The Intersection of FIRE and Disney

[GlamMistress]

Thoroughly enjoy this topic!

DH and myself, each 57 years old. Retirement is 5-6 years away. The only debt we have is a car payment; as much as I hate a payment, our loan is at 0%. We may pay it off sooner, just so we don't have a payment. We would have paid cash, had it not been for such a good financing offer. We own our home, so our housing expenses are related to property taxes, etc. I am a teacher (mid life career change), so will have about 1/2 my salary in my pension. We max out my DH's 401k, have some stocks, mutual funds with a brokerage firm. We have one child, a DD, 25 who is married and is about to finish dental school. Her undergraduate schooling was paid for by a combination of our own savings and a very smart grandmother. We are making interest payments on her dental school loans right now until she graduates (about $600 per month). Our goal was to make payments during the grace period before her loans capitalize. Since she is our only child, we'd rather help her out financially now when she needs it; after this, she and her engineer husband are on their own!

I do have a question: we have not yet opened any IRAs. We've funded retirement through 401ks and the mandatory pension contribution that I am required to make. Like must, I'd like to lower our tax liability as much as possible. If we open a traditional IRA and max it out, only about 1/2 of that has an impact on our taxes because of income limits. My thought is this: fund a traditional IRA with $3,000 (since that's about all that effects our tax burden) and use $4,000 to fund a Roth IRA.

Does that sound right?

Open a traditional IRA and do a back door Roth conversion. Contribute the max for both you and husband.

https://www.rothira.com/what-is-a-backdoor-roth-ira

 

[SouthFayetteFan]

I was updating my spreadsheets this evening and figured I'd share in case anybody wasn't up on the 2019 limits:

• 401k = $19,000 (up $500)
• IRA = $6,000 (up $500)
• HSA = $7,000 (up $100)

Happy Saving to all my fellow FIRE chasers

 

[Mrs. Ciz]

I was updating my spreadsheets this evening and figured I'd share in case anybody wasn't up on the 2019 limits:

• 401k = $19,000 (up $500)
• IRA = $6,000 (up $500)
• HSA = $7,000 (up $100)

Happy Saving to all my fellow FIRE chasers

Thanks for posting the limits. After reading all the posts, I got curious and looked up the 401K/403b max but hadn’t had time to look up the others. I’m a poorly paid teacher at a Catholic school. The 403b max would pretty much be half my salary. I won’t be able to do that until both kids are done with college. Right now I’m putting 15% in. We are at $4500 with the HSA. And we’ve never opened separate IRAs. When I was a SAHM I wanted to open a small Roth every year because I had no other retirement plan, but we could never scrap together the funds. Like I posted earlier, we have some catching up to do, but if we follow the plan I mapped out and start the catch up contributions in 2 years, we should have enough.

But I’m severely tempted to sell our big family house, buy something small here and buy a beach condo in Virginia Beach (about 2 hrs away) for summers and weekends and maybe retire there. Who knows. Gotta keep running the numbers to see if we can still meet our targets if we do it.

 

[QueenIsabella]

A couple thoughts:

First off, for those who are just starting out or just starting over--please don't feel badly that you're not putting away the maximum or have some debt. The point is to move in the right direction--save SOME for retirement, even if it's just a few hundred dollars a a year. Make an effort to pay down the debt. You get the idea. I grew up poor, had a ton of student loans upon graduation, and literally had to start with nothing--in the hole, actually. My Dh started off better than I did, but not by a whole lot. It took us close to 30 years to become 401k millionaires. The important thing was to start saving early, and keep going. So, don't get discouraged!

Second, on the Roth conversion--keep an eye on your tax burden for converting. When you convert, you owe taxes on that amount, at whatever tax rate you're at. We converted $50k last year, and all I'll say is YIKES! Not sorry we did it, but YIKES!

I won't be posting our budget for a number of reasons, the main one being that I don't like that stuff "out there". But we're also in flux (DH lost his job). Plus, we have a less common situation, in that we're dealing with an estate situation since my MIL passed last year. On the good side, DH inherited a decent amount, but there's a huge learning curve about all the rules in place on inherited assets.

