How to Structure Your Accounts for FIRE (Financial Independence, Retire Early)
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- Опубликовано: 11 июн 2024
- How to Structure Your Accounts for FIRE (Financial Independence, Retire Early)
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I wasn't financial free until my 40’s and I’m still in my 40’s, bought my third house already, earn on a monthly through passive income, and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing in the financial market is a grand choice I made. Great video! Thanks for sharing!
Very inspiring! I love this.
I understand that tomorrow isn't promised to anyone, but investing today is hard for me now because I have no idea of how and where to invest in. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.?
@@harrisonjamie794 I invest across the top markets but not by myself though. I follow the guidelines of *PRISCILLA DIANE AIVAZIAN* . you might have heard of her. I can correctly say she's worth her salt as an investment advisor as her diversification skills is top-notch, I say this because I see that in her results as my portfolio grows by averages of 20 to 3O% every month, unlike I can say for my IRA which has just been trudging along. my portfolio just mirrors what she places and not just on some particular industries of my choosing. she gave me that financial freedom I needed
@@georgerobinson2021 That’s great, your investment advisor must be really good, I have seen testimonies of people using the help of investment advisors in making them more financially stable. Do you mind sharing more info on this person?
@@harrisonjamie794 look her up on the internet with her name. she's quite popular for her services as she was recently featured on
CNN. She can work with anyone irrespective of where you're located
@@georgerobinson2021 I just looked up this person out of curiosity; surprisingly, she seems proficient. I thought this was just some overrated BS, I appreciate this.
I think the Mad Fientist would disagree regarding no one talking about this... He's been very vocal about how to structure things depending on what you need and how to structure it.
Great episode
Being in Canada I've set up my accounts as RDSP, TFSA and RRSP
I don’t think you guys really answered your title. You said 401ks and Roth accounts were great but not to touch them until you’re old but if I wanted to retire at 30 then where could I pull out my money
If you are still looking for answers i found a video (from same guys) who answers the questions you and I seem to be looking for the video title is "Retire Early AND Withdraw From Your IRA Penalty Free!" it talks about SEPP which is what people in the FIRE movement would be interested in
aarrow Thank you for your help!
If you want to retire early, you should be focused on first maxing out your Roth IRA and then investing as much of your remaining income in a taxable account you can touch at any time. Your primary wealth builder is your savings rate, not whether your account is tax advantaged. You need to be saving/investing 50% or more of your earned income if FIRE is your goal.
Once you've "won the game" by hitting the amount you need to retire early with your taxable account, then focus on other accounts like 401(k)s. If you're self-employed, consider a solo Roth 401(k). Most people who retire early don't really fully retire. They typically work part time doing something they find interesting or working a lower paying, lower stress job with abundant vacation time (such as teaching).
There is a risk of following this approach though. Once the year is over, you lose your ability to contribute to a 401(k) for that year. It's impossible to catch up once that time has passed. If you half-ass your FIRE pursuits, then you're leaving a LOT of money on the table by not maxing out your tax-advantaged accounts each year. If you end up working until you're 55+ anyway, you'd have been better off maxing out your Roth IRA, then your 401(k), then your taxable account.
But, if you want to retire in your 30s or 40s, a sizable taxable account is what you'll need. Keep in mind you'll only need enough money in that account to get you to age 59.5. After that, you can access your IRA and 401(k) penalty free. It takes planning and intentionality to do this correctly and effectively. One great thing about retiring in your 30s or 40s though, is that you can always go back to work and earn more! Not really an option if you mess this up and realize it in your 60s!
Good luck!
@@CalmerThanYouAre1 thank you for that advice! Rn I’m in college to double my income. Rn I can only stand to invest 5% into a Roth IRA and 5% into a 401k. I do that to get my company match so at least I’m saving 15% of my income.
@@CalmerThanYouAre1 why not max HSA, Roth 401k, and Roth IRA, until you have enough in in Roth contributions (principal) & HSA reimbursements (from previous years) to make it to 59.5? I don't see the advantage of a taxable account over any Roth-style account. Even backdoor roth is option for high income earners.
Of course, recent changes in IRS tax law makes some of this broadcast outdated. The stretch IRA has been severely limited. Upon your passing, your heirs (apart from your spouse) have to withdraw all funds from IRAs within 10 years. Also, required minimum distributions on IRAs now start at 72 1/2 rather than 70 1/2.
Im too lazy to look it up, could they rollover the money from your IRA to their personal IRA?
@@arga400 You can roll over from your traditional, pre-tax IRA to your Roth, or post-tax IRA any time and any amount. It becomes slightly more complicated if you have more than one traditional IRA account. You just need to pay the tax on money rolled over.
@@vincentdesapio I am specifically referring to inherited IRAs
If they required to be withdrawn within 10 years but can be rolled over to your own personal one's I dont see an issue.
My question is; Can you rollover an inherited IRA into your own IRA
@@arga400 No. Not unless it is your spouse. If not your spouse, you have ten years to withdraw it.
@@vincentdesapio That's butt :(
Thank you for the answer you save me quite a bit of time of research!
Mad fientist did a study and it’s better to do a 72t out of a tax deferred account than to use taxable accounts.
My withdrawal strategy: IRS rule of 55 withdraw pretax 401k at 55 to minimize RMD's, If my pretax 401k runs out, start spending taxable accounts age 55-65, HSA withdraw age 65, Social security claim at age 67, if any left in pretax 401k start RMDs at age 72. Roth IRA for my kids inheritance. if possible, do Roth conversions between age 55-67 before filing for social security at age 67.
Nice
Literally my game plan haha
Very organized, any advice for someone 30?
I thought you had to wait until you are 59.5 years old to withdraw from 401k?
