120K year Lifestyle

TheWizard said:
Checko.
Where it matters is what you are doing to get the extra income.
Some folks are doing nothing additional; they get an inheritance or maybe a spouse passed away and they have more income as a Single person.

That's fine.
But if you're still working in a high tax bracket when you easily could be retired, then there's room for discussion there...
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When my spouse passed away, I ended up with less income and more taxes.....:facepalm:
 
RothIRA withdrawals can help when you need tax free income. Withdrawing some iBonds can also help, because the taxes on the iBond interest will be due the following year.
 
aja8888 said:
When my spouse passed away, I ended up with less income and more taxes.....:facepalm:
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Yes, I'm w*rking diligently to set DW up so this issue (less income - more taxes) will be less of an issue.
 
Jenny needs to find investments with better tax handling. Non-dividend paying stocks could be a start. She gets hit with taxes on those only if she decides to sell shares at a gain.
 
Diogenes said:
I'll give an example/analogy. Jenny is a waitress in a cocktail bar, earning very modest wages. She shares an apartment with her roommate, and does her best to contribute to her Roth IRA. One day, Jenny's rich uncle Rufus dies, and leaves to her $10M. Jenny puts the $10M into the Vanguard S&P 500 index fund. The calendar rolls over, and now it's tax-season in the following year. Vanguard sends to Jenny a 1099R, showing that hey, over the months that she's had that account, it has generated $100K in taxable dividends. Now she needs to scramble to pay her tax bill... take extra hours at the bar, maybe get a second job... except that those extra hours or job, also mean more income tax. By becoming richer, Jenny has become... poorer.
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Jenny might benefit greatly from a quick course in (very) basic financial literacy.

"Sob! Now I need a second job because I made $100,000 in unexpected investment income!!"

Uncle Rufus: this is what happens when you leave big money to complete idiots.
 
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And she's most likely only paying 15% federal, given qualified dividends.

I do love when people complain about paying taxes, especially IRMAA or NIIT.

No way will I ever realize enough income to pay either of those.
 
ncbill said:
And she's most likely only paying 15% federal, given qualified dividends.

I do love when people complain about paying taxes, especially IRMAA or NIIT.

No way will I ever realize enough income to pay either of those.
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At least you won't need to get a job to pay the taxes. Be happy!
 
Diogenes said:
I'll give an example/analogy. Jenny is a waitress in a cocktail bar, earning very modest wages. She shares an apartment with her roommate, and does her best to contribute to her Roth IRA. One day, Jenny's rich uncle Rufus dies, and leaves to her $10M. Jenny puts the $10M into the Vanguard S&P 500 index fund. The calendar rolls over, and now it's tax-season in the following year. Vanguard sends to Jenny a 1099R, showing that hey, over the months that she's had that account, it has generated $100K in taxable dividends. Now she needs to scramble to pay her tax bill... take extra hours at the bar, maybe get a second job... except that those extra hours or job, also mean more income tax. By becoming richer, Jenny has become... poorer.

The peanut gallery might yell, "Hey Jenny, you dumb [expletive]! Don't ya know, ya gotta pay taxes on that them thar gains?" Yeah, Jenny knows. Now she makes quarterly estimated payments to the IRS (next one is due tomorrow, BTW)... meaning, that even less of her paycheck is hers to keep.

OK. The solution is right under Jenny's nose, yes? She can withdraw some of that money from her account, using it to pay her taxes, yes? She can. But she wants to keep contributing to her retirement... or at very least, not withdrawing from her accounts. Now suddenly she has to! She never earned much, but she spent a lifetime trying to be frugal and diligent and set money aside. Now, she can't.

I'm not Jenny. I don't work in a cocktail bar. I don't have a rich uncle Rufus. No stupendous windfalls here... just gradual accumulation. But eventually one wakes up, and realizes: "Holy [expletive!]! I have become just like Jenny!"
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Jenny does not need to be working and has an odd view of finances.

Diogenes, it seems like there is room to optimize your situation.
 
Jennay could take a couple days to a week off (unpaid from work, if need be) and learn about her new investments, including qualified and unqualified dividends, and the tax consequences. That's exactly what I did when I inherited some funds that upped my savings to a level that I thought might allow me to RE.
 
ncbill said:
And she's most likely only paying 15% federal, given qualified dividends.

I do love when people complain about paying taxes, especially IRMAA or NIIT.

No way will I ever realize enough income to pay either of those.
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When you eventually DO have to pay IRMAA or NIIT, I guess we'll enjoy hearing you whine about paying the taxes. :facepalm: :cool:

Whining about taxes is our right!
 
Koolau said:
When you eventually DO have to pay IRMAA or NIIT, I guess we'll enjoy hearing you whine about paying the taxes. :facepalm: :cool:

Whining about taxes is our right!
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I’ve said this before on here and got pushback, but if you are going to go over one of the thresholds, go over by a lot to make it worth your while. Having the extra income will cover the extra tax.
I am doing it with eBay this year. They will 1099 you at $600. So we are selling a bunch. We’re at over $4000 YTD. If I am going to pay the tax, I am going to make some coin at the same time.
 
