F.I.R.E. Thread

Matt

Administrator
Staff member
F.I.R.E. Financial Independence, Retire Early.

I see points and miles as a compliment to my approach to life- it makes sense to bolt these onto my foundation and get more out of life while focusing on my core goals. Financial Independence doesn't mean that you have to quit work and sit on a beach, it means that you CAN do that if you want. You can also start up your own business, take 10 years off to travel the world, or do whatever you want without any financial concerns.

To me, this must be a goal that everyone wants, but perhaps is ignored because it seems too far away. However, the journey of a thousand miles starts with a single step. I'll share some of my journey and hope you will too, and that we can reach the destination faster and happier together.

I pissed about in college, the topics and structured learning were not challenging enough for me. In the second year I only attended about 10 hrs over all semesters, I enjoyed hard work, and hard living. Despite working 70-80hrs a week I got into some debt, I think about $10-12K USD at the time.

I carried that debt for a good 6-7 years, paying off interest and fees but not hitting principal, and didn't shake off that debt until I started earning good money. My net worth went from -$10K to positive $50K in the first year of my new job in Japan.

I threw the $50K into the market and kept working hard, but I picked individual stocks and lost most of it. However, despite that dropping down considerably I earned more than enough to make up for it and push forward. This is why I am always saying stop picking stocks and get to work - there is so much money to be made from hard work. On my best day I was working a trade show in Singapore, walking booth to booth begging for business and got a call that I closed two huge deals for my company - the value was something like $300K. I kept walking the show, and begging for another 30 mins, then decided to call it quits and grab a beer with my team mates.

The most money I have made from a trade in the stock market is about $2K, and I have lost many times more than that.

When I came to the US I set up a company here, I had enough money to make it work. My solo efforts brought in 6 figure revenues and my costs were always below $10,000 per year, including renting an office. Despite the success of the business I walked away from it because I didn't feel the passion any more.

This might have been the first taste of FIRE. Or was it when I came to the US and decided to scratch build a company instead of get a job? I'm not sure..

I was my own boss, working my own hours in a very successful company, but I had issues with the ethical foundation of it, so walked away. Not unlike the feelings many lawyers experience too. There are two things you need in order to walk away from something like that - a positive net worth, and the ability to stare down your peers and say you don't want to buy into the rat race, this can include overly pushy parents and friends - luckily mine weren't like that.

As some of you might know, I am now studying to be a CFP. So I went from owning a successful business to walking away (setting up another in the interim) and going back to school. It might seem odd, but I am the type of person who doesn't want to lean on CPAs or CFPs for my own wealth management, and I also want to give back through knowledge.

I might well take a job again, as a peon, in order to learn the ropes, or I might just start my own planning firm from scratch - I am unsure. But either way I will be ready to work for 80+ hours a week, despite not needing to.

I'm not truly at a place I feel comfortable to say I am FIRE'd. I could retire now, but I would have to make lifestyle sacrifices, but I am far enough down the path to be able to walk away from a career, or a successful business if my heart isn't in it. Which is a wonderful feeling.

I'd like to start sharing more ideas about FIRE, and hearing your stories too - I couldn't give a crap about a First Class cabin if I had to go back to work on Monday.... So what do you say, are you with my on the real journey here?
 
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vasu

Level 2 Member
Heart touching story and yes i am with u for the FIRE , in fact has story similar to u regarding nationality and stocks , Miles n points will fade away but I am interested in Long term investments and early retirement strategies. I am in early 30's so can we discuss strategies according to age /salary/ personal goals . I am in the process of setting up a business so certainly will need professionals later on for financial services. Looking f award too more thoughts and ideas
 

MLH

Level 2 Member
My journey actually started at Bogleheads, where I'm a lurker. I read a thread there about which CCs people had and was shocked by someone's response that they had 20! Another poster mentioned that they must be a FT/FWer. From that post I started investigating CCs and MS on FT/FW/blogs which eventually led me to reselling. But CCs, MS, and reselling are just side shows compared to the bigger financial things like student debt, mortgages, and retirement planning.
 
I've a friend that's bought 20 houses (big and small) since 2002. He took a hiatus around 2007-2008 but kept on buying houses and this month, he has decided to quit work, take 6 months off and find something interesting to do.
 

TBB

Level 2 Member
Hey Matt, I came over here from your pissing match with Gary. To this day, that guy has never linked to me...for the record. So congrats for that. And it sure as hell it's not going to happen now lol.

I would like to throw in my few cents while I take a break from reading blogs wearing my TBB hat...

My way of reaching financial independence is remarkably simple...

