The Intersection of FIRE and Disney

QueenIsabella

DIS Veteran
Joined
Jan 17, 2016
This articulated some of what I like about the traditional IRAs--that I know what the benefit is, and it's in today's dollars. I'm not so much worried about changes to the tax code (although maybe I should be); my concern is that the Roth seems to be advantageous only when/if (or mostly when/if) we are in a lower tax bracket when we withdraw, and I don't know when/if that is going to happen. Starting a Roth for each of my kids in their teens was an easy decision. Paying taxes to convert our accounts to a Roth is not so clearly a winner.
This is our concern, as well. The vast majority of our net worth is in retirement accounts--mine, his, and inherited. We already take RMDs on inherited IRAs--not a huge amount, today, but...as we get older, and are required to take our own RMDs, on top of the increasing, inherited-IRA RMDs--you're starting to talk about a pretty big tax bite. Especially since we'll have SS and pension money coming in, as well--for us there IS no "lower tax bracket" in the future. And I probably shouldn't complain, because this means we'll be able to live large in retirement. But it does change the way you look at things like Roth conversions.
 

laceltris3

Mouseketeer
Joined
Oct 23, 2013
Approximately one third of my retirement savings is Roth, solely from maxing out Roth 401(k) contributions whenever they have been available to me. I see it mainly as tax diversification. While the top marginal rates may be the same or higher, given our current tax situation, and that we definitely won't be making near what we are now in retirement, I can plan on taking some money out of the tax deferred accounts for the lower brackets, and then switch to Roth if I need. I am also basically assuming that our Social Security will be 100% taxable based on our income.
 

Chickinvic

DIS Veteran
Joined
May 9, 2019
I haven't read the thread (51 pages lol), but hubby and I are Canadian. For retirement we have his pension (he served 28 years in the Navy and retired 2 years ago at 47). He is currently collecting his military pension and is now working for the Federal Government (adding to pension). He won't be able to collect that one until 65 I think.

My work does not have a DB pension, but my employer matches a certain percentage of my salary into RRSP contributions (similar to 401K). I put extra money into my RRSP also.

We have TFSA (similar to Roth IRA), but DH and I have been pretty bad at saving into those.

Of course, then there is CPP (Canada Pension Plan) and OAS (Old Age Security) for when we are senior citizens.

As far as our spending on Disney (or other vacations) and the interference with retirement planning/saving. Yes, I'm sure it does. I am of the opinion that I only get one life and I do want to enjoy it along the way as well as just saving everything for some date in the future. We are very fortunate that hubby has a good pension which definitely takes a lot of the stress out of saving for the future (but I still put money aside on top of that).

Both of us are currently 49. I think we will work for about the next 7 years and then evaluate if we want to throw in the towel at that point.
 
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  • georgina

    DIS Veteran
    Joined
    Apr 21, 2003
    This articulated some of what I like about the traditional IRAs--that I know what the benefit is, and it's in today's dollars. I'm not so much worried about changes to the tax code (although maybe I should be); my concern is that the Roth seems to be advantageous only when/if (or mostly when/if) we are in a lower tax bracket when we withdraw, and I don't know when/if that is going to happen. Starting a Roth for each of my kids in their teens was an easy decision. Paying taxes to convert our accounts to a Roth is not so clearly a winner.
    I'm not following this reasoning (bolded). To me the Roth is advantageous when we are in a HIGHER tax bracket when we withdraw from it, because none of it will be taxed. Everything coming out of a traditional IRA will be taxed, so if you are withdrawing from it in a lower bracket the traditional may be better for you.
    (I'm planning on being grandfathered from any possible Roth Tax changes, just as I think those currently withdrawing from inherited IRA's will be grandfathered in when those rules change under the SECURE act.)
     

    AmyAnne

    DIS Veteran
    Joined
    Sep 20, 2012
    I'm not following this reasoning (bolded). To me the Roth is advantageous when we are in a HIGHER tax bracket when we withdraw from it, because none of it will be taxed. Everything coming out of a traditional IRA will be taxed, so if you are withdrawing from it in a lower bracket the traditional may be better for you.
    (I'm planning on being grandfathered from any possible Roth Tax changes, just as I think those currently withdrawing from inherited IRA's will be grandfathered in when those rules change under the SECURE act.)
    Yeah, that sounded not really correct when I typed it. This forced conversion of a very small traditional retirement account has made DH and I admit that we really need to get an expert to look at our specific situation and explain our options. For many years, we contributed to our 401(k)s only what we needed to to get an employer match. It was easy not to think about retirement because (1) we had very little extra money and (2) we are in no hurry to retire. At early to mid fifties, we are way too old for early retirement, but we also are happy in our jobs. So we put off thinking about retirement accounts really until this year, when our youngest finished college. Our first (and only) move was to max out our 401(k) contributions. We can't contribute directly to a Roth, and as you can tell, we really don't understand the implications of converting a traditional account to a Roth.
     

