market_timer
Confused about dryer sheets
Hi,
I'm a new member who joined after reading Fuego's idea on using income-based repayment as part of a FIRE strategy. This has been a plan B of mine for a couple years. Good to see someone else has a similar idea. Some of you may know me from Bogleheads. I'd like to keep this thread from devolving into politics. The government makes the rules, and it is our job simply to comply with them.
An unintented consequence of income-based repayment is that some HENRYs with six-figure debt will decide to switch to a slower paced life with less pay, less debt, and more free time. Society has gradually adapted to harness the work ethic and intelligence of HENRYs, typically an urban professional in the upper middle class. There are several factors that combine to decimate the HENRY's buying power. Consider the costs facing a typical mid-career, single professional in NYC earning $200K:
(1) Progressive tax code: 33% tax rate, perhaps rising to 36% in 2011
(2) State and city income taxes: around 11-12%
(3) FICA: 2.9% Medicare + $6324/year Social Security, both likely rising
(4) Sales taxes: 8.875%
(5) Inflated property values: meaning people have the option either to buy a $1M property (with $1800/month property taxes) or rent at $2500/month
(6) Inflated cost of services due to higher rents
(7) "Clustering" costs -- by which I mean the cost of having to do business/travel during peak times: can translate into 100% higher costs for airfare than those with scheduling flexibility
Now, let's add $150K in student loan debt into the mix. On a 10-year repayment schedule at 5% interest, that is another $1600/month payment.
Clearly, there are ways to reduce the tax burden and save on expenses by adopting a LBYM lifestyle. This is what I've done. By rejecting the high costs associated with NYC, I'm quickly accumulating enough savings to become FIRE. While I think most of us HENRYs are pretty happy and fortunate to have good jobs, IBR offers a great plan B in case of job loss.
So, while not part of my immediate future, I'd like to consider jobs that qualify for PSLF, so as not to be caught doe-eyed if there is another financial crisis. Perhaps that means even taking steps now as insurance. Here are the characteristics that I would find most appealing:
(1) High benefits-to-pay ratio: only pay is included in AGI, so benefits like free housing, health insurance, a pension, and international travel would be ideal
(2) Minimal work week, flexible schedule: technically, 30 hours per week is the minimum for full-time
(3) Position that increases one's skill set for a second career: for example, a government job that leads to a private sector consulting position
I'm a new member who joined after reading Fuego's idea on using income-based repayment as part of a FIRE strategy. This has been a plan B of mine for a couple years. Good to see someone else has a similar idea. Some of you may know me from Bogleheads. I'd like to keep this thread from devolving into politics. The government makes the rules, and it is our job simply to comply with them.
An unintented consequence of income-based repayment is that some HENRYs with six-figure debt will decide to switch to a slower paced life with less pay, less debt, and more free time. Society has gradually adapted to harness the work ethic and intelligence of HENRYs, typically an urban professional in the upper middle class. There are several factors that combine to decimate the HENRY's buying power. Consider the costs facing a typical mid-career, single professional in NYC earning $200K:
(1) Progressive tax code: 33% tax rate, perhaps rising to 36% in 2011
(2) State and city income taxes: around 11-12%
(3) FICA: 2.9% Medicare + $6324/year Social Security, both likely rising
(4) Sales taxes: 8.875%
(5) Inflated property values: meaning people have the option either to buy a $1M property (with $1800/month property taxes) or rent at $2500/month
(6) Inflated cost of services due to higher rents
(7) "Clustering" costs -- by which I mean the cost of having to do business/travel during peak times: can translate into 100% higher costs for airfare than those with scheduling flexibility
Now, let's add $150K in student loan debt into the mix. On a 10-year repayment schedule at 5% interest, that is another $1600/month payment.
Clearly, there are ways to reduce the tax burden and save on expenses by adopting a LBYM lifestyle. This is what I've done. By rejecting the high costs associated with NYC, I'm quickly accumulating enough savings to become FIRE. While I think most of us HENRYs are pretty happy and fortunate to have good jobs, IBR offers a great plan B in case of job loss.
So, while not part of my immediate future, I'd like to consider jobs that qualify for PSLF, so as not to be caught doe-eyed if there is another financial crisis. Perhaps that means even taking steps now as insurance. Here are the characteristics that I would find most appealing:
(1) High benefits-to-pay ratio: only pay is included in AGI, so benefits like free housing, health insurance, a pension, and international travel would be ideal
(2) Minimal work week, flexible schedule: technically, 30 hours per week is the minimum for full-time
(3) Position that increases one's skill set for a second career: for example, a government job that leads to a private sector consulting position