Other than working hard of course, take EVERY opportunity the US govt's tax code gives you. Let me explain:

- Fully maximize the 401k contributions (yeah, all $17.5k starting the first year of work after college! Of course generous matching helps too!)
- Fully maximize a retirement plan for the self-employed starting the first year you have a profit! Which plan to use is not that relevant. THE KEY IS TO START AS SOON AS POSSIBLE FUNDING THE ACCOUNTS AS MUCH AS POSSIBLE.
- Fully take advantage of IRAs. (If under 50, contribute $5.5k in a Roth IRA...assuming you can not fully deduct a regular IRA)
- Fully take advantage of an HSA account if you have access to it at your company or open one yourself if employed. Treat it as a Retirement IRA account and do not draw from it, pay out of pocket for current healthcare expenses
- Make a target of how much you are going to put away for your kids' college expenses (this varies quite a lot obviously), decide on a path, and STICK TO IT EVERY YEAR. Mine has been to open a Coverdell Education Savings Account which allows a maximum contribution of $2k per child per year. In addition, fund a regular taxable account $600 per month ($300 for each of two kids) starting as soon as we got married. We did not invest in 529 Plans mainly because the Michigan 529 Plan sucked at the time (still does).

Work hard always. Saved like mad as always. We keep at it so we show our kids that working hard is expected, is noble and it leads to something very important as you stated: Having choices in life which is a WONDERFUL thing. You can do whatever you want and have no fear you will get fired or losing the Amazon link LOL.

I made sure the clients I worked with stayed on that path outlined above and most are millionaires now. It can be done! The key is to START EARLY! I have a favorite phrase I came up with: "The more (you invest), the earlier the better". Sounds corny but it's so true!

This is what you will do as a CFP. Of course investing is important. But without the discipline of sticking to a plan (assuming you do have savings habits) you will meet many like I have in their early 50s finally deciding to get serious about saving for retirement. I tell them "I am sorry, it's too late until you start eating noodles every day and we both know that is just not going to happen"...too painful! I wish them well.).

I wish I had more time to spend here man! This could be the next Flyertalk if KKR conducts surgery on it :)
 

Rick

Level 2 Member
I have been on and around Wall St. Since 1981. Absolutely, there is good money to be made, but I think it is prudent to stick to some very simple principles. It takes real money to make real money. It takes time, patience, and the guts to go against the crowd when the crowd is stampeding.

I think, like in ANY other profession, there are people of superior talent. I've done original stock research, managed accounts and beaten the market, but the amount of work it takes to do that successfully is way more than I care to do any more. So the key is finding a "team" of managers that I am comfortable with. My very own fantasy league, if you will.

Never buy a fund. Buy a manager.

Here are some things I like to learn about before I buy:
who is at the helm
how long their tenure has been
how they do in up and down markets
the velocity of the growth in assets under management
the concentration of assets (I like concentration)
how a particular style may fit with other assets I own

I try to find interviews with the manager. I like to learn about how they approach their discipline, and especially, how they "distance" themselves from the constant noise that makes up so much of the investment industry.
 

Matt

Administrator
Staff member
Hey Matt, I came over here from your pissing match with Gary. To this day, that guy has never linked to me...for the record. So congrats for that. And it sure as hell it's not going to happen now lol.

I would like to throw in my few cents while I take a break from reading blogs wearing my TBB hat...

My way of reaching financial independence is remarkably simple...

Other than working hard of course, take EVERY opportunity the US govt's tax code gives you. Let me explain:

- Fully maximize the 401k contributions (yeah, all $17.5k starting the first year of work after college! Of course generous matching helps too!)
- Fully maximize a retirement plan for the self-employed starting the first year you have a profit! Which plan to use is not that relevant. THE KEY IS TO START AS SOON AS POSSIBLE FUNDING THE ACCOUNTS AS MUCH AS POSSIBLE.
- Fully take advantage of IRAs. (If under 50, contribute $5.5k in a Roth IRA...assuming you can not fully deduct a regular IRA)
- Fully take advantage of an HSA account if you have access to it at your company or open one yourself if employed. Treat it as a Retirement IRA account and do not draw from it, pay out of pocket for current healthcare expenses
- Make a target of how much you are going to put away for your kids' college expenses (this varies quite a lot obviously), decide on a path, and STICK TO IT EVERY YEAR. Mine has been to open a Coverdell Education Savings Account which allows a maximum contribution of $2k per child per year. In addition, fund a regular taxable account $600 per month ($300 for each of two kids) starting as soon as we got married. We did not invest in 529 Plans mainly because the Michigan 529 Plan sucked at the time (still does).

