Early Retirement: Roadblocks & Contemplations

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I never thought I would be the type of gal who stays up late reading about taxes, 401k’s and Summary Plan Descriptions (SDC), yet here I am and I blame my friend Fritz

After-Tax 401k Contributions

Last week, during an early morning van ride to the airport in Tucson, I popped in my earbuds to listen to Fritz wax poetic about his retirement plans on the Choose FI podcast.  During his interview, Fritz mentioned a not so commonly known way to pad your retirement with After-Tax 401k contributions.  You can read all about the method and its pros and cons HERE, but the main issue is whether or not your company allows it.  My employer, I have come to find, sadly does not.  Roadblock #1.

Ok, honestly, I am not all that upset about it.  I mean, I don’t like knowing I can’t do something (I have never been great with authority), but until a week ago I never even considered doing an after-tax contribution so it’s easy for me to let this one fly.  The next roadblock, however, I am not taking so lightly…

In-Service Rollovers

While I had my retirement provider on the line, I figured it was as good a time as any to confirm another huge (for me) early retirement factor, In-Service Rollovers.  An in-service rollover means taking money from your 401k and rolling it to an IRA while you still maintain employment at your company.  Why would anyone want to do this?  Easy – more diversity, better investment options, and increased control over the future of those funds.  What kind of control you ask??  For me, early retirement control via the Roth IRA conversion ladder.  Let’s dissect this a bit…

Have you heard of the Roth IRA conversion ladder?  If not, here is an overly simplified explanation:

  1. Contribute max to traditional 401k (18k pretax as of 2017)
  2. Quit job, roll 401k to a Traditional IRA
  3. Roll a portion of your Traditional IRA into Roth IRA (yes, taking a tax hit on the conversion but skipping the 10% early withdrawal penalty)
  4. Let it season for 5 years
  5. Withdraw the rolled portion from the Roth IRA free and clear of taxes and penalties

Further reading can be found by these dudes who can explain it far better than I…

So back to the phone conversation with my retirement provider.  Turns out… Continue reading “Early Retirement: Roadblocks & Contemplations”

Lola, Landlording, & Life

It’s been a while, ladies, and gents!!  Let me give you a quick catch up before we can move on to the latest…

AUGUST

  1. PORTLAND – Far Away Friends, Couchsurfing, & Lola Retreat!

Have I mentioned how much I LOVE the Pacific Northwest?  I DO!!  Many moons ago I lived in Ashland OR and, looking back over the years, I still consider it one of those magical times in my life where my surroundings had the ability to refresh and energize me.  The trees, mountains, and clean air (compared to city life, that is) were a true delight.  Every time I am back, I feel right at home…

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Born Treehugger

I arrived in Portland a day before Lola Retreat so I could meet up with my friend, Angela.  Angela and I met in 2013 while hiking the first ever European Peace Walk (EPW).   The hike itself was tough, but the friendships made on that trip were solidified by an unspoken bond that only happens when you hike painfully long days in excruciating heat across 6 countries with little-to-no route information.  Such a BLAST!!  🙂 Since then, I have met several of my US-based EPW buddies on work overnights, some met me in Spain to hike, and last year while on vacation, I met Angela in her hometown of Dublin.  It was only proper that I meet her when she visited the states.

We made our plans a week before Lola but when I checked for accommodations I realized the downside of our timing – the fucking solar eclipse!  NOOOOOOOO!!!  As awesome a sight for many, this “once in a lifetime” event put a damper on our plans…until we consulted Couchsurfing.  Now, I have stayed in a ton of random places during my travels (barns, old classrooms, churches, monasteries), but I have never Couchsurfed for fear of being murdered in my sleep.  I am happy to say that fear is now gone…and it was so easy!  Not only were our hosts super accommodating, they were also very informative (all for $0!!!).  They told us about a local hike called the 4-T Trail.

Continue reading “Lola, Landlording, & Life”

An Aha Moment… Reverse Engineering FI

This post was featured by Rockstar Finance. If you clicked over from there, THANK YOU, and I hope you enjoy the read. If you just happened to wander over here and are interested in all things Personal Finance or FIRE (Financial Independence/Early Retirement), I highly recommend you hop over to Rockstar Finance to check out their site and all the awesome bloggers they host weekly.  Oh, and don’t forget to check out the Rockstar Finance Forum where you can chat PF to your heart’s content. Thanks for stopping by and I hope you will follow along on my long and winding road to FI!

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It occurred to me last week that I have been looking at this whole FI thing the wrong way.  Building your wealth is a long process and it takes time…1,979 more days in my case but who’s counting?!  In an effort to not feel overwhelmed, I decided to flip the script.  What if I started looking at FI from what I have already saved?  What if I start looking at it with an attitude of abundance and not destitute (a tad dramatic but I love the striking opposition it induces 😉 ).