@@majorgear1021 the financial advisors say it is 59.5. it's not 100% true. Read your 401k summary prospectus at your job. You are allowed to take your 401k withdrawal in the year you turn 55 with no early withdrawal penalty if you quit, get fired, or laid off in the year you turn 55. When I read about that I though I hit the lottery because my job 401k allows early withdrawals in the year I turn 55.
Great!
Some really great points! Index funds and dollar cost averaging are great strategies to set yourself up for long term success!
I would love a video explaining how much to have in which accounts and when to pull from them in early retirement. HSA, Roth IRA, Taxable Account, 401(k), savings account, ect.
Ikr?????
This is what I was expecting and it turned out to be just a bunch of gobbledy gook with no value. Needs to be more FIRE targeted.
Are they saying draw from Roth only if you are ever in dire need? Otherwise never?
Wall Street Atlas!
Do most of you stick with ETF index funds in your taxable accounts?
With low dividend income, yes. Think growth ETF's, small and mid cap
Yes. I also invest in individual stocks in the taxable account so I can deduct losses :)
For clarity- do you look at your marginal fed tax rate + state rate or actual fed tax rate+ state? For example my income places me in the 24% fed; but actual rate is 12%.
@ James. Good question. I believe you have to do it this way:
1. Start off with your gross income.
2. The above is “before” any 401k or IRA monies. Put this aside for now
3. Subtract out your deductions. If only standard section then fine but if you itemize then deduct.
So to me it’s this tax rate you should be looking at. It’s gross income minus the deductions.
This way you can see if you “defer” income does it help reduce current taxable income from a higher bracket. It doesn’t need to lower you into the next tier bracket.
There are other factors too because usually for most is that the early years of retirement you can be in the lower tax brackets but in the latter years when RMD kicks in then it’s perhaps higher bracket.
It’s challenging to save the right amount and pay the least taxes.
Stretch IRA is gone 😔
Index funds/mutual funds for Roth IRA to compound gains and dividends and individual stock picks on Robinhood?
Please put an adult beverage on my tab for who ever came up with the idea for Rule of 55. The look on Beau's face @ 13:12 as Brian is explaining the benefits of the Roth is priceless. I feel the same way!
Equal asset allocation in all accounts!
I wonder how much the money guy’s net worth is if he is so good with money…
@BigRec Red 😂 good point.
He's claimed to have an effective tax (just federal) at around 41 percent. He's swimming in money.
He said between $1-2 million
Less than 14 minutes? 🤔
@@adamtatusko thanks!
I’m afraid to jump into investments. Everything seems like it’s at a peak ready to bust.
Dollar Cost Averaging is a great way to build confidence and ease into investing. If you are under 50 I would not be too worried about where we are in this market cycle. Human innovation and growth will work hard to ensure the markets are substantially higher by your retirement.
my dad told me when I graduated college in 2013 not to open a 401k because the market was ready to burst... doing the math I missed out on the largest bull market ever worth ~$500k at retirement (7% average). Here it is 6 years later and market still hasnt burst.. you can spend your time worrying about it, or let it grow and just wide the waves.
The market always goes up, over time. There is never a better time to start than NOW!
This is exactly why most people don’t create wealth. Also assuming a bubble. Trust me we all did that at some point. Invest and take the ups and downs as they come and go
Look at a historical market chart (1980 until now) and see if you can see the 20% dip on Black Monday in 1987. Barely noticable. Crashes are just irrelevant in long-term investing. Also, the market does have the tendency to go sideways over decades but dividends are give you the returns that dont show up in the charts.
: )
Use passive rental income for your "NUT". Know what you minimum monthly expenses are. Mine is under $2000 with a modest paid for house.
If you only use accounting then you will alter your lifestyle in a market downturn. Nobody saves enough money then spends it when the market goes south no matter what you structure. It is just human nature. If you have passive rental income to cover your nut you will avoid this trap. This technique will also allow you to remain more aggressive in your investment to get a higher yield even when retire. Truth is most "rich" people plan to leave their wealth to another which means their timeline is MUCH longer than most programs plan.
My plan is to have over $10k a month in passive net rental income which I have already passed. Should I stretch to $20k?
My plan is to have over $10K a month in investment income which I think is possible on $1M and we are at $440k now. See how it goes.
With SSI we likely will play as health appear at time but at 70, 65 we would have $5k a month and much less if earlier.
Yes I think I am marching towards $300k income at "retirement" if I never work again at 56 or add more to our retirement when we normally made under $150k. If I get another six figure IT job that I love the the numbers could increase. Of course this is not FIRE because this is not retire early. Retirement may be MUCH more enjoyable for some than others. I like to work. I don't think I will ever totally "retire".
Health insurance is a big thing for people trying to retire early. Our plan is for wife to work until 65. If we meet our goals earlier we may need to look into getting health insurance another way until Medicare at 65.
How much is your property taxes and insurance per year on your home? What about car insurance per year? How much a month for electricity, phone, water, internet, etc.
@@HappyPenguin75034 My taxes about $250, $150 electric, phones $300, water $100, Internet and cable $250. Car insurance is about $300. All figures are per month.
I have multiple places now that are another $350-$500 a month each.
I have read a few books that talk about these very same points......This is not anything new.....
Did they say they created any of the info they presented? Just because something isn’t new for you doesn’t mean it isn’t for the vast majority of their audience. Weird comment. Was it just that you wanted 12 people to know you read books.....
Of course none of this is new, but it’s good to listen to make sure you stay on track
If you’ve truly read books that cover these same points, a more helpful comment would have been suggesting one or two of your favorite titles for those people who would like to read more on the topic.
@@username00009This. Which books?