The Intersection of FIRE and Disney

[pillow]

As soon as DD earns income, this is what we'll be doing for her.

https://www.nerdwallet.com/blog/investing/why-your-kid-needs-a-roth-ira/

We opened Roths for our kids at Vanguard and we matched what they contributed. At this point, I'm having a hard time convincing them to contribute, and I'm not willing to match again. With so little money on hand, they don't want to part with it!

 

[pillow]

Ahh the beauty of being young and saving even a small amount of money!! If only everybody at your age could understand this concept!!! CONGRATS!!

I KNOW!!! If only I could turn back the clock . . .

I want to clarify why I said this cause maybe it will help a young person. DH and I always contributed to 401K accounts way back in our 20's (unfortunately, Roths did not exist then). However, we didn't really start ramping up retirement savings to the MAX until fairly recently. I wish I had been more tuned in at age 25. I think back then I contributed 5 - 6% - whatever got the match. In hindsight, I should have contributed MORE and lived more frugally. At 25, retirement was the last thing on my mind.

So now, I lecture my kids!

 

[SouthFayetteFan]

I KNOW!!! If only I could turn back the clock . . .

I want to clarify why I said this cause maybe it will help a young person. DH and I always contributed to 401K accounts way back in our 20's (unfortunately, Roths did not exist then). However, we didn't really start ramping up retirement savings to the MAX until fairly recently. I wish I had been more tuned in at age 25. I think back then I contributed 5 - 6% - whatever got the match. In hindsight, I should have contributed MORE and lived more frugally. At 25, retirement was the last thing on my mind.

So now, I lecture my kids!

I remember at 23 telling my wife that if we could just live out of a van for a year and save all of our money (for just 1 year) that we’d never have to save a dollar again. She thought I was crazy (and I was) but it would’ve been an amazing jolt to our savings!!

 

[pillow]

I remember at 23 telling my wife that if we could just live out of a van for a year and save all of our money (for just 1 year) that we’d never have to save a dollar again. She thought I was crazy (and I was) but it would’ve been an amazing jolt to our savings!!

Too bad you didn't. That could have been a great book!

 

[SouthFayetteFan]

Too bad you didn't. That could have been a great book!

I think my exact words were “be homeless” but then I clarified to live in a van. I probably scared her off from the idea with the word homeless...LOL!

 

[platamama]

We opened Roths for our kids at Vanguard and we matched what they contributed. At this point, I'm having a hard time convincing them to contribute, and I'm not willing to match again. With so little money on hand, they don't want to part with it!

Still, you helped them get their Roths started early and that will help them immensely even if they don't contribute currently.

DD is 14, so as soon as she gets some income, it will go straight into a Roth and we will compensate her for the contribution so that she doesn't feel like she's lost the freedom of having her own money. As a bonus, I believe it's asset protected in terms of college FAFSA applications since it's a retirement account and not a savings account.

 

[pillow]

I think my exact words were “be homeless” but then I clarified to live in a van. I probably scared her off from the idea with the word homeless...LOL!

Ha - its a good thing you were already married at that point. Otherwise she might have run!

 

[1st*toright]

I KNOW!!! If only I could turn back the clock . . .

I want to clarify why I said this cause maybe it will help a young person. DH and I always contributed to 401K accounts way back in our 20's (unfortunately, Roths did not exist then). However, we didn't really start ramping up retirement savings to the MAX until fairly recently. I wish I had been more tuned in at age 25. I think back then I contributed 5 - 6% - whatever got the match. In hindsight, I should have contributed MORE and lived more frugally. At 25, retirement was the last thing on my mind.

So now, I lecture my kids!

I dunno, I'm not sure we could have lived any more frugally in our 20s! We were lucky not to have student loan debt, but we made very little money and lived in a high COL area (I suppose we could have moved to another part of the country, but we liked where we lived and lived in a tiny apartment in a cheap town). First we saved for a house, then immediately had a kid and went to 1.5 incomes, then we decided to do grad school (a law degree and a masters, funded almost entirely by selling the first house we bought - that was a ridiculously lucky investment!) Then we were saving for a house again... It was well into our 30s before we had established careers, a house and enough income left over to be maxing out our retirement accounts. No regrets- lots of good stuff happened in those years (although I have no idea what happened during the grad school years - I had a full load of classes, a full time job and a toddler that I handed back and forth to DH between classes. No sleep, no time, no money, but we made it through somehow!)

 

[RamblingMad]

What’s the plan to handle inflation, especially healthcare costs, and lower expected returns over the next ten years?

I’m struggling to find investments that will return more than 5% to me annualized over the next ten years.

 

[QueenIsabella]

Would it make sense for you to do Roth conversions now since Roth balances don't factor into RMD?

