Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-26-2014, 09:52 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
I tend to look at my 401k both ways...as an expense, and as an asset. Essentially, I'm paying to fund my retirement. I'll benefit from it down the road when it's time to live off of it, but for the time being, it's still an expense.

I have thought about trying to cut back on my 401k a bit, as it's grown enough that adding more to it doesn't have the effect it once did. However, I'm addicted to the tax savings right now. I'm in the 25% federal bracket, so by the time I tack on state and local taxes, every dollar I put in the 401k only "costs" me about 67 cents. Plus, I get a 4% company match, which is nice.

I would never cut out the 401k completely, though. I'd always make sure to at least get the company match. Most likely, I'll keep maxing it out for the foreseeable future. Even though I'm calling it an "expense", the more I pay, the sooner I can "buy" my early retirement!
__________________

__________________
Andre1969 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-26-2014, 10:01 AM   #22
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,167
SS contributions, while a "hit" as a payroll deduction, are used in building a future income stream. We couldn't be where we are at this point, income wise, if it wasn't for the $45K per year we get back from SS.
__________________

__________________
aja8888 is offline   Reply With Quote
Old 03-26-2014, 10:24 AM   #23
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,844
Quote:
Originally Posted by walkinwood View Post
... hourly income after taking into account work related costs, commuting time and taxes & shows just how little you make - and therefore, how valuable each dollar is.
This is the logic we used 22 years ago when the first kid arrived; after removing employment taxes, employment related expenses and day care, just the slightest belt tightening got us even.

Quote:
Originally Posted by aja8888 View Post
SS contributions, while a "hit" as a payroll deduction, are used in building a future income stream. We couldn't be where we are at this point, income wise, if it wasn't for the $45K per year we get back from SS.
Good point. My calculations 22 years ago ignored this factor. But then again, everyone has been saying not to depend upon SS to continue in its current form, and I'm not planning on engaging SS for 15 more years.
__________________
sengsational is offline   Reply With Quote
Old 03-26-2014, 11:02 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
Quote:
Originally Posted by aja8888 View Post
SS contributions, while a "hit" as a payroll deduction, are used in building a future income stream. We couldn't be where we are at this point, income wise, if it wasn't for the $45K per year we get back from SS.
That's a good point. The SS that I currently pay out, while an expense right now, also helps out with retirement down the road. Even if I were to quit work right now, what I've earned so far will cover about 30% of my baseline budget, starting at age 62. Provided they don't monkey around with it, that is!
__________________
Andre1969 is offline   Reply With Quote
Old 03-26-2014, 12:11 PM   #25
Recycles dryer sheets
 
Join Date: Jan 2013
Location: Lafayette
Posts: 267
Quote:
Originally Posted by chris66 View Post
This is absolutely our expectation. We sold our primary home in Columbus, Ohio, and moved to our second home in Missouri wine country. We did this last year when hubby and I were both part of a reduction in IT staff at MegaCorp. Columbus has insane property taxes, and we had mortgages when we were working. With the proceeds of the Cols home sale, we were able to pay off the Missouri home mortgage, and buy a truck, and then some...

I got another job, but after running the numbers, and considering how long it's taking us to remodel the current home, I gave my notice a few weeks ago. I agreed to stay on until the end of this month, and then my ACA insurance begins 4/1. It's affordable, even without subsidies (since we've made to much already this year for a reduction in premiums). If it wasn't for ACA, I wouldn't be able to do this (I'm 48).

We live in town, so we can walk to about everything. Lots of cheap entertainment nearby. Room for gardening (which is both entertainment and money saving for us. I'll have time to research to save money, and to do all that frugal living stuff that I actually have fun doing when I have time.

Overall, if I continued working, we'd have even more money -- but, really, we have enough, and not working, we can effectively and enjoyably live on considerably less money.
Nice story, Chris. Especially the part about gardening being both entertainment and money saving.

Congratulations on appreciating the true pleasures of life (as opposed to adding to the money pile)!
__________________
gardenfun is offline   Reply With Quote
Old 03-26-2014, 01:01 PM   #26
Full time employment: Posting here.
 
Join Date: Nov 2010
Posts: 588
While running calcs, our taxes will decline such that 85% will give us the same take home pay. Social security is approx 7%. Long capital gains rates will make up the bulk of the other 8%. Other savings by having time to save will be a bonus. I expect LTCG to increase though.
__________________
devans0 is offline   Reply With Quote
Old 03-26-2014, 02:02 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,457
Quote:
Originally Posted by Rex View Post
.... It's shocking to me that w**king & living in the family home costs me this much.

I would welcome any comments and shed some light on what I am missing.....
Downsizing from two homes to one home was a key for me pulling the plug (we were using both homes living in one int eh summer and the other in the winter). Between property taxes, heating oil, electricity, cable, internet, snowplowing, insurance and maintenance on our main home, we saved a bundle. Plus we added the proceeds from the sale of the main home to the nestegg and that was earning now rather than home equity sitting there. All in I figure I was $25-30k a year ahead of having two homes.

I didn't view the taxes or 401k contributions as a savings because they were all coming out of income but I understand your point.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 03-26-2014, 03:02 PM   #28
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,060
Here is what I was thinking as to what my situation would do.

