There are some folks out there who are enthralled by the idea of taxes. The idea of working on their tax return actually excites them every year. I’m far from being one of those people. Taxes… borrrrring! Unfortunately, love ’em or hate ’em, if you’re in the U.S., you’re stuck with doing a tax return every year. There’s a part of taxes though that I don’t really get. It’s the idea that if you get money back on your tax return, you did something wrong. And the higher your refund, the more your year was botched. This year we got around $5,000 on our tax return (between federal and state). That’s quite a bit more than we usually get back.
As I became a little more familiar with the idea of FIRE (financial independence / retire early), I needed to learn where I should be putting my money. And I’m not talking about the specific investments – I’m referring to the type of investment account. Terms like taxable, tax-deferred, and tax-free can make a huge difference in the outcome of your portfolio. When I started out, I didn’t understand just how much of a difference each of these accounts could make in the long run. Most of the articles you read or the standard investment advice you hear from planners on TV anticipates that you’ll be retiring at the traditional age… or even working for the rest of your life. Because of
Rule 72(t). The name sounds as boring as 401(k). And it should because it’s from the same place – the Internal Revenue Code. Both are part of the tax law that the IRS gets to govern. Coincidentally, both Rule 72(t) and 401(k) plans are pertinent to this post. I recently wrote a post about our FIRE plans titled The Roth IRA Conversion Ladder Dilemma. I talked about how we plan on using the ladder to access our tax-deferred accounts earlier than the traditional retirement age. The problem we ran up against is covering the 5-year gap in the meantime until we can access the funds. We need to have enough money in our taxable accounts to make that happen… and we
I’ve been a bit moody the past couple of weeks. I’ve been focusing a lot on trying to pinpoint our exact retirement date and I’ve been struggling. The problem all stems with the Roth IRA Conversion Ladder we plan to do. First off, if you’re on the path to FIRE (Financial Independence/Retire Early) and you’re not familiar with how a Roth IRA Conversion Ladder works, this could be important to you. It’s not the end-all-be-all solution, but the ladder is a method that many early retirees are able to use to make FIRE actually happen. You see, normally you don’t have access to your traditional 401(k) and other retirement accounts until 59½. This is a problem for young whippersnappers trying
Recently, I decided that I wanted a second opinion on my game plan. Although I’m pretty confident on how to make things work, I decided that this is important enough to warrant bringing in someone else to look everything over and give some unbiased input. So I recently hired a certified financial planner. I thought this would be a great opportunity to take you through the process from start to finish to give you a better idea if this is something that you might want to pursue for yourself. What is a Certified Financial Planner (CFP)? Anyone can say that they’re a financial planner or financial advisor. There’s not really a lot of governance on this term. However, to become a Certified
I recently realized that I have a number of loose ends out there from previous posts that my regular readers might be wondering about. So I thought I would take an opportunity to put out a post following up to hopefully tie up those loose ends a bit… Switching to an Accountant This was the first year I decided not to use TurboTax and go to an accountant. If you remember, I had three goals with this: Check over my work Get advice for how to structure things Provide help on future strategy planning I’ve since met with the accountant and I really liked the guy. He knows his stuff and he owns a rental property of his own. It was important for me to find someone