COcheesehead said:
I’ve said this before on here and got pushback, but if you are going to go over one of the thresholds, go over by a lot to make it worth your while. Having the extra income will cover the extra tax.
I am doing it with eBay this year. They will 1099 you at $600. So we are selling a bunch. We’re at over $4000 YTD. If I am going to pay the tax, I am going to make some coin at the same time.
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I take the same approach. If I'm going into the 22% marginal bracket, I might as well go to the top of it with Roth conversions.
 
Diogenes said:
Call me a whiner - or more bluntly, just plainly stupid - but had I realized 20 or 30 years ago, how expensive it is to be "rich", I'd not ever have gone to the trouble.
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Instead of complaining that you have too much money to afford to live, why don't you learn from those who did well with far less?

We live well under $120k a year, in fact well under $90k and have a paid off house, a paid off cabin, and snowbird for 3 months every winter. I can't think of anything we're missing out on.

You're doing something wrong.
 
if you have a paid off house 120k goes pretty far here. If youre making a buncha payments on it, it aint great.
 
Music Lover said:
Instead of complaining that you have too much money to afford to live, why don't you learn from those who did well with far less?

We live well under $120k a year, in fact well under $90k and have a paid off house, a paid off cabin, and snowbird for 3 months every winter. I can't think of anything we're missing out on.

You're doing something wrong.
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Oh, I'm all in favor of learning! But, with all due respect, instead of "teaching", the message seems to be emoticons with tiny violins.

The thematic message in my posts, goes like this.... The FIRE culture is all about building wealth. How to be frugal, how to invest and so on. What rarely gets conveyed, is that the building of wealth introduces its own problems... I mean, not the "how to do it", but what happens upon having done it.

Let's run with your second paragraph, by way of example. You spend under $90K, with a paid-off house. Meaning... that you have a paid-off house, right? In the alternative, you spent 35 years living in crappy basement apartments with roommates, saving the difference between rental costs and the PITI of owning a house. So, now you have all of those millions or billions or trillions or whatever. Right? But you don't have a house. This alternative version of you, is wealthier... because that's how the problem is set up. You made "better" investment choices. Now you have some options (because, we're told, that wealth bestows options on us... right? That's a debate for a different thread...). Those options are: (1) spend $1.5M on a house, from your cash-stash; (2) spend $10K/month on a mortgage; (3) stay in your roach-motel basement apartment. If you choose (1), there are the pangs of dipping into the stash. Option (2) blows that $120K/year budget. And option (3)... speaks for itself.
 
Having money allows you to have more choices. Not having money limits your choices. If you're having trouble making choices, your problem is not the money.
 
Diogenes said:
Let's run with your second paragraph, by way of example. You spend under $90K, with a paid-off house. Meaning... that you have a paid-off house, right? In the alternative, you spent 35 years living in crappy basement apartments with roommates, saving the difference between rental costs and the PITI of owning a house. So, now you have all of those millions or billions or trillions or whatever. Right? But you don't have a house. This alternative version of you, is wealthier... because that's how the problem is set up. You made "better" investment choices. Now you have some options (because, we're told, that wealth bestows options on us... right? That's a debate for a different thread...). Those options are: (1) spend $1.5M on a house, from your cash-stash; (2) spend $10K/month on a mortgage; (3) stay in your roach-motel basement apartment. If you choose (1), there are the pangs of dipping into the stash. Option (2) blows that $120K/year budget. And option (3)... speaks for itself.
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We live on $90k but could live on $60k. But on $90k we're living large.

We didn't spend $1.5 million on a house, we spent 20% of that. And we paid it off before retiring, like most people we know did.

If your only option is a $1.5 million dollar house move somewhere cheaper.
 
Diogenes said:
I'll give an example/analogy. Jenny is a waitress in a cocktail bar, earning very modest wages. She shares an apartment with her roommate, and does her best to contribute to her Roth IRA. One day, Jenny's rich uncle Rufus dies, and leaves to her $10M. Jenny puts the $10M into the Vanguard S&P 500 index fund. The calendar rolls over, and now it's tax-season in the following year. Vanguard sends to Jenny a 1099R, showing that hey, over the months that she's had that account, it has generated $100K in taxable dividends. Now she needs to scramble to pay her tax bill... take extra hours at the bar, maybe get a second job... except that those extra hours or job, also mean more income tax. By becoming richer, Jenny has become... poorer.
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Shouldn't she call Vanguard and ask why she got a 1099-R rather than a 1099-Div?
 
Diogenes said:
Now they're being penalized (via taxes), whereas their counterparts, who spent every penny, aren't thus being penalized. Call me a whiner - or more bluntly, just plainly stupid - but had I realized 20 or 30 years ago, how expensive it is to be "rich", I'd not ever have gone to the trouble.
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"Nothing is more admirable than the fortitude with which millionaires tolerate the disadvantages of their wealth" (Jean Rostand)

Having said that, this is one of the most mmmmm...... "interesting" posts so far this year. What a fascinating angle!

It may be expensive to be rich but it's equally expensive to be poor and having less money to deal with it.
 
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Diogenes said:
there are the pangs of dipping into the stash
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Is this your issue?

I have no problem dipping into the stash. The stash is there to be dipped into. That has always been the plan. Spending interest and dividends is dipping into the stash too. If I don't dip into the stash, I have to go back to w*rk. No one is going to give me a free ride, and I have no desire to live on $0/yr.
 
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