    alryan

    Mouseketeer
    Joined
    Dec 13, 2011
    This isn't exactly FIRE related but I'm looking for some thoughts on HSA/High Deductible Health Insurance. So DH has the opportunity to switch to this next year. I know the basics, that generally these are most beneficial for those who are relatively healthy and tax advantages. This year we contributed $2700 for flex spending, knowing we will spend that for DD braces. DS will also need braces in the next few years. DH does have some chronic health issues, but they are well controlled. But he did have a mild stroke 5 years ago at the age of 46. Yearly cost for his medications will be $320. The kids and myself and healthy and the past few years haven't gone to the Dr. except for checkups, which would be covered 100%. Deductible for HDHP is $6000, deductible for PPO is $1,000 and Max OOP $2200. Savings in annual premium is $870.

    Here's my math on funding HSA, which would keep the paycheck close to the same.
    • Contribute $2700, the same as I did with Flex Spending this year
    • $1200 annual employer contribution
    • Contribute $478, which is yearly savings in difference between cost this year and lower premium for HDHP
    • Total $4378
    So worst case scenario I would have to pay another $1622 if we had medical expenses and paid the $6000 deductible. Best case, we have around $1000 in cost next year and we get to save that $3378.

    Or, just fund up to the match, $1200, so then I would only have $2400 in there. This would result in a bigger paycheck.

    Since we have already been living on the lower paycheck I am leaning toward funding the HSA with the $4378. Obviously I like the idea of saving this money to be able to use at the age of 65. I would appreciate any/all thoughts. Am I totally off in my reasoning? Thank you!
     

    coast2coastmickey

    Mouseketeer
    Joined
    Apr 13, 2018
    Keep in mind that with an HSA plan, that you may be paying full price for medications, which is a drag, but the benefit is that the medication costs count toward the deductible. You should find this out as it caught many of my coworkers off guard and really impacted their finances (even though there were NUMEROUS notices and warnings advising this if you chose the HSA plan at my employer).

    I chose the HSA plan despite that because most years I spend nothing for medical care for myself. However, many of my coworkers chose the HSA because the out of pocket max was not bad for the family plan, so they at least knew that despite chronic health conditions, their medical spending would not exceed X amount.
     
  • 1st*toright

    DIS Veteran
    Joined
    Mar 1, 2017
    Love your calc! This is exactly what I did back in the day when I had a choice between PPO and HSA (new company is HSA only, so there ya go). Your reasoning makes sense to me - there is potential up-side to the HSA if you have a good medical year, and the downside (a terrible medical year) sounds like it would be manageable. Once you are a few years into an HSA, if you have your OOp max sitting in the HSA, you can decide how much to contribute in a given year - scale up or down your contribution for current cash-flow, or continue funding the max if you want it as an investment vehicle.
     

    alryan

    Mouseketeer
    Joined
    Dec 13, 2011
    Keep in mind that with an HSA plan, that you may be paying full price for medications, which is a drag, but the benefit is that the medication costs count toward the deductible. You should find this out as it caught many of my coworkers off guard and really impacted their finances (even though there were NUMEROUS notices and warnings advising this if you chose the HSA plan at my employer).

    I chose the HSA plan despite that because most years I spend nothing for medical care for myself. However, many of my coworkers chose the HSA because the out of pocket max was not bad for the family plan, so they at least knew that despite chronic health conditions, their medical spending would not exceed X amount.
    Thanks for the reminder. I did go online to CVS caremark, where I could put in my medication to see the cost. That's where I got the $320 annual cost. I do think I'd like to speak to someone just to make sure because when I just went to Walgreens last year it was some crazy amount like $1000/3 months so I didn't really look more into it.
     

    alryan

    Mouseketeer
    Joined
    Dec 13, 2011
    Love your calc! This is exactly what I did back in the day when I had a choice between PPO and HSA (new company is HSA only, so there ya go). Your reasoning makes sense to me - there is potential up-side to the HSA if you have a good medical year, and the downside (a terrible medical year) sounds like it would be manageable. Once you are a few years into an HSA, if you have your OOp max sitting in the HSA, you can decide how much to contribute in a given year - scale up or down your contribution for current cash-flow, or continue funding the max if you want it as an investment vehicle.
    Thanks for the reassurance!! It just seems like a big decision and I just wanted some feedback that I wasn't totally off base. I also like your suggestion of tailoring your contributions once you have the max OOP sitting in your HSA.
     

