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Old 07-21-2013, 10:47 AM   #21
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Originally Posted by ducky911 View Post
your spending will go up (a good thing) with children....
Yeah and if the OP is targeting only 18k annual expenses I'd say spending after having say 2 kids will increase that by 50-80% more!

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Old 07-22-2013, 01:30 PM   #22
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My observations while being FIRE'd. I went back to work after 3 months, not because of $.

> I assumed that my finacial budget would not change and added $10k per year as a safty net for HC insurance. So my $60k budget was $70k one. It is better to have more $ then not enough!

> I had three kids in High school and my wife and I wanted to spend time with them so we could not really travel w/o them.

> We needed a house big enough for the 5 of us plus all their stuff and the large sleepovers/gatherings.

> Once you have kids you get dogs and other pets so your even more tied down to the location. They are also expensive to keep.

> I relaized that I needed to challenge my brain and interact with people. You have to build schedual that will satisfy your desires and fill the day with interesting things to do. We went to the YMCA each morning and then did local stuff until the kids came home.

> Kids are expensive!!! Each of my kids needed over $5k worth of braces. Sports/dance class, car insurance, college. Another car for all of them to use to get to work etc..

> You want to retire in style - if you are worried about surprise expenses breaking your budget then you could be introducing alot of stress into your life that is not fun!

> We have 5 yrs of budget in a high yielding savings account and a 50/50 split for our investments. It depends on alot of things esp. age. We are in our 50's so our portfolio is very conservative. Much of it is in Vangard Wellesely Income, which is a 30/70 split. I make up the difference with Index funds. This has worked very well for us as we weathered Great Recession without having to alter our allocations or worry about dipping into our income generating portfolio.

> I was keen on retiring early but my wife was not - she just was not ready for it and was nervous. Even though we had the $. Now - 6yrs later and in our 50's we are both ready. The kids are graduating next year from college. Even with that we will have to hold onto the house for a year to give them some breathing room to find work.

> Kids and retiring early. My kids heard me talking about it and looking forward to it and I think they felt that I could not wait for them to leave. So I am very carful about talking about it infront of them. Esp. selling the house - which is their home and not just an asset to them. All their childhood memories are their, it's a part of them.

Now we are telling them. You can stay and take care of the dogs and house while your mother and I travel. Leaving our options open.

These are just my observations and personal experiences - everyone is different.

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Old 07-27-2013, 05:10 AM   #23
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Kramer - I really appreciate your feedback on my ER query. Since I fired my financial planner and went to a simple indexing investment approach, I guess I need to ask how one knows if the portfolio is "structured correctly" so that our tax bill can be $0. I honestly had no idea that this is even a possibility. My impression is that 15% is the lowest a person can pay, given any reasonable income.
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Old 07-27-2013, 06:02 AM   #24
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Originally Posted by coltsfan53 View Post
Kramer - I really appreciate your feedback on my ER query. Since I fired my financial planner and went to a simple indexing investment approach, I guess I need to ask how one knows if the portfolio is "structured correctly" so that our tax bill can be $0. I honestly had no idea that this is even a possibility. My impression is that 15% is the lowest a person can pay, given any reasonable income.
It depends on where your income is coming from.
If you take most out of tax deferred accounts, that all gets taxed like ordinary income...the taxes were deferred not avoided.

If you take dividends and cap gains up to about $90,000 a year they can be taxed at 0% (federally, married file jointly) so if say $50000 is dividends and $40,000 is capital gains you subtract your standard deductions and your federal income tax bracket is under $70,000 so you owe ZERO to the federal government. Your ACTUAL money to spend will be over $90,000 because if you have $40,000 in capital gains, it means you made money above the principle investment. If your gain was conservatively 3% per year for 20 years then you got a $40,000 cap gain by selling out $66,667 of assets. So you would have an "income" of $116,667 which while not extraordinary has to be considered reasonable. Some of it will have to be used to pay state income taxes, but in most states that still leaves a reasonable income on a yearly amount on which you paid far lower than 15%.
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Old 07-27-2013, 01:57 PM   #25
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Coltsfan, yes urn2bfree got it exactly right. Additionally, about 20,000 or so (the standard of a married couple) of that 90,000 or so can be interest income and unqualified dividends. So you can keep some fixed income in your taxable account for security purposes (even though most of that should be in IRA) and you probably even have headroom to do some annual IRA to ROTH IRA conversions, without paying federal income taxes.

Other considerations are state income taxes and keeping your income low for ObamaCare subsidies.

I live overseas so I pay no state income taxes and I don't have USA health insurance, so those last two items don't affect me personally.

You made the right decision by going to index funds!

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