For people who retire in their 30s, there is a long stretch ahead before we can access our retirement accounts at age 59.5.
For ourselves, and many others, the solution is a sufficiently large taxable brokerage account to fund life for several decades. The long term, if you will.
But over time, this can become increasingly tax inefficient.
Over the past few weeks I’ve replied to numerous comments and questions, loosely paraphrased as:
“I’ve read that you aren’t a big fan of Roth accounts, but in your post about not paying taxes for 5 years you show how you routinely contribute to Roths. Isn’t that a bit hypocritical?
Maybe.
It’s a totally fair question. Let’s find out.
The end of 2017 marked the completion of 5 full years of early retirement and world travel.
It’s been a fun ride so far… we’ve traveled a bit, had a few good meals, and taken many naps.
But how effective have these 5 years been in terms of implementing our tax minimization strategies? Are Roth IRA Conversions and Capital Gain Harvesting just fantasies we keep while working, or do they actually produce results in the real world?
Let’s do a financial check-up and see how we are doing.
Here it is folks, the post exactly 3 of you have been waiting for… our 2017 tax return. Just in time for the October 15th deadline.
It’s an interesting one this year; 2017 is the first time we claimed the Foreign Earned Income Exclusion (FEIE) which allowed us to once again have income in excess of $100,000 and pay $0 in income tax.
Details on the FEIE were difficult to come by, and examples either lacking or confusing, so this FEIE example is for posterity.
The Foreign Earned Income Exclusion is a great tax saving opportunity for Americans living abroad, allowing the exclusion of $104,100 in foreign earned income per person in 2018. Nice!
But… Of all the tax topics I’ve explored, the FEIE is among the most convoluted and obfuscated. For one thing, documentation uses words like convoluted and obfuscated. Worse, much of the information on the Internet is confusing or inaccurate.
It also isn’t necessarily obvious if a person should claim the FEIE, and doing so isn’t guaranteed to be advantageous.
In this post I attempt to explore the FEIE and when to use it, for ourselves and our posterity. (Well, ourselves at least… should we FEIE or nah?)