Work hard always. Saved like mad as always. We keep at it so we show our kids that working hard is expected, is noble and it leads to something very important as you stated: Having choices in life which is a WONDERFUL thing. You can do whatever you want and have no fear you will get fired or losing the Amazon link LOL.

I made sure the clients I worked with stayed on that path outlined above and most are millionaires now. It can be done! The key is to START EARLY! I have a favorite phrase I came up with: "The more (you invest), the earlier the better". Sounds corny but it's so true!

This is what you will do as a CFP. Of course investing is important. But without the discipline of sticking to a plan (assuming you do have savings habits) you will meet many like I have in their early 50s finally deciding to get serious about saving for retirement. I tell them "I am sorry, it's too late until you start eating noodles every day and we both know that is just not going to happen"...too painful! I wish them well.).

I wish I had more time to spend here man! This could be the next Flyertalk if KKR conducts surgery on it :)
Great advice George! Thanks for swinging by, I know you are spread thin so much appreciated. I certainly agree with what you are saying here, I guess I should get more into what we did with that too:

Before coming to the US I had no reason to get involved in the Code here, but when I moved and decided to set up shop I did exactly that:

For me Max SEP+Traditional IRA circa 23K
For wife 403b/401k + Traditional IRA circa 23K
Did not do a HSA (lifestyle decision on the HDHP) but might think of it.
College - we are figuring that out now (and writing a post on it!) because there are certainly factors to consider, such as buy in from the child if they have a free pass.

I do truly think of taking advantage of tax savings to be as important as earning - but I have a massive issue with people who focus on the tax stuff, or leveraging the investments too soon, when they aren't working their arse off to build the nut - unless you are blessed with a rich family or other windfall you simply have to work hard to get the momentum (I know I am preaching to the choir here) and I want to see more of that hard work!
 

Matt

Administrator
Staff member
I have been on and around Wall St. Since 1981. Absolutely, there is good money to be made, but I think it is prudent to stick to some very simple principles. It takes real money to make real money. It takes time, patience, and the guts to go against the crowd when the crowd is stampeding.

I think, like in ANY other profession, there are people of superior talent. I've done original stock research, managed accounts and beaten the market, but the amount of work it takes to do that successfully is way more than I care to do any more. So the key is finding a "team" of managers that I am comfortable with. My very own fantasy league, if you will.

Never buy a fund. Buy a manager.

Here are some things I like to learn about before I buy:
who is at the helm
how long their tenure has been
how they do in up and down markets
the velocity of the growth in assets under management
the concentration of assets (I like concentration)
how a particular style may fit with other assets I own

I try to find interviews with the manager. I like to learn about how they approach their discipline, and especially, how they "distance" themselves from the constant noise that makes up so much of the investment industry.
Hi Rick,

Solid advice here - actually this is why I really dislike managed funds. Let's go a step further... what if there is a good person/team but then they start suffering from external events? What happens when something impacts their approach to life, such as a death or divorce? Investors wouldn't see the change, they see the name and tenure, but not what is happening in the office, and how decisions are made.

I do believe smart people with strong teams can outperform a pure index, but the risks are high.
 

Rick

Level 2 Member
Matt,

Indeed, your points are good. Theses risks pertain to the companies whose stocks you buy directly. It comes down to judgement. For me, whichever road you choose, you have to make a judgement on management, and there is only so much you can know. Yet when you cut through all the marketing, this is still a simple game.

I like Tim Duncan. I feel I know his make-up, his drive his willingness to learn his craft. He went through a divorce last year, but he's still my guy for the game he plays.

I guess if you want to do the work yourself, do it right. Don't fall prey to stories, don't chase. Think of buying a stock as hiring someone whose sole job is to make money for you. If you don't want to do it yourself, but want active management, remember that once again you are hiring people, not a marketed name or fund family.

...and then, there are always ETFs.
 

pstlb

Level 2 Member
Just a quick reply...yes it can be done. I'm a blue collar kind of gal, but with a thirst for financial independence. Worked hard, took advantage of every available opportunity to save, with an eye toward the future. My husband listened to me and retired at 50 (and he doesn't even have a high school degree). I have a BA, but in nothing useful, and found my own way to financial freedom. Our health insurance, best out there, cost me $90 per month for both of us. Went to a "financial adviser" about 4 years ago and she said she could "make us a few more bucks" but it wasn't worth the fee. Took the opportunity to buy ETFs during 2009 and now am reaping the benefits. Now I just do MS for fun, profit, travel, and too keep me active. Another success story for those not in the position to start a profitable business: My brother, a carpenter, got laid off at the grand old age of 45 with no prospects for a job due to the economic conditions. Educated himself to the stock market (I do not recommend this to the average person) and now travels to the south of France 4 months each year (and trades from there). My only regret is that if I had the opportunity to find a financial adviser such as TBB a few year back, I would be 5 times more "independent" than I am now and travel more. I cannot express how important it is to find the "right" adviser for your future. Back in the day when I needed help, advisers were insurance salesmen, bank reps and scam artists.
 

