Many Americans try retirement, then change their minds

[Shanky]

FIRE is a term that means you don't have to work for money. I think there are many FIRE people who still work because they enjoy it, gosh so many! To me, FIRE is freedom, freedom to choose. If the forest preserve offered me a paying job, I would certainly consider it. I love it there and spend most of my time there because I want to.

That would be FI, not FIRE.

 

[Fleur58]

In my case I had to quit at almost 58 to get out of an untenable work situation. Luckily I could afford to do so even though there was no pension. I never looked for a job I was so disoriented and disappointed. However, after a year of going crazy with nothing to do except vacations; I started taking courses to be an ESOL Teacher. Right decision. I had homework to do, classes to attend, and volunteer opportunities to participate in. Now 2 years into the "retirement" I am about to get my ESOL certificate at almost 60. I may continue to volunteer or seek a part-time paying position. I don't "need" the money I just need something to do a few days a week. When you have nothing to do, the days seem endless. I don't even wear a watch anymore. I don't want to teach English everyday, a few days per week helps to break up the monotony.

 

[UnrealizedPotential]

Fleur58,
I say go for it! Nothing wrong with that since you enjoy it or at least keeps you busy. You can do it for as long as you like.

 

[HI Bill]

I'm 52 years old, and planning to retire from full-time consulting work, which I've been doing non-stop for 27 years. On the weekends, I'm perfectly content to stay in bed with my wife until 11, then have a leisurely brunch, then nap, then try to get motivated to do something in the late afternoon. My idea of retirement is starting each day with either a scuba dive, working out or lap swimming, then on to photo editing, and/or writing articles for dive magazines. If I get bored with all that, I may take up wedding photography as a part-time hobby. Guess I'm ready to repurpose my life, rather than to retire now that I'm FI.

I was at a friend's condo in Waikiki a couple of weeks ago, and she doesn't work, and her husband is in the mainland working on his hobby (growing corn). I asked her what she does all day, and it's mostly just going out with friends. Not sure I could get by with just doing that!

 

[haha]

I was at a friend's condo in Waikiki a couple of weeks ago, and she doesn't work, and her husband is in the mainland working on his hobby (growing corn).

I wonder how this woman feels about her husband preferring corn growing to spending time with her. Perhaps there are other elements to this otherwise hard to understand tale?

Ha

 

[HI Bill]

I wonder how this woman feels about her husband preferring corn growing to spending time with her. Perhaps there are other elements to this otherwise hard to understand tale?
Ha

She's a self-proclaimed 'city girl', and he's a farmer at heart. She likes to take diving vacations, and he likes to stay on land. Seems to work for them!

 

[Huston55]

She's a self-proclaimed 'city girl', and he's a farmer at heart. She likes to take diving vacations, and he likes to stay on land. Seems to work for them!

Sounds like Green Acres is NOT the place for her.

 

[jollystomper]

I have to admit I am amused at the "is it RE or is it not RE?" for those who retire and then choose to do something that they are being paid for, when the need for money is not an issue. I have always seem as RE being able to choose every day what you wanted to do without regards to the want or need for money. If someone retires then chooses, out of some interest, to spend time on something they get paid for, more power to then.

The way two of my siblings who are RE have put it, before retirement they had to fit how they wanted to spend their time around their job, but after retirement they can choose if they want to fit a paying gig around how they want to spend their time.

 

[RE2Boys]

I have to admit I am amused at the "is it RE or is it not RE?" for those who retire and then choose to do something that they are being paid for, when the need for money is not an issue. I have always seem as RE being able to choose every day what you wanted to do without regards to the want or need for money. If someone retires then chooses, out of some interest, to spend time on something they get paid for, more power to then.

The way two of my siblings who are RE have put it, before retirement they had to fit how they wanted to spend their time around their job, but after retirement they can choose if they want to fit a paying gig around how they want to spend their time.

+1000
Exactly how I feel and how I've lived the 18 years since I "retired" from my career job. BTW, I still tell folks I'm semi-retired as I work on my terms. Just resigned a seasonal job (tax prep) as the CPA firm, after 12 years, has started acting like a Megacorp, I don't need to put up with that crap. Next year may seek another "dog days of winter" job but more likely to find a volunteer position as it is getting really tough to stay in the now 12% tax bracket

 

[gayl]

+1000
Exactly how I feel and how I've lived the 18 years since I "retired" from my career job. BTW, I still tell folks I'm semi-retired as I work on my terms. Just resigned a seasonal job (tax prep) as the CPA firm, after 12 years, has started acting like a Megacorp, I don't need to put up with that crap. Next year may seek another "dog days of winter" job but more likely to find a volunteer position as it is getting really tough to stay in the now 12% tax bracket

Never worried about the tax bracket as keeping only 78% of the next dollar VS 88% of the next dollar is immaterial. I also worked in accounting (tax & forensic) after early retirement. Left last January but promptly started with elections dept up to 10 hrs month. Some of us never learn

 

[RE2Boys]

Never worried about the tax bracket as keeping only 78% of the next dollar VS 88% of the next dollar is immaterial. I also worked in accounting (tax & forensic) after early retirement. Left last January but promptly started with elections dept up to 10 hrs month. Some of us never learn

Unfortunately the marginal rate last year for going over the 15% bracket meant a marginal rate of 33%. If I added $100 to AGI, only got to keep $67 (including state). Well known issue.

