What's the deal with 45?

[EastWest Gal]

One of the nice things about taxable brokerage account MFs or ETFs is that if you have them for 15 years or so, you'll likely have up to 50% LTCGs (long term capital gains), and due to the current LTCG exclusion, you may not have to pay ANY federal taxes on withdrawals (e.g., if you withdraw funds with 50% LTCGs, you can withdraw up to $166,700 annually and pay NO FEDERAL TAXES (currently, for MFJ, the first $83,350 of LTCGs are tax-free)!

That’s only true if you have no other sources of income, such as dividends or interest. Do the math before you sell those equities.

 

[HI Bill]

That’s only true if you have no other sources of income, such as dividends or interest. Do the math before you sell those equities.

Sure, I take dividends first, and any taxable interest.

 

[Rianne]

Am I missing family health care, growing kids, college? The progress is awesome but some missing pieces or did I miss that discussion?

 

[scrabbler1]

Making great progress! My only comment is that if you want to RE at 45, then having savings outside of tax-deferred is important, unless you have a large 401(k) and want to use the SEPP method (otherwise, you'll have to pay taxes and a 10% early withdrawal penalty, except on ROTH contributions).

I wish I had RE'd between 45-50. I had a goal of 50, which would have been almost perfect. But by 47, I had my first health problem (which is a fairly typical age), and my savings were only sufficient for a LEAN FIRE. So, I continued on until 55, which allowed me to Fat FIRE...but due to COVID, I missed out on two years of travel when my health was still fairly good and I still had stamina. So, I say, continue with the goal of 45, and enjoy your health while it's good!

One of the nice things about taxable brokerage account MFs or ETFs is that if you have them for 15 years or so, you'll likely have up to 50% LTCGs (long term capital gains), and due to the current LTCG exclusion, you may not have to pay ANY federal taxes on withdrawals (e.g., if you withdraw funds with 50% LTCGs, you can withdraw up to $166,700 annually and pay NO FEDERAL TAXES (currently, for MFJ, the first $83,350 of LTCGs are tax-free)!

Keep in mind that if you are on the ACA , those LTCGs will reduce the premium subsidy even if you pay no taxes on them. In my case, using my tax spreadsheet, if my LTCG rises by $1,000, my tax bill is unchanged but my ACA premium subsidy drops by $125, or a 12.5% "tax" on that income.

 

[Exit 2024]

Bird, great thread, I really enjoined reading about your journey!
As I understand - you changed your mind and do not have retirement plans for near future, so do you plan to expand your spending? or will continue to accumulate at the same rate? what are the new targets?

Asking because I also logging our journey and original plan was to FIRE in 2024 with $3m TNW. As we are getting closer - we are thinking to delay and bump up our target to better account for inflation risks. We are also raking in good money, but if we delay FIRE - thinking to slowdown our saving rate and expand spending to include more travel while we have our health. What is your take on that?

 

[Koolau]

Bird, great thread, I really enjoined reading about your journey!
As I understand - you changed your mind and do not have retirement plans for near future, so do you plan to expand your spending? or will continue to accumulate at the same rate? what are the new targets?

Asking because I also logging our journey and original plan was to FIRE in 2024 with $3m TNW. As we are getting closer - we are thinking to delay and bump up our target to better account for inflation risks. We are also raking in good money, but if we delay FIRE - thinking to slowdown our saving rate and expand spending to include more travel while we have our health. What is your take on that?

FIRE at 45 is a worthy goal, but maybe not at the expense of memories you make now with family, travel and experiences. There can be a happy medium of spending that insures FIRE (soon) but lets you live more in the now. No value judgment on my part since I don't know your situation. More of a caution than a pronouncement because YMMV.

 

[Exit 2024]

Koolau, thanks for your input, we are thinking along the same lines although for us FIRE was planned at 55 and I am not sure if it worth to continue grinding till 58-60 with expanded spending or just keep as is till 56-57 (extra 1-2 years to mitigate inflation risks) and quit completely.