stonksock said:

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Yeah in early retirement I can engineer my taxable income, I could have made it look like I made no money last year as far as the IRS concerned and gotten a full subsidy on my healthcare from the exchange. I decided to do large Roth conversion instead and pay my premiums. I think that will give me more long term results since I am over 30 years away from RMDs I should be able to Roth convert my entire IRA at 12% before then.

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interested in hearing more about the engineering taxable income part, where you draw/take gains from and what limits to stay under for (medi-cal?) eligibility

also are you now Roth laddering and spending from any of it after 5 years or just from taxable now, and what the healthcare premium costs are with converting at 12% (plus any other taxable distributions taken?)

I hope this isn't how my comment comes across.

my expenses are prob a lot lower since I'm single and frugal even living on the beach, but I could prob close to double my annual expenses with 4% withdrawal rate, but would like to be more comfortable in early retirement and taxes/healthcare would be an x factor, plus being tough to shift to conservative portfolio after seeing it essentially triple over 3 years

EliteZags said:

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stonksock said:

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Yeah in early retirement I can engineer my taxable income, I could have made it look like I made no money last year as far as the IRS concerned and gotten a full subsidy on my healthcare from the exchange. I decided to do large Roth conversion instead and pay my premiums. I think that will give me more long term results since I am over 30 years away from RMDs I should be able to Roth convert my entire IRA at 12% before then.

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interested in hearing more about the engineering taxable income part, where you draw/take gains from and what limits to stay under for (medi-cal?) eligibility

also are you now Roth laddering and spending from any of it after 5 years or just from taxable now, and what the healthcare premium costs are with converting at 12% (plus any other taxable distributions taken?)

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Direct indexing and tax loss harvesting gives you control of when and how you take your long term capital gains. So if you hold an index its very tax efficient because one sector is down and the other is up it balances out and you don't have that much capital gain. But when you spread your investments out over all the all the sectors you can pick and choose when to take gains or losses. When you choose to take loses you are just lowering your basis and inflating your unrealized gains, so basically just kicking the tax can down the road. By spreading your investments across the sectors you still are basically index investing you just get a little more control.

After retiring I could have only sold my investments that were at a loss or equal and reinvested in similar companies to basically make it look like I was losing money or just breaking even. I am 20+ years away from my small pension and reduced social security (since I didn't work a full 40 years) so there is no income being forced on me outside of the 1.3% dividends on my indexed holdings (all my bonds are stored in my tax differed IRA to avoid the tax drag).

So if I wanted the IRS to think I was broke, I could just sell shares that were underwater, reinvest into something that isn't identical but tracks with it, and lived off that income while still qualifying for the maximum subsidy for healthcare.

I didn't want to kick that can down the road and decided it was better to just pay my premium ($900 a month for my wife and I) and Roth convert my tax-deferred IRA up to the top of the 12% bracket for MFJ because I think I can fully convert it before I need to worry about RMDs.

I have enough after tax I doubt I will need to dip into the Roth before I am 59.5 but the fact that I am laddering into it now give me that flexibility if I need to before age 59.5. I also have a little over 100k in an HSA (and I am still contributing to and will continue to now that all bronze exchange plans are HSA eligible), and I am sitting on about 30k of receipts that I could use to pull from there if needed.

stonksock said:

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RightWingConspirator said:

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Insurance is a consideration. I'm Type 1 Diabetic and I do have some insurance benefits from my work, but it would still be substantial until I can roll over to Medicare. I'm only 52 so I'd have to fork over a decent chunk of money for the next several years.

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Have you priced out healthcare exchange policies? I am mid 40s, retired a year and half ago and on the exchange. The plans aren't as bad a f16 will have you believe. You could always go HDHP and just pay the 8k a year max out of pocket. If you budget for that you could give up work now and do whatever you want. Don't throw years of your life away just for the insurance.

If you love your job and it brings you purpose keep at it. Otherwise as someone on the other side I am glad I hung it up once I hit my number.

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Are you talking about Obamacare? I wasn't aware they had HDHP on that.