The basic formula for FI is 25 x yearly expenses.  Whatever that number equates to is considered safe to use a 4% rate of withdrawal.  If all these numbers are true, we can instead flip it around to calculate how much I would receive each month if I quit working today based on what I have already saved!  Here’s a semi-random example:

Bianca has $333,000 in assets.  Divide that number by 25 and you’ll get $13320 per year which is equal to $1110 per month.

$1110 per month.  That is how much all my years of work combined have afforded me to live.  For reference, I have been working and earning a W2 since 1993 when I was 14.  That’s 24 years of working for the man and all those years of labor have afforded me 1110 dollars per month of FREEDOM.  Isn’t that incredible?!  Not from a high or low standpoint but just that it is actually calculable?!  Isn’t it strange to compare your future life’s enjoyment based on the number of hours you worked to earn such jubilee?  It’s hard to wrap my brain around!

So the question is, forgetting all tax implications, could you live off $1110 per month?  If forced to do so, I’m fairly certain my answer would be yes.  I’ve crafted my life in such a way that I have few responsibilities which result in my cost of living being lower than most.  Granted, my studio is paid for and I would likely have to stay there, I’d have to remove all travel from my agenda, sell my car in favor of my bike, eat a shit ton of beans and rice (which I do anyway), and never get sick.  Pretty risky with some of those variables but I could probably make it work, and many people do.* Continue reading “An Aha Moment… Reverse Engineering FI”

Knowledge Gained From A Month Of Financial Celibacy

May came and May went and I survived.

For those of you following along, you are very much aware of my addiction to spreadsheets and tracking.  It is a nerdy hat that I wear well and take much pride in.  The hat, however, started to stretch out from overuse and was slowly slipping further and further down my face to the point that it was covering my eyes.  I needed a break and I took that break in the form of a month-long challenge.  May began my month of Financial Celibacy.

The month started out slow.  I had to delete all financial apps from my phone, iPads, and bookmarks from my computer in an effort to make logging in less habitual and more intentional.  Each time I felt the urge to do so, I was stopped by the fact that I no longer had quick (relatively) access.  If I wanted to log in I now had to go online and do so manually or download the app again.  Taking those extra few seconds to reflect gave my mind space it needed to move on to a different task.  In time, the habit faded and I was no longer reaching for that crutch to fill random moments of downtime.  So, Goal #1 to break the habit was accomplished.

My second goal was to spend my time doing more fulfilling activities.  Two weeks into May I found it easy to disconnect when my BF and I went to Cuba for a few days.  Without access to data or wifi, I was pleasantly surprised how much more focused we were.  I didn’t check in on Twitter.  I didn’t text with my friends.  And, without the use of Google, I was tasked with lead navigator using a simple paper map.  How refreshing to find that my brain still works in an efficient manner!!  The last week of the month found me in Seattle attending Camp Mustache, making new friends and enjoying every moment of it.  One thing that I noticed, and couldn’t help but comment on, was the lack of cell phone use during that weekend.  We were all able to chat and get to know each other without endless interruptions from outside realities.  Each of us was there 100%.  Due to my experiences in Cuba and CM, I am starting a new June goal of less online activity.  So far so good.  I do love my interactions on Twitter but I completely deleted my blog FB page in an effort to simplify my interactions in general.  At one point, in an effort to keep my life compartmentalized, I had 3 different FB profiles: my regular one, one for work, and Miss Mazuma.  It was time-consuming and ridiculous.  I am just me, after all.  I don’t need FB for the blog or for work.  If you need to find me, look here or on Twitter – I’m always lurking. 😉

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See the bee?  Yup, that’s me…lurking.  😉

On a (more) personal note, I can’t stress how perfect the timing of this challenge was for me.  I learned first hand that time is more important than money.   Continue reading “Knowledge Gained From A Month Of Financial Celibacy”

Defending Mr. Avocado Toast – Priorities are Key

I HATE when I feel compelled to weigh in on stupid shit but it is hard to bite my tongue in certain cases…

I am sure you have all read THE POST that spawned the avocado toast backlash that will forever go down in history as the one item that could knock the $4 latte off the FI stage.    Thank fucking god…I hate coffee and could never truly relate.  I would much rather debate an avocado as the reason no one can afford to save, so here we go…

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Looks just like mine… ~via~

First off, GenXer here…I feel the need to state that as this slanderous attack was thrown directly at my good friends, The Millennials.  But seriously folks, this issue is not generation based – it is stupidity based.  Yes, I said it.  As a whole, people are financially stupid.  What?  You never made a financial mistake in your life??  Just wait, you will.  And when you do, feel free to come back and tell us all about it!  I promise not to chastise you because I have been stupid too.  But to get straight to the point, this whole avocado toast thing has been completely blown out of proportion, on both sides.  Continue reading “Defending Mr. Avocado Toast – Priorities are Key”