We did a Roth conversion in 2017. The taxes wound up being very, very painful when tax time came around! DH makes 6 figures, which didn't help. Most of what we received in inheritance that year wasn't taxed to us. Adding insult to injury, not only did we owe a big federal tax bill, but state, as well. And then the state turned around and requested a large pre-payment of our expected 2018 taxes. So, we "get" the value of a Roth conversion, but we're waiting to see if we have a low-income year. We thought this might be it--DH lost his job 12/31/18. But then he got severance, a bonus, unused vacation time, and a new job. And his annual RMDs (from his inherited IRAs). Pity us, we have too much money coming in (the horror!)

As soon as DD earns income, this is what we'll be doing for her.

https://www.nerdwallet.com/blog/investing/why-your-kid-needs-a-roth-ira/

I think I mentioned this, probably a couple dozen pages back, but we had DD23 put money in a Roth, last year and this year. She inherited a small 5-figure amount from her grandmother that she partial used for this (the rest, we encouraged her to spend on travel, which both she and her late grandmother love). She also has a pension and a 403b--obviously, her numbers are small right now, but she's better situated than most 23yos. On the Roth, we used the argument with her that she can pull out the principle in 5 years. Obviously, I'd rather she not do that, but I think it's easier for a 20-something to see the shorter time horizon. And she's kind of thinking about maybe buying a house someday--retirement is decades away, she's not giving it much of a thought.

P.S. While we've considered the idea of funding/matching for a Roth, we're not doing it at this time. Our oldest has been given a really good head start already, and we have three other kids to consider--two of whom still have pricey college plans. The other thing that DH and I have discussed privately is, our older two got much more in monetary gifts from their grandmother--she was much less generous with the younger two. We are more likely to quietly balance that out, versus giving more to our oldest (the only one with income).

 

[alryan]

I retired at 60 last year so early but not really early. I waited until I had saved 2 years of income just in case and as fate had it the market went down right after I retired. I've used a part of those savings since then and am only now getting ready to tap my retirement savings. I'll use some of that to restore my 2 year savings but looking into some safe but higher interest rate places to store it. The savings gave me a peace of mind that was so nice to have after I stopped working.

Thanks, so how long did it take you to save that two years of income? Did you stop contributing to the retirement during that time?

 

[alryan]

Of course, the future of the ACA is unknown . . . however, a few months ago I went to the healthcare.gov site and entered my info as if I was pulling a 40k income in retirement. The premiums were tiny! I was looking at high deductible plans, so you'd have to have funds to cover deductibles, but I think the monthly premium was $200 or so. My memory is fuzzy, but I was somewhat encouraged. Of course, that can change with the political climate, but at least its possible for now . . .

Yeah, I think the ACA has made it easier to RE, but like you said who knows how long that will be around.

 

[alryan]

Just realized SO and I have reached our coast fire number. (a little over a year of SO working his first real job) Assuming no additional contributions we will have about 2.5million in 40 years. That would put us at 64. I don't really have a FIRE number yet but 2.5 million at a 4% withdrawal rate is over double what we spend now.

Well, I had to google coast fire number...always learning something! Congrats! That's awesome!

 

[SouthFayetteFan]

Well, I had to google coast fire number...always learning something! Congrats! That's awesome!

I was basically pursuing “coast FIRE” before I knew what coast fire was. I just set a goal of $100k by 30 - seemed like if I hit that figure we’d never need to save another $. That live in a van idea would’ve really kickstarted things but despite never being homeless, we still found a way to reach that goal.

 

[platamama]

We did a Roth conversion in 2017. The taxes wound up being very, very painful when tax time came around! DH makes 6 figures, which didn't help. Most of what we received in inheritance that year wasn't taxed to us. Adding insult to injury, not only did we owe a big federal tax bill, but state, as well. And then the state turned around and requested a large pre-payment of our expected 2018 taxes. So, we "get" the value of a Roth conversion, but we're waiting to see if we have a low-income year. We thought this might be it--DH lost his job 12/31/18. But then he got severance, a bonus, unused vacation time, and a new job. And his annual RMDs (from his inherited IRAs). Pity us, we have too much money coming in (the horror!)



I think I mentioned this, probably a couple dozen pages back, but we had DD23 put money in a Roth, last year and this year. She inherited a small 5-figure amount from her grandmother that she partial used for this (the rest, we encouraged her to spend on travel, which both she and her late grandmother love). She also has a pension and a 403b--obviously, her numbers are small right now, but she's better situated than most 23yos. On the Roth, we used the argument with her that she can pull out the principle in 5 years. Obviously, I'd rather she not do that, but I think it's easier for a 20-something to see the shorter time horizon. And she's kind of thinking about maybe buying a house someday--retirement is decades away, she's not giving it much of a thought.