    RamblingMad

    DIS Veteran
    Joined
    Mar 29, 2019
    Thanks for the reminder. I did go online to CVS caremark, where I could put in my medication to see the cost. That's where I got the $320 annual cost. I do think I'd like to speak to someone just to make sure because when I just went to Walgreens last year it was some crazy amount like $1000/3 months so I didn't really look more into it.
    Also, try Costco. I tend to get the best pricing there for meds. Also, check for coupon programs.
     
  • SouthFayetteFan

    Saving Money on Disney Vacations since 2006
    Joined
    Sep 6, 2014
    Apparently all of my major threads and groups are experiencing a case of the "Mondays" today as activity is way down...How about a fun FIRE discussion topic today:

    If you were NOT pursuing FIRE, what would you spend all of your money on? To achieve savings rates of 25%, 50%, and some even at 75%+ to the normal world we are sacrificing a lot. If you were not pursuing FIRE, where would your money go?
     

    speedyfishy

    DIS Veteran
    Joined
    Apr 3, 2016
    Apparently all of my major threads and groups are experiencing a case of the "Mondays" today as activity is way down...How about a fun FIRE discussion topic today:

    If you were NOT pursuing FIRE, what would you spend all of your money on? To achieve savings rates of 25%, 50%, and some even at 75%+ to the normal world we are sacrificing a lot. If you were not pursuing FIRE, where would your money go?
    adventures by Disney trips and more DVC points! I also would eat out a lot more. I don’t really think I’m sacrificing much for FIRE.
     

    AmyAnne

    DIS Veteran
    Joined
    Sep 20, 2012
    Apparently all of my major threads and groups are experiencing a case of the "Mondays" today as activity is way down...How about a fun FIRE discussion topic today:

    If you were NOT pursuing FIRE, what would you spend all of your money on? To achieve savings rates of 25%, 50%, and some even at 75%+ to the normal world we are sacrificing a lot. If you were not pursuing FIRE, where would your money go?
    That's an interesting question. DH and I are not committed to retiring early but we are saving about 50% of our income. Right now most of that is going into retirement funds to catch up for all the years we didn't contribute much (we always contributed enough to get an employer match but for a long time, we didn't contribute any more). If we weren't saving that money, I probably would pay for people to do household things that neither DH or I is very good at, like lawn upkeep or even thorough housecleaning. I actually am thinking that I am going to splurge on a one-time housecleaner as a Christmas gift to myself. We also are slowly replacing our IKEA-grade furniture with fewer but better quality pieces now that we are empty nesters. If money were no object, I'd have gotten rid of our couch yesterday. But in terms of major sacrifices, after raising four kids and getting them all through college with no debt, I think we have just become used to not spending a lot of money so on a daily basis it doesn't feel like we are sacrificing.
     

    SouthFayetteFan

    Saving Money on Disney Vacations since 2006
    Joined
    Sep 6, 2014
    Apparently all of my major threads and groups are experiencing a case of the "Mondays" today as activity is way down...How about a fun FIRE discussion topic today:

    If you were NOT pursuing FIRE, what would you spend all of your money on? To achieve savings rates of 25%, 50%, and some even at 75%+ to the normal world we are sacrificing a lot. If you were not pursuing FIRE, where would your money go?
    So I'll answer my own question. I didn't want to be first to answer it...lol!

    I think it's actually an interesting exercise to go through. Our savings rate has averaged 52.7% over the past 4 years and as a single income household, I'm quite certain that people around us are completely confused by our financial situation. The things we do spend money, on the things we don't spend money on...it has to confound people at times.

    If I HAD to spend all our money...here's some things I'd think about:

    1) Put a pool in the backyard and hire a service to take care of it (cleaning, chemicals, etc.)
    2) Buy a nicer house in general (we live in a small ranch house worth about $150k)
    3) Drive a nicer car
    4) Spend money to make our yard look nicer (lawn care service?, professional landscaping??)
    5) Buy a vacation home on Captiva Island in Florida (this one would require crazy money though so not sure that's really a realistic answer to this question...)

    I wouldn't spend any more on travel because we are already pretty much taking our dream trips each year...