ElainePDX

Level 2 Member
Interesting discussion, although at this point I am retired and I have a husband who could but won't retire. But maybe that is what Matt's point was. We did not live our life using the FIRE strategy. I don't think it was anywhere near our radar until it was too late. But we both began saving for retirement very early on. I'm not sure we would have done so on our own, but we worked at universities where there was a match, and so we signed up. I am glad to see so many here trying to look ahead.

One little quibble:
- Fully take advantage of an HSA account if you have access to it at your company or open one yourself if employed. Treat it as a Retirement IRA account and do not draw from it, pay out of pocket for current healthcare expenses
Our HSA (through my husband's job) allows us to put $$ in every year, but if we don't spend it, we lose it! So the above may be misleading to some folks, if their HSA works the same as ours does. We usually have enough bills to get reimbursed, but if not, we order new eyeglasses, fill prescriptions ahead if possible, etc. I monitor our medical spending carefully to make sure we don't forfeit any money.

My concern is for my kids. One has lots of money in the bank but claims "no time" to invest it properly. This is partially my husband's fault, as he promised to help get this going, but he claims "no time" as well. I think it is all prioritization and there is time enough. Sadly it is easy to delay doing things that you are unsure of how best to complete. My other kid has less money, but she has a much better handle on what to do, as well as the discipline to do it monthly. I have never been comfortable being in charge of the family's investing and I hate math, so while I wear lots of hats around here, that is one area I prefer not to handle.

Looking back, we did OK. But I think we should have engaged a CFP rather than trusting a broker for advice. We did not do badly, but a monthly plan of exactly what to do, monitored by a CFP, would have served us well.

The other things I will toss out is that FIRE may be a strategy for only some folks. Both my daughter and her husband are teachers and work in the non-profit world. While they will save for college for eventual kids and retirement for themselves, I can't imagine FIRE is really an option for them. And realistically, it really would not have been an option for me (a librarian and writer) and my college professor husband either. We would have needed either other careers, or a much more entrepreneurial approach to our existing ones.
 

Matt

Administrator
Staff member
Interesting discussion, although at this point I am retired and I have a husband who could but won't retire. But maybe that is what Matt's point was. We did not live our life using the FIRE strategy. I don't think it was anywhere near our radar until it was too late. But we both began saving for retirement very early on. I'm not sure we would have done so on our own, but we worked at universities where there was a match, and so we signed up. I am glad to see so many here trying to look ahead.

One little quibble:


Our HSA (through my husband's job) allows us to put $$ in every year, but if we don't spend it, we lose it! So the above may be misleading to some folks, if their HSA works the same as ours does. We usually have enough bills to get reimbursed, but if not, we order new eyeglasses, fill prescriptions ahead if possible, etc. I monitor our medical spending carefully to make sure we don't forfeit any money.

My concern is for my kids. One has lots of money in the bank but claims "no time" to invest it properly. This is partially my husband's fault, as he promised to help get this going, but he claims "no time" as well. I think it is all prioritization and there is time enough. Sadly it is easy to delay doing things that you are unsure of how best to complete. My other kid has less money, but she has a much better handle on what to do, as well as the discipline to do it monthly. I have never been comfortable being in charge of the family's investing and I hate math, so while I wear lots of hats around here, that is one area I prefer not to handle.

Looking back, we did OK. But I think we should have engaged a CFP rather than trusting a broker for advice. We did not do badly, but a monthly plan of exactly what to do, monitored by a CFP, would have served us well.

The other things I will toss out is that FIRE may be a strategy for only some folks. Both my daughter and her husband are teachers and work in the non-profit world. While they will save for college for eventual kids and retirement for themselves, I can't imagine FIRE is really an option for them. And realistically, it really would not have been an option for me (a librarian and writer) and my college professor husband either. We would have needed either other careers, or a much more entrepreneurial approach to our existing ones.
FIRE is for everyone. It is a mindset and approach to life. Being a teacher and working non-profit doesn't mean that they don't earn and spend money, which is everything that FIRE is built upon..

Also, for your quibble... you are quibbling with a CFP in George, and a Wannabe CFP in me :) You are describing a FSA, which is a common cause for confusion.