I limit my election involvement to two days a year for a whopping $210 running a polling location. Those 14 hour days a long.

 

[gayl]

Unfortunately the marginal rate last year for going over the 15% bracket meant a marginal rate of 33%. If I added $100 to AGI, only got to keep $67 (including state). Well known issue.

Exactly ... next dollar not 1st dollar & more concerned with 2018 then 2017

 

[Loving Life]

I retired at 55 about 8 years ago - It not that I need to work ( FI since I was 40), but I keep getting good opportunities overseas with contract jobs. - Had a ball - now 63, at home and retired again - we will see how long it will last.

 

[pb4uski]

Exactly ... next dollar not 1st dollar & more concerned with 2018 then 2017

I think the way it works is that the marginal tax rate above the top of the 12% bracket will be 27% for any rdinary income up to the amount of preferenced income as each additional dollar of ordinary income is taxed at 12% and pushes preferenced income from 0% to 15%.

So if you have $30k of LTCG in your income to the top of the 12% tax bracket an additional $30k of ordinary income would result in $8k of tax! Ouch!

 

[street]

When some people retire they retire from a career and choose to do a PT/Temp gig to fill a little of their time. A train moving 120 MPH sometimes just can't stop on a dime.

I have done the PT/Temp gig for about 90 days a year and really has helped me slow down the fast tempo I had when working. I have a very physical PT job so for me I get paid for staying in shape and have a social life with a few of the other workers. Been a healthy thing for me and I don't need the money but I needed the rest of what that PT job has given me.

 

[Huston55]

I think the way it works is that the marginal tax rate above the top of the 12% bracket will be 27% for any earned income up to the amount of preferenced income as each additional dolar of earned income is taxed at 12% and pushes preferenced income from 0% to 15%.

So if you have $30k of LTCG in your income to the top of the 12% tax bracket an additional $30k of ordinary income would result in $8k of tax! Ouch!

This doesn’t sound right. Isn’t the sequence earned income (which determines LTCG tax rate), then LTCGs (unearned income) are taxed @ the LTCG rate? So, in the example above (assuming MFJ), the $30k of ordinary income would be taxed @ 10-12%, then the LTCG would be taxed @ 0% up to $77k, then 15% from $77k-$479k.

 

[Fleur58]

I am getting confused. Does this mean if I have $36, 600 of total unearned income and no earned income:
15K Roth Conversion is 12% tax
10 K qualified dividends is 0% tax
10.6 K long term cap gains is 0% tax
2K Short term cap gains is 12% tax?

 

[pb4uski]

This doesn’t sound right. Isn’t the sequence earned income (which determines LTCG tax rate), then LTCGs (unearned income) are taxed @ the LTCG rate? So, in the example above (assuming MFJ), the $30k of ordinary income would be taxed @ 10-12%, then the LTCG would be taxed @ 0% up to $77k, then 15% from $77k-$479k.

No, it is right... but you are right too... if the added income is preferenced income/LTCG then the marginal tax is 15%... but if the added income is ordinary income then the marginal tax rate is initially 27% and then 22%.

To make it simple lets assume that the top of the 12% tax bracket and the top of the 0% preferenced rate is $77,200 (MFJ) and ignore the $200 difference.

Taxpayer has $77,200 in TI, $30,000 in LTCG and $47,200 in ordinary income. They are in the 12% tax bracket for ordinary income and the 0% tax bracket for LTCG.

They then add $30,000 of ordinary income (by doing a tIRA withdrawal, or Roth conversion or whatever). That extra $30,000 of income makes their TI $107,200... $77,200 of ordinary income and $30,000 of LTCG. Their ordinary tax increases $3,600 ($30,000@12%) and their $30,000 of LTCG are now taxed at 15% rather than 0%, result in a $4,500 increase in tax. So their total tax increases by $8,100... 27% of the $30,000 increase in income.

If from the $107,200 they add more ordinary income it would be taxed at 22%... or more preferenced income/LTCG would taxed at 15%.

