2018 was our 6th full year of early retirement, world travel, and blogging. We’ve now been doing this longer than time spent in high school, college, or in my first real job.
Most of the content I’ve written comes from trying to figure things out for myself and our family, and then sharing the outcome. It’s helped create an exciting community of early retirees, tax geeks, expats, world travelers, nomadic families, and adventurers.
Although the blog became a profitable side business back in 2014, any financial benefit was mostly accidental. I typed some words, talked to some reporters, added some links, and (virtually) cashed some checks.
This year I put more hours into creating regular content, as I was trying to figure out a bunch of new things with taxes, travel hacking, and our life direction.
This seems to be a good approach – 2018 was the most profitable year yet.
The holiday season is quickly approaching, a time when many are hoping for or expecting a hefty year-end bonus.
Without traditional employers, alas, nobody will be sending us a check to install a new swimming pool or even a membership to the jelly of the month club. (The gift that keeps on giving.)
So not wanting to go without, I decided to just go ahead and create my own bonus season. I ended up leaving $425 on the table and one bank is still holding some funds hostage, but this year we are getting another $2,575 worth of holiday cheer. (As an added bonus, only $825 of it is taxable.)
(This post is the 2nd in a series. Subsequent posts forthcoming… soon. See the first post: Is Your 401k Too Big?)
A Traditional 401k / IRA allows us to invest for the future in a tax advantaged way. However, in some cases these accounts can become tax disadvantageous due to sheer size.
When the IRS forces withdrawals after our 70 1/2 birthday (the RMD), large accounts may get hit with higher tax bills. Those taxes could even be greater than what we saved on contribution.
We already saw this in the first post in this series. Even account values at age 70 1/2 of $350k or more (Married Filing Jointly) would most likely fail to Never Pay Taxes Again. But this isn’t necessarily tax disadvantageous.
Due to tax savings on contributions, are there higher account values that can be reached before our 401k becomes too big? And if so, how do we evaluate additional contributions?
For us, going back home (to the United States) means enrolling in an ACA health insurance policy and potentially stepping into the clutches of a State tax authority (e.g. California.)
Going back to Cali, stylin, profilin
Growlin, and smilin, while in the sun
Paying taxes and health insurance premiums
Driving to the mountains in the vintage Escort
We have been having the Forever Home discussion for some time now… Is there somewhere we love that would be a good place to raise a kid or two?
We have a few International destinations in mind, but several places in California rank high on our list of criteria.
I hear California is an expensive place to live, with high taxes, costly health insurance, and sky high housing prices. I figured I should at least crunch some numbers before we consider putting some California cities at the center of our radar.
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.