Here's my post on HSA for you, http://saverocity.com/finance/need-hsa-account/ and I copied the relevant paragraph for you below:

Health Savings Accounts, or HSA’s are a very important part of your financial planning process. They are particularly good for people with high incomes that are seeking to reduce taxation, and work towards that in several ways. Before we go on, we need to quickly differentiate a HSA from a FSA, as the two are often confused:

  • FSA -Short Term Use it or lose it - this is an account designed for smaller health related purchases, such as medical co-pays, contact lenses, eye exams, etc. Funds are not invested, they remain in a checking type environment, with an attached debit card. You fund a FSA annually and you must spend the account in full each year or lose the money inside it. $2,500 annual maximum contribution (2014), deducted from taxes.
  • HSA- Long term – this account is designed for long term health needs, frequently invested in the market, it is similar to an IRA for your healthcare. You do not have to spend down this account. You can use the HSA for similar medical expenses as the FSA, however you cannot use it for non-prescription drugs (other than Insulin) and check first! $3,300 Single, $6,550 family annual maximum contribution (2014) with a $1,000 catch-up allowance for those over 55. Contributions deduct from your taxes, above the line. HSA’s require pairing with a HDHP.
-------
 

Annie H.

Egalatarian
I'm a long-time (but not long enough!) Boglehead. I'm retired now but if I had to do it all over again I'd start at 18 and buy index funds with 75-80% of my investable funds, 10% for "play" money (stocks) and 10% perhaps in I-bonds and buy every year. I laughed at I-bond when they first came out but now there are folks earned a fixed 3.6% rate (guaranteed) which is added to the inflation component--which changes every 6 months, currently it's 1.94%--that's 5.54% guaranteed which is a lot more than you can get in other bonds or fixed investments.

Current limits for yearly I-bond purchases are $10K--prior limit was $30K (but there are ways around that) plus $5k if purchased with tax return. Interest can be tax free if used for college.

https://www.treasurydirect.gov/indiv/research/articles/res_invest_articles_purchaselimits_0406.htm

Would definitely recommend the Bogleheads forum:
http://www.bogleheads.org/

The other thing I probably should have done differently is instead of spending the past month trying to learn al the "secrets" to MS is to have bought XLV- Health Care Select Sector SPDR which would have made me a thousand bucks or so in that time (much more than I've earned MS).

Finally the CBOE Volatility Index (VIX) generaly know as the "fear index" has been near or known as Wall Street’s fear gauge, is sitting below 12 for about two weeks. The last time it was at these levels for a prolonged period was in 2007. Are we in for a big market correction?
 

ElainePDX

Level 2 Member
@Matt, thanks for correcting me. I never heard of an HSA before!

As for your other point, if Financial Independence Retire Early is truly reachable on lower salaries and for those in the non-profit world (social workers, teachers, and others not raking in big bucks) I would love to learn more!
 

Matt

Administrator
Staff member
Just a quick reply...yes it can be done. I'm a blue collar kind of gal, but with a thirst for financial independence. Worked hard, took advantage of every available opportunity to save, with an eye toward the future. My husband listened to me and retired at 50 (and he doesn't even have a high school degree). I have a BA, but in nothing useful, and found my own way to financial freedom. Our health insurance, best out there, cost me $90 per month for both of us. Went to a "financial adviser" about 4 years ago and she said she could "make us a few more bucks" but it wasn't worth the fee. Took the opportunity to buy ETFs during 2009 and now am reaping the benefits. Now I just do MS for fun, profit, travel, and too keep me active. Another success story for those not in the position to start a profitable business: My brother, a carpenter, got laid off at the grand old age of 45 with no prospects for a job due to the economic conditions. Educated himself to the stock market (I do not recommend this to the average person) and now travels to the south of France 4 months each year (and trades from there). My only regret is that if I had the opportunity to find a financial adviser such as TBB a few year back, I would be 5 times more "independent" than I am now and travel more. I cannot express how important it is to find the "right" adviser for your future. Back in the day when I needed help, advisers were insurance salesmen, bank reps and scam artists.
I'm really happy for you, and glad your brother is doing well. I'd caution anyone who reads this to emulate it, we don't know the full story, and if he actually is in solid financial shape. While this might be offensive (my apologies if it is) but if he hasn't the ability to find work in his trade, he probably hasn't the ability to successfully trade stocks. We have been lucky since 2009, but there will be bad times ahead, and trading is not the answer.

I'm saying it more as a general caution, and hope that you all live a fabulous and successful life.
 