EliteZags said:

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stonksock said:

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Yeah in early retirement I can engineer my taxable income, I could have made it look like I made no money last year as far as the IRS concerned and gotten a full subsidy on my healthcare from the exchange. I decided to do large Roth conversion instead and pay my premiums. I think that will give me more long term results since I am over 30 years away from RMDs I should be able to Roth convert my entire IRA at 12% before then.

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interested in hearing more about the engineering taxable income part, where you draw/take gains from and what limits to stay under for (medi-cal?) eligibility

also are you now Roth laddering and spending from any of it after 5 years or just from taxable now, and what the healthcare premium costs are with converting at 12% (plus any other taxable distributions taken?)

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Married couples pay 0% on LTGapGains (incl qualified Div) for taxable income under $96.7K. Married couples can deduct $31.5K of regular income which includes interest income. ACA max subsidy for married couple is complicated but around AGI of $35K and decreases about $1.5K for every $10K of additional AGI. I think the subsidy disappears after this year when a married couple AGI exceeds $84K (subsidy cliff).

YouBet said:

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stonksock said:

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RightWingConspirator said:

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Insurance is a consideration. I'm Type 1 Diabetic and I do have some insurance benefits from my work, but it would still be substantial until I can roll over to Medicare. I'm only 52 so I'd have to fork over a decent chunk of money for the next several years.

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Have you priced out healthcare exchange policies? I am mid 40s, retired a year and half ago and on the exchange. The plans aren't as bad a f16 will have you believe. You could always go HDHP and just pay the 8k a year max out of pocket. If you budget for that you could give up work now and do whatever you want. Don't throw years of your life away just for the insurance.

If you love your job and it brings you purpose keep at it. Otherwise as someone on the other side I am glad I hung it up once I hit my number.

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Are you talking about Obamacare? I wasn't aware they had HDHP on that.

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Yes Obamacare but it might be area dependent. In DFW there are two HSA eligible plans one is Baylor Scott and White and I think the other is United healthcare. There are several other plans with max out of pocket slightly larger (I think 2-3k more per year) but offer co pays so if your biggest expense is office visits and medication you might still save. Plus all bronze plans will be HSA eligible starting next year even if they aren't hdhp

JohnClark929 said:

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EliteZags said:

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stonksock said:

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Yeah in early retirement I can engineer my taxable income, I could have made it look like I made no money last year as far as the IRS concerned and gotten a full subsidy on my healthcare from the exchange. I decided to do large Roth conversion instead and pay my premiums. I think that will give me more long term results since I am over 30 years away from RMDs I should be able to Roth convert my entire IRA at 12% before then.

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interested in hearing more about the engineering taxable income part, where you draw/take gains from and what limits to stay under for (medi-cal?) eligibility

also are you now Roth laddering and spending from any of it after 5 years or just from taxable now, and what the healthcare premium costs are with converting at 12% (plus any other taxable distributions taken?)

---

Married couples pay 0% on LTGapGains (incl qualified Div) for taxable income under $96.7K. Married couples can deduct $31.5K of regular income which includes interest income. ACA max subsidy for married couple is complicated but around AGI of $35K and decreases about $1.5K for every $10K of additional AGI. I think the subsidy disappears after this year when a married couple AGI exceeds $84K (subsidy cliff).

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Even though LTCG are taxed at 0% in the lowest brackets, it's still considered taxable income for the subsidies calculations. So to rig it make it look like you are broke you have to offset gains with carry over or harvested losses. I feel like it's much better to realize the gains at 0% with a combination of Roth converting at 12% and pay for my premiums over getting the subsidy and kicking the tax can down the road.

Due to where we were employed in this time frame we've been mostly NASDAQ and more than 5x overall.

Do you mind sharing how you transitioned?

Real estate generates income
What do you do for insurance?
What hidden costs are there to not having W2 income that we may not be considering?

Thanks

Yeah thanks. Knowing what you know - where do you think the break point for someone with cash/taxable brokerage accounts to truly break free? Not talking 401k or Roths.

I'm sure it's highly dependent on the person/family, but for us it was "Can we live on $XXX and be satisfied knowing that we're giving up some stuff for our freedom/flexibility/peace of mind?" We have plenty right now (live on $300kish per year), but of course if I were working, with what I've accomplished already, we could easily be making twice or even more than that. But for what? To save up so that we can have freedom/flexibility/peace of mind. Which we already have! That's what I just don't think most people realize or even comprehend.