    What's interesting about this exercise for me is I envision my life having those things and I don't suddenly feel that much better about it. If imagining having any of those things made me feel really happy long-term perhaps I'd seriously consider doing them. It's odd but when my wife and I sit down each year and review all of our spending and savings we always agree that we want for nothing. We live an awesome life and we'd feel so wasteful if we just blew all of our money on stupid stuff we really don't need.
     

    bernina

    DIS Veteran
    Joined
    Jan 25, 2014
    Apparently all of my major threads and groups are experiencing a case of the "Mondays" today as activity is way down...How about a fun FIRE discussion topic today:

    If you were NOT pursuing FIRE, what would you spend all of your money on? To achieve savings rates of 25%, 50%, and some even at 75%+ to the normal world we are sacrificing a lot. If you were not pursuing FIRE, where would your money go?
    Great question!

    If we weren’t saving for retirement/DD8’s college/wedding, then it would be one of two very different things:

    1) I’d quit my job. Without a huge chunk going to savings we could easily live on one income with very little change in lifestyle.

    2) Adventures by Disney travel and a redo of our house and yard.

    Option 1 is the most likely and I think would bring more overall joy to the family. I’d be able to run our household more efficiently and effectively and I’d have a greater capacity to help at school, extracurriculars, and just overall invest more in my family.

    Folks tend to see FIRE as a way to get that quality time sooner, however in our case the point where I can FIRE is just as DD turns 18 and the quality time isn’t in such high demand. Really makes me wonder if I should evaluate the choices we’ve made. I don’t regret at all where we are and the choices we’ve made to this point, but need to dig deep on working full time for 10 more years and (likely) being set for a good retirement, or push out retirement and enjoy things a bit more in the now.
     

    WVMomof3

    DIS Veteran
    Joined
    Feb 21, 2005
    Great question!

    If we weren’t saving for retirement/DD8’s college/wedding, then it would be one of two very different things:

    1) I’d quit my job. Without a huge chunk going to savings we could easily live on one income with very little change in lifestyle.

    2) Adventures by Disney travel and a redo of our house and yard.
    I think we chose your option number 1 and it is why we are not really FIREing. We have been able to put a good amount in retirement every year, but we have only maxed our contributions for 1 year! That was a year DH had some overtime, which is really unheard of in his work and only happened that one year. Kids are just darn expensive! lol We live in a relatively low COL area, so we have been able to make it work. I still think we can make retirement happen at 57, which I guess technically is early, even though I really feel we have not done all the right things over the years like maxing out savings. If I had more money to spend, I think at this point it would go to travel. I once upon a time wanted a bigger house, we live in a 1400 SF ranch, but now I am ready to go smaller. lol I told my DH that once we get the kids all out of the house we need a smaller house so they don't come back. :rotfl2:
     

    tzolkin

    DIS Veteran
    Joined
    Jan 3, 2008
    What's interesting about this exercise for me is I envision my life having those things and I don't suddenly feel that much better about it. If imagining having any of those things made me feel really happy long-term perhaps I'd seriously consider doing them. It's odd but when my wife and I sit down each year and review all of our spending and savings we always agree that we want for nothing. We live an awesome life and we'd feel so wasteful if we just blew all of our money on stupid stuff we really don't need.
    We just had this discussion the other day.

    Over the summer we moved into a house that is half the size (and half the cost) of our previous home. My husband keeps checking in with me and the kids to be sure that we're happy and still feel that we made the right decision. The truth is that this house is actually more comfortable for our family, the style fits our personality, and it's just all around better (even unrelated to the money aspect).

    We live in an area where it's just automatic that as soon as you can afford a better house you "move up" without question. I think almost everyone we know thought we were insane or secretly having financial problems to make the move we did. But in reality we really were just not seeing any added value for the extra money we were spending, so we would rather allocate those resources somewhere else that would make us happier long term.

    I'm sure that for some their house or car is a source of joy, but I think most people just buy those things because "that's just what you're supposed to do" rather than really considering what they really want out of life.
     

    AmyAnne

    DIS Veteran
    Joined
    Sep 20, 2012
    Education and travel. Okay, that's where our money goes now. But if we didn't have to be semi-careful, we'd be taking some splendid trips, much more often. We'd probably also travel more in style than we currently do.
    This is where our money went for a good 15 years. No regrets at all, even though we are playing catch-up with our retirement funds (good thing neither of us is in a hurry to retire). When my oldest started high school, it hit me that the kids would be leaving us eventually and I really wanted to travel internationally with them before then.
     


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