Matt

Administrator
Staff member
I'm a long-time (but not long enough!) Boglehead. I'm retired now but if I had to do it all over again I'd start at 18 and buy index funds with 75-80% of my investable funds, 10% for "play" money (stocks) and 10% perhaps in I-bonds and buy every year. I laughed at I-bond when they first came out but now there are folks earned a fixed 3.6% rate (guaranteed) which is added to the inflation component--which changes every 6 months, currently it's 1.94%--that's 5.54% guaranteed which is a lot more than you can get in other bonds or fixed investments.

Current limits for yearly I-bond purchases are $10K--prior limit was $30K (but there are ways around that) plus $5k if purchased with tax return. Interest can be tax free if used for college.

https://www.treasurydirect.gov/indiv/research/articles/res_invest_articles_purchaselimits_0406.htm

Would definitely recommend the Bogleheads forum:
http://www.bogleheads.org/

The other thing I probably should have done differently is instead of spending the past month trying to learn al the "secrets" to MS is to have bought XLV- Health Care Select Sector SPDR which would have made me a thousand bucks or so in that time (much more than I've earned MS).

Finally the CBOE Volatility Index (VIX) generaly know as the "fear index" has been near or known as Wall Street’s fear gauge, is sitting below 12 for about two weeks. The last time it was at these levels for a prolonged period was in 2007. Are we in for a big market correction?
Bogleheads is a fantastic resource, I highly recommend it to anyone interested in personal finance. Who knows about market corrections? I think rather than worry about them, we should have asset allocations that will withstand them.
 

Matt

Administrator
Staff member
@Matt, thanks for correcting me. I never heard of an HSA before!

As for your other point, if Financial Independence Retire Early is truly reachable on lower salaries and for those in the non-profit world (social workers, teachers, and others not raking in big bucks) I would love to learn more!
More will be forthcoming. Hopefully from others here too.

It is not important what you earn, but what you keep. If you make $1M per year but only keep $50K of it, you will never be able to retire... so we can all get there :)
 

TBB

Level 2 Member
Thanks for catching the FSA vs HSA thingie, Matt. I would give you an A in that class :)

Bogleheads is a great resource. I consider myself one but I just don't go there. I just go to Flyertalk when I am not fooling around in the TBB comments.

I can go on...

I believe you should not trade stocks, you should not hire anyone to trade stocks and Vanguard ETFs are the best thing since sliced bread. I also make the fearless prediction: Stock market will fluctuate...so there!
 

ElainePDX

Level 2 Member
Thanks for catching the FSA vs HSA thingie, Matt. I would give you an A in that class :)
I went back and read Matt's Saverocity post, scratching my head in wonder that I hadn't seen it already. Then I saw the simple title: "Do You Need an HSA Account?" and I remembered that I had indeed read the title after which I replied to myself, "No, we have one," not bothering to even skim the post. Perhaps the topic would be better served if the title could reflect the fact that HSA does not equal FSA....

I guess it is a new concept to me because, having never been self-employed, and always having good healthcare coverage from my employers or my husband's, we have never participated in a high deductible health plan, which I now know is a requirement to qualify for an HSA.

Live and learn ;) !
 

MLH

Level 2 Member
We did not invest in 529 Plans mainly because the Michigan 529 Plan sucked at the time (still does).
Why only focus on the Michigan 529? Other states have good plans, and most have no requirement that you be a resident. Or am I missing something?

Who knows about market corrections? I think rather than worry about them, we should have asset allocations that will withstand them.
Great point. IMO 'Market corrections' (and other similar terms) are just market timing, and market timing is basically guessing. A perfect example from Bogleheads is a thread one member started, towards the end of calendar 2012 during the Fiscal Cliff and Debit Ceiling crises I believe (when the DJIA last fell below 13000), stating that they were adjusting their allocation because the market was surely going to suffer. All the available evidence pointed to the market being in for a tough period as politicians weren't close to coming to an agreement and the market was beginning to dip. Sure enough, an agreement was reached, the market rallied, and this person sold low and missed out on the recovery.
 

cocobird

Level 2 Member
My story is a similar to others who have gained financial independence and have retired. The key is to live below your means so that you have the ability to accumulate funds and invest them. When people follow that rule, even when lower paid people, you can save. I worked as a regulator in the banking area and can tell you that I have seen numerous examples of people who would be considered "low income" who have saved and invested their entire lives, eventually becoming comfortable or even millionaires. Investing as early as possible makes it feasible for assets to compound many times over.

Many people believe that it is not possible to save without a substantial income. The reality is these people believe everything they spend money on is a necessity. They need a paradigm shift. The basics are food and shelter. Even with those items, there is much discretionary control.