110,000 – Salary
(-8,415) – Medicare/SS
(-23,000) – 401K Deduction
(-2,115) – Purchased Vacation
(-16,800) – P&I of Mortgage paid off

$59,670 equivalent.

Factor in commute and parking costs, it may be even lower. If you are making only 59K, rather than 110K, your federal taxes are probably lower too.
__________________
Senator is online now   Reply With Quote
Old 03-26-2014, 03:17 PM   #29
Recycles dryer sheets
chris66's Avatar
 
Join Date: Jan 2014
Posts: 78
Quote:
Originally Posted by gardenfun View Post
Nice story, Chris. Especially the part about gardening being both entertainment and money saving.

Congratulations on appreciating the true pleasures of life (as opposed to adding to the money pile)!
Based on your username, it seems we're kindred spirits. I'm looking forward to talking with you more. I'll add my interests to my user info...
__________________
chris66 is offline   Reply With Quote
Old 03-26-2014, 04:02 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by RetireAge50 View Post
We see 30% of our income.

The rest currently goes to taxes 23% retirement savings 22% and kids college 25%.
Despite being employed for many decades, we never saw a penny of our income. It all went to taxes, spending and savings!
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 03-27-2014, 11:12 AM   #31
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,844
Quote:
Originally Posted by gardenfun View Post
Nice story, Chris. Especially the part about gardening being both entertainment and money saving.
I was just reading an Andrew Weil book and he includes exercise in the list of benefits of gardening. I might need to start gardening again!
__________________
sengsational is offline   Reply With Quote
Old 03-27-2014, 11:20 AM   #32
Recycles dryer sheets
chris66's Avatar
 
Join Date: Jan 2014
Posts: 78
Quote:
Originally Posted by sengsational View Post
I was just reading an Andrew Weil book and he includes exercise in the list of benefits of gardening. I might need to start gardening again!
Oh, totally! I exercise longer and harder when I'm gardening, because it doesn't "feel" like a workout (at least not until sometimes the next morning). I workout every muscle group. It's great stuff. For comparison, in winter, I do old Firm workouts that I have on VHS, but I think I get more benefit from gardening. However, I am very physical when I garden. I'm usually covered in dirt, and a total mess. I'm turning compost with a manure fork, and digging holes, and moving plants...
__________________
chris66 is offline   Reply With Quote
Old 03-27-2014, 02:40 PM   #33
Thinks s/he gets paid by the post
robnplunder's Avatar
 
Join Date: Nov 2013
Location: Bay Area
Posts: 2,124
Quote:
Originally Posted by ERD50 View Post
I don't see any way that the end of 401K contributions can be called 'saving' - no 'hair splitting' about it. In fact, if the OP gets a company match, it is a loss.

You keep the 401K money you contribute, it isn't 'spent', so ending it isn't saving anything. I think the OP is confusing the comparison between annual spending, take home pay, and gross pay. Taxes and other payroll deductions are a hit, 401K contributions or other savings are not.


-ERD50
Agreed. I restrained from making similar comment.

IMO, quitting a job to save on expense only makes sense if the job doesn't pay much to begin with.
__________________
Pura Vida
robnplunder is offline   Reply With Quote
Old 03-27-2014, 05:02 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,327
Quote:
Originally Posted by robnplunder View Post
Agreed. I restrained from making similar comment.

IMO, quitting a job to save on expense only makes sense if the job doesn't pay much to begin with.
I think it depends on your individual circumstances and tax situation. Here is one way to not work at a W2 job and break even financially. Assume the ACA subsidies and an HSA plan equal your last employer health care subsidies so health care expenses are a wash.

1. Lower your housing expenses by moving to a lower cost resort or beach area: 20%

2. No more job and commute costs: 10%

3. Pension income replaces some of former salary: 30%.

4. Lower taxes - no more Social Security tax, lower state and federal income taxes, more time for tax planning: 15%

5. Lower personal expenses from being home more, cooking from scratch, more time to price shop, switch to LED bulbs, etc.: 15%

6: More time for credit card and frequent flyer hacks for cash and free travel: 10%

This hypothetical worker would break even with working a 40 hour a week W2 job - the categories above all add up to 100% of his former gross salary. It isn't the exact salary as much as the percent in each category that matters. Other categories could include the money an early retiree saves from having the kids launched, downsizing the house instead of just a lower cost of living area or working part-time at an enjoyable hobby job.

If you have a high salary but live where 3/2 tract homes cost $1M like the South Bay, just moving to Southern Cal and buying an equivalent house for $500K is going to free up $500K you can use for after tax living expenses, which might reduce your taxable income significantly.

And I left out not having to save for retirement as an expense.
__________________

__________________
daylatedollarshort is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Saving vs. Saving ProGolferWannabe FIRE and Money 37 07-07-2013 06:10 PM
Cost Saving- Furnace & Central A/C v. Room Heater/Electric Blanket & Room A/CUnit-Fan nico08 FIRE and Money 4 01-08-2012 11:52 PM
downsizing: relocation & cost of living lazygood4nothinbum FIRE and Money 67 05-23-2008 09:09 PM
Downsizing & Holiday Decorations shtg42012 Other topics 14 12-28-2006 04:19 PM
Downsizing WRBT FIRE and Money 42 11-29-2005 01:48 PM

 

 
All times are GMT -6. The time now is 06:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.