 

[Southernmiss]

A couple thoughts:

First off, for those who are just starting out or just starting over--please don't feel badly that you're not putting away the maximum or have some debt. The point is to move in the right direction--save SOME for retirement, even if it's just a few hundred dollars a a year. Make an effort to pay down the debt. You get the idea. I grew up poor, had a ton of student loans upon graduation, and literally had to start with nothing--in the hole, actually. My Dh started off better than I did, but not by a whole lot. It took us close to 30 years to become 401k millionaires. The important thing was to start saving early, and keep going. So, don't get discouraged!

Second, on the Roth conversion--keep an eye on your tax burden for converting. When you convert, you owe taxes on that amount, at whatever tax rate you're at. We converted $50k last year, and all I'll say is YIKES! Not sorry we did it, but YIKES!

I won't be posting our budget for a number of reasons, the main one being that I don't like that stuff "out there". But we're also in flux (DH lost his job). Plus, we have a less common situation, in that we're dealing with an estate situation since my MIL passed last year. On the good side, DH inherited a decent amount, but there's a huge learning curve about all the rules in place on inherited assets.

Such a good post.

I don't think any of those active in this thread are trying to be pompous or intimidating, but I do think some posts can come across that way to those who are struggling and doing the best they can with what they have. I think those posting are excited for their own journey and I just caution folks to just be aware of how their post come across.

DH and I are financial nerds. We've always lived within our means and have no debt--mortgage paid off in October. We've got kids in college and things we thought when they were elementary age, have had to adapt and change.

The tug to be a stay at home mom hit strong when oldest kids were 4 and 1 and son #3 was on the way. I quit my good job in banking that i had for 12 years (but it had become a 60 hour a week job) and began to work part time for our church. Family and raising the kids became much more important than anything else.

And the kids have done very well. Had I not quit my job, I don't think DH and I could have led them in the direction to do what they have done.

Kids have earned scholarships to pay for college and through our example, they are so far debt free. DH and I did not have the extra $$ to put into 529s. Oldest has his Master's no debt and a good job. 2nd son is in year 4 with no student loan debt. Son #3 is in year 2 on scholarship also. However, son # 2 and 3 are working to become pharm d and an MD. So student loans are in their future when scholarships run out for years beyond year 4. Daughter is a junior in high school and on track for merit scholarships, also. But all of the kids live frugally. Years of hand me downs and growing up in a family that was frugal set the example. We do intend to help the kids at least with living expenses in college. It will be our honor to help them start out on the best foot possible.

We have a plan for retirement--DH is already getting a pension at a young age and working on retirement pension #2. We've saved what we could steadily through the years in 401k and 403bs, but it's not been the full recommended 15 percent. But due to the pensions and a paid for house, we will be ok.

DH wants to retire in 12 years at age 62 and we'd like to travel some then. But other than staying steady on course, we are not cutting our modest lifestyle now to hopefully live later.

My own father died at age 38. Never was a shot for he and my mom to experience their BIG dreams. She finished raising their 4 children on little $ and we've all turned out great. But I do wish they didn't have to work so hard for nothing in the end.

It takes a balance. Don't get so caught up in chasing the FIRE that you lose sight of here and now and the people around you.

 

[Judique]

Nearest Sams Club with gas is 45 minutes away.....hopefully the nearby stations match because the line to get gas was very long...

They probably will.

I want to start freezing it! DH thinks I am crazy for that. I think MIL maybe does too...? Like I think she probably knows it can be done because I think her mother does it (just with pre-shredded, buy in bulk and freeze), but it's more like why would we do that as we are not old people trying to live off SS checks... because I am a frugal/bargain person at heart!

I've never been able to bring myself to freeze cheese. I'd probably find it in the bottom all dried up in about 2 years.