I was retired at the age of 52 because I needed to handle family medical and legal emergencies. Despite my concerns that we didn't have enough, I eventually realized that my concerns were unfounded. You cannot plan for everything, just most things. Now I fully enjoy being retired and keep encouraging my husband to join me. He has not quite reached that stage where he can let go.

So what did we invest in:
We started with savings, CD, IRAs and 401ks. Diversified our holdings so that we have large, medium, and small business domestically and then international funds. Branched out into individual high quality stocks when there were pull backs. Learned to play options (covered options, which are very conservative). Next purchased a rental property.

We did not have it easy given that both my husband and I have been laid off and changed jobs four times each (8 total) during our working career. No matter what, we followed the rule to live below our means.
 
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MLH

Level 2 Member
- Fully maximize a retirement plan for the self-employed starting the first year you have a profit! Which plan to use is not that relevant. THE KEY IS TO START AS SOON AS POSSIBLE FUNDING THE ACCOUNTS AS MUCH AS POSSIBLE.
I'd LOVE to learn more about retirement plan options for the self-employed - especially when that business (Blog? Reselling?) is simply a side business. I have a full-time corporate job and contribute the max $17.5k to our 401k and $5.5k to a Roth, but I've started a profitable (but not lucrative!) side resale business this year. How can I funnel those profits in to retirement account with tax advantages?
The little bit of research I've done so far has yielded the following:
SIMPLE IRA- Out because contributions count against other 401k contributions.
SEP IRA- Questionable because contributions to all employees must be the same (i'm currently the only employee, but I've toyed with having a sibling help as an 'employee' in their spare time).
Solo 401k- Can be expensive and complicated.
 

TBB

Level 2 Member
Why only focus on the Michigan 529? Other states have good plans, and most have no requirement that you be a resident. Or am I missing something?
Not missing anything. Love the Utah 529 Plan! It was a combination of factors: 1) You are restricted to the options available in the 529 plans and restricted to moving around the funds. I do not like being restricted 2) My kids are geniuses and fully expect them to get full rides at an Ivy League school...just kidding but I do think they will get some major merit based help so what if we had put away too much in the 529 plans?...Hate paying penalties haha which leads to 3) We save instead in taxable accounts in broad based Vanguard ETFs and hold on for years. If kids do not use the funds, mommy and daddy keeps them and use for our retirement...Sweet! Nothing against 529 Plans by the way. When I opened the accounts if Vanguard was administering the Michigan 529 Plan I would probably be all over it. Doing business with TIAA-CREF has been VERY frustrating to say the least (from primarily a customer service perspective towards working with financial advisers...they don't like us and are so so protective of their educator participants...but we 'll leave that for another thread another time).

Now I got to publish the Buzz post....readers are waiting to be first again!
 

Matt

Administrator
Staff member
I'd LOVE to learn more about retirement plan options for the self-employed - especially when that business (Blog? Reselling?) is simply a side business. I have a full-time corporate job and contribute the max $17.5k to our 401k and $5.5k to a Roth, but I've started a profitable (but not lucrative!) side resale business this year. How can I funnel those profits in to retirement account with tax advantages?
The little bit of research I've done so far has yielded the following:
SIMPLE IRA- Out because contributions count against other 401k contributions.
SEP IRA- Questionable because contributions to all employees must be the same (i'm currently the only employee, but I've toyed with having a sibling help as an 'employee' in their spare time).
Solo 401k- Can be expensive and complicated.
SEP. You can establish the plan with a couple of caveats - such as bennies don't apply until after X years of employment (don't exclude yourself here though!) and also you can consider hiring people as 1099 contractors, that will mean they aren't regular employees... I set this up with Fidelity, give them a call.

Consult a CPA etc etc...
 

Mel

Level 2 Member
I have no bills except a car @0% interest. So no bills, I mean why give them the money when I can earn 1% on it... We set ourselves on a path a few years back to pay off the our cars, student loans and the mortgage. First of all, we liked the idea of not having debt and I was stuck in a crappy job in a bad economy. The house was upside down and the local job market was too. Over the course of about 3 years, we paid it all off. I had planned to quit my job because I saw no other way out. As soon as the house was paid off 1 year ago at the age of 35, we maxed out our 401ks, and HSAs. We will probably funds IRAs this year as well. We've taken a year off from paying off things like crazy to purchase furniture and make improvements, etc.

Starting miles and point collecting last year certainly has supplemented my love of travel. It has allowed us to increase our contributions to charities as well. If we don't have kids, i expect to retire by ~43, if we do perhaps later. I'll run that calculation when the time comes. I track our spending, net worth and crossover point to be able to retire monthly. It's all worth it.

I like the acronym FIRE, BTW. It's a beautiful thing.
 

