salary doable but seems like a huge drop off especially given doing this early in life
Why not pay off the mortgage to reduce the need to incur capital gains after retirement to make mortgage payments? You could knock down your expenses and build a little more wiggle room in the lower tax bracket.
Why not pay off the mortgage to reduce the need to incur capital gains after retirement to make mortgage payments? You could knock down your expenses and build a little more wiggle room in the lower tax bracket.
2 reasons:
1. Paying off the debt would mean having to sell 375k worth of stocks. Which would mean a huge tax bill.
2. My mortgage is 2.6%. I've made an avg of 31% annually over the past 10 years. That 375k will do much better than 2.6% (even ignoring tax benefits of the interest paid)
My expenses are very conservatively at 6500. It's more around 5000-5500 but I'm accounting for emergency amounts and other unknown stuff in the 6500.
For 2021, the 0% capital gains bracket for MFJ goes up to $80,800. Keep in mind that the capital gains bracket goes on top of the deduction (standard or itemized) you get. So if you're taking the MFJ standard deduction for 2021 of $25,100, your income can potentially go up to $105,900 without paying federal taxes if you structure it correctly (yours can probably go even higher with child tax credits, but I don't stay up to date on those amounts since I don't have kids).
I've been RE for nearly five years now - quit working at 43. The way I structure it is to keep my ordinary income (interest/non-qualified dividends/short-term capital gains/small RMD from an inherited IRA/traditional IRA to Roth IRA conversion are my ordinary income categories) under my itemized deduction total. Then, on top of that, I can add my long-term capital gains and qualified dividends that are in the 0% capital gains bracket. I end up making most of my decisions on IRA conversions and tax gain harvesting in mid-Dec, at which point I have a pretty complete picture of my income for the year.
Where I worked, as long as I worked one day in the month, my health insurance was covered for that month. So obviously I set my last day to be on the 1st of the month to take advantage of that. Early retirement has been wonderful, for me. My former boss actually just contacted me earlier this month asking if I'm ready to come out of retirement because he has a great job opening. Nope. I can't imagine going back to a work schedule after having all this freedom.
For 2021, the 0% capital gains bracket for MFJ goes up to $80,800. Keep in mind that the capital gains bracket goes on top of the deduction (standard or itemized) you get. So if you're taking the MFJ standard deduction for 2021 of $25,100, your income can potentially go up to $105,900 without paying federal taxes if you structure it correctly (yours can probably go even higher with child tax credits, but I don't stay up to date on those amounts since I don't have kids).
I've been RE for nearly five years now - quit working at 43. The way I structure it is to keep my ordinary income (interest/non-qualified dividends/short-term capital gains/small RMD from an inherited IRA/traditional IRA to Roth IRA conversion are my ordinary income categories) under my itemized deduction total. Then, on top of that, I can add my long-term capital gains and qualified dividends that are in the 0% capital gains bracket. I end up making most of my decisions on IRA conversions and tax gain harvesting in mid-Dec, at which point I have a pretty complete picture of my income for the year.
Where I worked, as long as I worked one day in the month, my health insurance was covered for that month. So obviously I set my last day to be on the 1st of the month to take advantage of that. Early retirement has been wonderful, for me. My former boss actually just contacted me earlier this month asking if I'm ready to come out of retirement because he has a great job opening. Nope. I can't imagine going back to a work schedule after having all this freedom.
Thats great. Happy for you!
And thanks for the info regarding the 105k limit. You're right. I knew that piece but hadn't bothered to.actually calculate it since our expwnse are currently around 70k tops.
Tell me more though....what are you doing in retirement to keep busy? I have a 1000 things i have in my mind...so i doubt ill be bored. What nw and portfolio size did you retire with? Feel free to message inatead of posting here if you wish. Thanka again! Very inspiring.
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