I like to ask people "what is your perfect day?" and then help them see that the majority of how they'd want to spend their ideal day has very little to do with money and a ton to do with being intentional instead of kicking the can down the road when the life you want is pretty much in reach for you right now.

Hope this helps. Sorry to derail and hope everyone isn't annoyed. Take care.

Not bad retiring with around $7.5MM.

Nah, I said above we're at about $5M. Our real estate does really well and gets a great return and have a couple other small things that throw off the rest with about 5 hours a week of direct work. I was never trying to brag. Sorry if it seemed like that.

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We do a medi-share program for health insurance.

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Medi-share won't cover you if you're within the five year window of being declared cancer free. My wife will hit the five year anniversary next month so hopefully it will be an option in 2026.

In the meantime, she's on a high deductible (five figure) marketplace policy which does cover office visits and pharmacy, but not much else. And it's 'only' $1250 per month due to the fact we exceed the income threshold of Obamacare.

I was planing to retire early as well, but I too was diagnosed with cancer. As such, I chose to work until I qualified for Medicare (65).

I admire those of you in your 40's and 50's who are retired. I hope you stay in good health until you're 65.

ToddyHill said:

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Quote:

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We do a medi-share program for health insurance.

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Medi-share won't cover you if you're within the five year window of being declared cancer free. My wife will hit the five year anniversary next month so hopefully it will be an option in 2026.

In the meantime, she's on a high deductible (five figure) marketplace policy which does cover office visits and pharmacy, but not much else. And it's 'only' $1250 per month due to the fact we exceed the income threshold of Obamacare.

I was planing to retire early as well, but I too was diagnosed with cancer. As such, I chose to work until I qualified for Medicare (65).

I admire those of you in your 40's and 50's who are retired. I hope you stay in good health until you're 65.

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That's one of my biggest hurdles as well. My wife is 6 months cancer free. To keep her doctor, I'm paying close to $2800/month for cobra. I'm self employed and the exchange options aren't accepted by MD Anderson, so I'm likely going to have to pay full freight for a group plan through my company.

Just curious if this is a net worth number that you got to for you to feel "comfortable" to retire at or $$ you had in the market. I wonder sometimes if I'm too heavily weighted towards retirement accounts vs brokerage to access funds if I retire early.

50% is in retirement
10% in 529s
25% in brokerage and the rest in private equity.

It really is. We travel a lot and have started doing our annual checkups and some tests on the road. Did this one last year and will again in a few weeks when we are moving through BKK to get to our place in Samui. Runs about a fourth of what it costs us in the states.

Work hard, save at least 10% of what you make - whether or not you work for someone else or are self-employed. Invest in stocks (preferably SPY) and bonds, heavily weighted toward stocks. Drive a car until it wears out. Buy a home that you can afford and pay it off as soon as possible. Payoff credit cards every month. Dabble in real estate only when it's a good deal that makes sense. Hire a good CPA that knows your business. And last but not least - DON'T loan money to relatives or friends!

We are weird and don't really have almost anything in retirement funds. Literally like 1%. All of ours is in taxable brokerage (about 10% of net worth), 529's (about 5% of net worth), and cash producing real estate (the rest including our personal home). So I'm not sure we're the best example. I DO think taxable brokerage accounts for people with any interest whatsoever in retiring early are absolute gold and should be talked about and utilized far more often than they are (especially for super savers).

In retirement after tax brokerage is generally better than tax deffered. For MFJ LTCG is mostly capped at 15% for something like $600k of gain... Assuming you have to pay NII on a portion of it you are still only at 19%. Compare that to trying to take the same amount in a tax deffered account, not only are you taxed on the entire amount (in brokerages you are only taxed on the gains not the entire amount of the withdrawal) you will easily be in the top marginal brackets. That is why I hold my bonds and treasuries in my tax deffered account, the 4%ish interest is going to be taxed as ordinary income anyway but having it there gives me control on what year I want to pay the tax on it (thus lowering my income for this year to free up more room for low tax bracket Roth conversions). Also since the bonds grow slower than stocks, it's less likely for me to have a RMD tax bomb when I am 75.

Absolutely!!!