MLH

Level 2 Member
SEP. You can establish the plan with a couple of caveats - such as bennies don't apply until after X years of employment (don't exclude yourself here though!) and also you can consider hiring people as 1099 contractors, that will mean they aren't regular employees... I set this up with Fidelity, give them a call.

Consult a CPA etc etc...
Dang, contributions capped at 20%-25% of earnings/profit? Not quite the retirement funding loophole I was hoping for. Oh well, its still something!
 

Gody

Level 2 Member
I have a little bit of a disconnect here in trying to link retirement account funding(IRA,Solo 401K) to financial independence. My personal goals mirror what Matt mentioned in his original post, to be able to be financially independent and pursue my own ventures without a necessity of outside employment.

So if the goal is to have stockpile of money or passive income that you can live off of so you may have an early retirement(which I assume may be in your 40's or 50's), why put money into vehicles that will not let you have access those funds until you are in your 60's?

Are people investing in retirement accounts and then taking the early withdrawal penalties to have access to them earlier? I used to do this with my company 401K where I would allow for the 100% company match and then a couple years down the line I would withdraw and absorb the tax penalty because I would still be profitable over that initial time span and then have the funds available to put towards investments where I believed I could have a better ROI.

Currently I put a very small amount toward my retirement accounts. And I use my savings for investing in vehicles that can build my capital to a point that I can use to have multiple passive income streams. Putting funds in a retirement account feels counterproductive to my goals if I want to have access to funds that will allow me to retire early.

Any thoughts? Am I missing something?
 

Matt

Administrator
Staff member
I have a little bit of a disconnect here in trying to link retirement account funding(IRA,Solo 401K) to financial independence. My personal goals mirror what Matt mentioned in his original post, to be able to be financially independent and pursue my own ventures without a necessity of outside employment.

So if the goal is to have stockpile of money or passive income that you can live off of so you may have an early retirement(which I assume may be in your 40's or 50's), why put money into vehicles that will not let you have access those funds until you are in your 60's?

Are people investing in retirement accounts and then taking the early withdrawal penalties to have access to them earlier? I used to do this with my company 401K where I would allow for the 100% company match and then a couple years down the line I would withdraw and absorb the tax penalty because I would still be profitable over that initial time span and then have the funds available to put towards investments where I believed I could have a better ROI.

Currently I put a very small amount toward my retirement accounts. And I use my savings for investing in vehicles that can build my capital to a point that I can use to have multiple passive income streams. Putting funds in a retirement account feels counterproductive to my goals if I want to have access to funds that will allow me to retire early.

Any thoughts? Am I missing something?
You raise an incredibly important point. There is something of a disconnect between the two notions on some levels. I do not think it is wise to fund the retirement account only to withdraw from it early, but there are some benefits to the tax treatment of such accounts that we should explore. On one hand, each dollar that you put away into an IRA is locked up, and not producing cash flows - but on the other, leaving tax dollars on the table probably isn't a wise decision either.

Personally think it something of a balancing act. The question being, if you put some into a retirement account and some into cash flow generating assets how much advantage do you see? On one hand we certainly have a case for the value of diversification within the efficient frontier, but on the other are we slowing down wealth generation by tieing it up to a future date that is too far in the future. A lot to think about (and write about)
 

Annie H.

Egalatarian
I believe you should not trade stocks, you should not hire anyone to trade stocks and Vanguard ETFs are the best thing since sliced bread. I also make the fearless prediction: Stock market will fluctuate...so there!
I agree and I'm totally an Indexer and BH--I even post there-- but every once in awhile I get an itch to buy a segment ETF and that's why I've allocated small dollar % to do so. Most often I don't pull the trigger. I'm in the withdrawal stage, though, not accumulation and I gotta have some fun!
 

TBB

Level 2 Member
Boglehead here too...I don't know about you guys but I am loading up the truck when that Bitcoin ETF opens!

If you think this was a serious statement I am sorry for you :D
 

Sesq

Level 2 Member
I'd LOVE to learn more about retirement plan options for the self-employed - especially when that business (Blog? Reselling?) is simply a side business. I have a full-time corporate job and contribute the max $17.5k to our 401k and $5.5k to a Roth,
Its pure luck if your employer allow after-tax contributions and in-service withdrawals, but that can be a game changer if you are looking for a savings vehicle.

http://www.bogleheads.org/forum/viewtopic.php?f=11&t=104829
 

Shantravels

Level 2 Member
I have always been frugal and a saver. I joined Bogleheads after I received a small windfall a couple years ago because I wanted to be a good steward of the money. I am in my early 30s and hope to reach FIRE within 10-20 years.
 
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