Well, whattaya know… 7 years ago today-ish I walked out of my office building for the last time.
A lot has happened since that day. We traveled full-time for a couple of years before becoming parents and traveling parents… Jr has now been to 40+ countries. We started a couple of blogs, Winnie wrote a book, and we had maybe 5 minutes of fame when our story was shared throughout the media. We lived large, practiced intentional lifestyle inflation, and grew as people and as a family.
Thankfully, throughout all of this, our investment portfolio has also continued to grow. This is largely due to an extended bull market in US stocks, but also in small part due to blog and book income. (More is more.)
It’s been a good ride.
But… what if things didn’t go so well? What if the stock market crashed and the economy tanked? What if our hobbies never made a dime? What if it all went to hell?
Early retirees are an interesting bunch… on the one hand, it takes a lot of audacity to leave the workforce decades early. I mean, who does that?!
On the other hand, most of us are extremely fiscally conservative. People are even competitive over who is the most risk-averse… “You go ahead and target a 3% withdrawal rate, buddy, I’m going to keep working until I can spend less than 1.76852%!”
For most people though, the debate is primarily internal and manifests itself as One More Year Syndrome. “I’ll just work one more year to cushion the portfolio a bit more, THEN I’ll quit…”
It’s a very reasonable discussion to have with yourself. But working one more year also has some costs.
In rough terms, market timing is the practice of trying to make money by predicting future market performance. It is almost universally agreed to be a poor investment practice… “time in market is more important than timing the market.”
Predicting future market performance is… difficult. Even when your hypothesis is sound the market can remain irrational much longer than you can remain solvent. Not only do you need to be correct (often twice) but taxes and fees can erode any gains you do make.
But sometimes, when the stars align, it happens accidentally.
A lot of people dream about the day they finally finish paying off the mortgage. Free and clear, baby!
What might you be willing to pay to live in this house you already own? Economists refer to this concept of a mortgage-free living space having market value as “imputed rent.” Some countries even tax it.
Beyond being a fun topic at cocktail parties, for most people imputed rent has few real-world considerations… you pay off the house and you have more $$$ every month. Good times.
But for an early retiree with a tax-minimization hobby, the choice to pay rent or imputed rent has some interesting implications.
We will never have the experience of receiving an inheritance, but GCC Jr will.
In my role as fiscal steward, I would like to ensure that he, along with our other beneficiaries, receive the largest amount possible. (After we are done spending as much as we want, naturally.)
But Jr only gets what the IRS doesn’t take, so I’m taking my tax efforts to the next level: multi-generational tax minimization.
Note: The ability to withdraw funds over the beneficiaries lifetime was eliminated in the SECURE Act. Check out the details here.
Well, whattaya know… 7 years ago today-ish I walked out of my office building for the last time.