P.S. While we've considered the idea of funding/matching for a Roth, we're not doing it at this time. Our oldest has been given a really good head start already, and we have three other kids to consider--two of whom still have pricey college plans. The other thing that DH and I have discussed privately is, our older two got much more in monetary gifts from their grandmother--she was much less generous with the younger two. We are more likely to quietly balance that out, versus giving more to our oldest (the only one with income).

I'm hoping that by starting while DD's young (she's 14), she'll have the habit instilled into her before she goes off on her own. As an only child, everything we have will go to her anyway, but I know it can be quite the juggling act when you have more than one child in trying to figure out what's fair and I don't envy that position.

I found this graph for starting a Roth at age 15 vs at age 25 where the inputs are $1000 per year contributions for 4 years (i.e. 15-19 vs 25-29) then no further contributions, and money earns 7% annually:

 

[alryan]

I was basically pursuing “coast FIRE” before I knew what coast fire was. I just set a goal of $100k by 30 - seemed like if I hit that figure we’d never need to save another $. That live in a van idea would’ve really kickstarted things but despite never being homeless, we still found a way to reach that goal.

I love that van story! Even if that might have been a bit much, it really is crazy to think that like @speedyfishy you could save like crazy for a year and then theoretically never have to save again.

 

[QueenIsabella]

That's all well and good, but in order to open a Roth, the 15yo has to have earned income. I think it can be yard work/babysitting type jobs, if you document properly, or you could sign working papers to allow a 15yo to work. If I had a kid that young working, I would be much more inclined to do the matching Roth contribution type of thing (or even gift them the Roth contribution). Mostly because, when my kids were working in HS, it was part time and they weren't pulling down huge amounts.

 

[AmyAnne]

I dunno, I'm not sure we could have lived any more frugally in our 20s! We were lucky not to have student loan debt, but we made very little money and lived in a high COL area (I suppose we could have moved to another part of the country, but we liked where we lived and lived in a tiny apartment in a cheap town). First we saved for a house, then immediately had a kid and went to 1.5 incomes, then we decided to do grad school (a law degree and a masters, funded almost entirely by selling the first house we bought - that was a ridiculously lucky investment!) Then we were saving for a house again... It was well into our 30s before we had established careers, a house and enough income left over to be maxing out our retirement accounts. No regrets- lots of good stuff happened in those years (although I have no idea what happened during the grad school years - I had a full load of classes, a full time job and a toddler that I handed back and forth to DH between classes. No sleep, no time, no money, but we made it through somehow!)

Are you living my parallel life? (Well except for the lucky first house investment--that didn't happen to us!) Four kids, and I went back to grad school when my youngest started school (although I never was a full-time SAHM) -- lots of years of barely paying all the bills. But no regrets either -- DH and I both have jobs we actually enjoy and are in no rush to RE. Definitely here for the FI, to make up for those years of no investing. My kids do all have Roth IRAs though.

 

[platamama]

That's all well and good, but in order to open a Roth, the 15yo has to have earned income. I think it can be yard work/babysitting type jobs, if you document properly, or you could sign working papers to allow a 15yo to work. If I had a kid that young working, I would be much more inclined to do the matching Roth contribution type of thing (or even gift them the Roth contribution). Mostly because, when my kids were working in HS, it was part time and they weren't pulling down huge amounts.

You're right, it does need to be earned income, not gift money. But money is fungible. Any earned money can go into the Roth and she would be gifted from us the corresponding amount. If I had been more hard-nosed about this, I would have had her contribute the money she earned busking when she was younger, but she wasn't mature enough to understand the substitution. She would understand it now.

I started working when I was 13, mostly during the summers, and it wasn't a huge amount but it was something. If a Roth had been available back then and my parents had been in a position like I find myself contemplating now, that would've set up a far different future for me. Money isn't everything, but having enough of it certainly gives you options.

 

[QueenIsabella]

You're right, it does need to be earned income, not gift money. But money is fungible. Any earned money can go into the Roth and she would be gifted from us the corresponding amount. If I had been more hard-nosed about this, I would have had her contribute the money she earned busking when she was younger, but she wasn't mature enough to understand the substitution. She would understand it now.

I started working when I was 13, mostly during the summers, and it wasn't a huge amount but it was something. If a Roth had been available back then and my parents had been in a position like I find myself contemplating now, that would've set up a far different future for me. Money isn't everything, but having enough of it certainly gives you options.

You could just put the gift directly in the Roth--if she earned, say, $1300, that's the amount you put in. You could even do it before 4/15 of the following year (so you have her grand total for the year). You just couldn't put in more.

Back when we lived in NH, my older two worked at the local ski resort, starting at age 14. We weren't in a position to match into Roths at that time. DD(now)15 was paid in hot cocoa and chicken tenders from the snack shop--I'm thinking the IRS would have been a little suspicious of that one! Now, it's just the odd cello gig for her--she's paid in cash, but we don't report it. This summer she'll be 16, and will likely get a legit job (her dream is to work for Chick-Fil-A--ooh!)