So their marginal rate is 27% for ordinary income added above the top of the 12% tax bracket for the amount of their preferenced income.... and then it drops to 22% for additional ordinary income or 15% for additional preferenced income.

 

[Huston55]

I am getting confused. Does this mean if I have $36, 600 of total unearned income and no earned income:
15K Roth Conversion is 12% tax
10 K qualified dividends is 0% tax
10.6 K long term cap gains is 0% tax
2K Short term cap gains is 12% tax?

Yes, I think that’s correct. Although, your numbers add to $37,600. But, still below the 0% tax rate threshold ($38,600 filing single) for LTCG & Qualified Dividends.

 

[Fleur58]

I don't know why I was thinking 37, 600 was the limit! The 0 tax has implications for calculating how much I'll owe in quarterly taxes! A break! Wish my state tax of 7.5% had the same treatment. Thanks!

 

[Huston55]

No, it is right... but you are right too... if the added income is preferenced income/LTCG then the marginal tax is 15%... but if the added income is ordinary income then the marginal tax rate is initially 27% and then 22%.

To make it simple lets assume that the top of the 12% tax bracket and the top of the 0% preferenced rate is $77,200 (MFJ) and ignore the $200 difference.

Taxpayer has $77,200 in TI, $30,000 in LTCG and $47,200 in ordinary income. They are in the 12% tax bracket for ordinary income and the 0% tax bracket for LTCG.

They then add $30,000 of ordinary income (by doing a tIRA withdrawal, or Roth conversion or whatever). That extra $30,000 of income makes their TI $107,200... $77,200 of ordinary income and $30,000 of LTCG. Their ordinary tax increases $3,600 ($30,000@12%) and their $30,000 of LTCG are now taxed at 15% rather than 0%, result in a $4,500 increase in tax. So their total tax increases by $8,100... 27% of the $30,000 increase in income.

If from the $107,200 they add more ordinary income it would be taxed at 22%... or more preferenced income/LTCG would taxed at 15%.

So their marginal rate is 27% for ordinary income added above the top of the 12% tax bracket for the amount of their preferenced income.... and then it drops to 22% for additional ordinary income or 15% for additional preferenced income.

I see now. The difference is that we were counting from different income levels & using different income sources.

Edit to Add: These examples seem to illustrate the tax advantages of deriving a larger proportion of income from unearned (“preferenced”) sources.

 

[pb4uski]

Yes... principally equities. Most US equities dividends are qualified and LTCGs are preferenced too. For international equity funds, typically a good portion of their dividends are qualified, LTCG are preferenced, plus you get the foreign tax credit. In our case, our international holdings income have a negative effective tax rate (foreign tax credit exceeds the tax on unqualified dividends).

That is why, other than cash in an online savings account, all our taxable account investments are equities and I am steering it more towards international equities as I rebalance.

 

[Huston55]

Yes... principally equities. Most US equities dividends are qualified and LTCGs are preferenced too. For international equity funds, typically a good portion of their dividends are qualified, LTCG are preferenced, plus you get the foreign tax credit. In our case, our international holdings income have a negative effective tax rate (foreign tax credit exceeds the tax on unqualified dividends).

That is why, other than cash in an online savings account, all our taxable account investments are equities and I am steering it more towards international equities as I rebalance.

Similar here. Largest taxable account allocation is equities, next largest is near-term ‘safe’ money in CD Ladder & Muni-Bonds. No international tilt for us.

 

[Katsmeow]

DH retired almost 8 years ago and has never had any thought at all of doing any kind of work.

I intended to retire at the same time but was prevailed upon to continue to do some part-time work. For the last several years it has been done from home and is now very, very part-time.

But, I have actually thought about getting an actual job when I quit doing that. I would not work in the actual field I spent my career. I mean that is sort "been there, done that." But I do sometimes think about doing something in some other field entirely. Just because some things sound interesting and I think it would be fun to do them. I do have a lot of hobbies and interests. Those are fun to me and interesting. But, there are some things that also sound fun and interesting that people get paid for doing. I could see doing something like that just for the fun and interesting part and the fact you get paid would be a bonus.

Now -- these are mostly jobs where you work part-time or can work part-time or where you can at least somewhat set your schedule. I have no interest at all in working full-time to someone else's schedule. That would take away from the fun and interesting part.

But, I can definitely imagine doing some work in some fields that I would have never worked in before because they didn't pay enough compared to may actual field. But, since the money wouldn't be necessary, I could indulge myself by doing something like that.

I doubt that I actually will do it...but I do see why someone might do it.

 

[gayl]

some things sound interesting and I think it would be fun to do them.... since the money wouldn't be necessary, I could indulge myself by doing something (like that)

exactly, once money isn't the motivator, self fulfillment thru volunteering or paid work takes on a different perspective