 

[AmyAnne]

I was updating my spreadsheets this evening and figured I'd share in case anybody wasn't up on the 2019 limits:

• 401k = $19,000 (up $500)
• IRA = $6,000 (up $500)
• HSA = $7,000 (up $100)

Happy Saving to all my fellow FIRE chasers

I'm curious about whether you all FIREers max out your HSA. This is the first year I have had one (before, no high-deductible insurance so no option for a HSA). If you do maximize, is it with the thought that someday you might need that amount for healthcare expenses, or do you have other plans for that money?

 

[platamama]

Thanks for starting this thread on here. It's cool to see that it's pretty active.

I heard of FIRE several years ago, and read MMM back then, and it's always just been on the back burner of my mind. We've just been plugging away over the years, adding to our Roth IRAs, and DH maxes what he can get matched from work for his 401k. It was so much easier before DD was born when we were DINKs, I'm glad we got started saving and investing before she was born. Neither DH or I had undergrad debt, his grad school was free and even gave him a small stipend to live on and my grad school debt was paid off when we sold our starter home with the profits. We don't have credit card debt, our cars are paid off (5 yr and 11 yr old vehicles), and our current house should be free and clear in 8 years, putting us in mortgage-free territory in our mid-to-late 50's. Hopefully DD will be out of college by then (seeing the other thread on paying for college makes me realize I need a good plan for this soon since she's in high school).

My biggest money concern going forward is healthcare and what that is going to cost us in years to come. We have preexisting conditions and I'm grateful that the ACA makes sure that those are covered by insurance plans. I don't know how we calculate FI status when that chunk of the budget is unknowable. We're switching to a HD plan next year and will max out the 7K contribution to an HSA, but I'm doubtful that that will lead to significant savings; DH's take home pay will actually go down because of the HSA contribution. The upside to this is that I can meet MSR on cc's (folks from the ILCC thread can appreciate this) paying for healthcare, and reimburse us from the HSA.

 

[SouthFayetteFan]

I'm curious about whether you all FIREers max out your HSA. This is the first year I have had one (before, no high-deductible insurance so no option for a HSA). If you do maximize, is it with the thought that someday you might need that amount for healthcare expenses, or do you have other plans for that money?

I have a lot of strong positive feelings towards the HSA...I'll try to clearly list why in some bullets here: (some of this may be very "elementary" but figured I'd share all the details in case somebody knows nothing about an HSA)

• First off - it's worth noting that NOT everybody can have an HSA. You must be in a qualifying high-deductible health plan (HDHP). HDHP's are growing in popularity, my employer actually ONLY offers HDHP plans now (3 different levels). Some employers offer both a PPO and HDHP and it's important to figure out which is best for you.
• HDHPs are generally best for fairly healthy people who want to keep their premiums low and pay OOP for any medical expenses. HDHPs typically cover all well-visits and most preventive care.
• The HSA is a savings vehicle available to people with a HDHP to save tax-free dollars to use when those OOP medical expenses come up. I think most people solely look at it as a medical savings account, but I actually treat it as a retirement account.
• Many employers will make a contribution each year (which counts towards the max FYI). We are in a family plan and receive $1,200 each year from the employer in our HSA. (this also is NOT a match - i.e. we get the money whether or not we contribute any funds ourselves)
• Aside from being useful for medical costs, it actually functions a lot like a traditional IRA (funded with pre-tax dollars and grow tax-free) with a few differences:
  • You can withdrawal funds for qualified medical expenses at any time at any age TAX FREE (so you've put in tax free and taken out tax free
  • For someone looking at early retirement, a large concern could be future medical costs and being able to withdraw tax-free from this account is huge
  • At age 65, you can withdraw money from an HSA for ANY reason and just pay normal income taxes - just like an IRA (except the IRA is 59.5)
  • IF you choose to withdraw funds for a non-medical expense BEFORE age 65 there is a 20% penalty (vs. 10% in a traditional IRA)
• One of my FAVORITE PARTS of contributing to my HSA via payroll deductions is that it is the ONLY savings vehicle where you can avoid FICA taxes (you know that nasty 7.65% they take for Soc Security/Medicare). Contributions to a 401k or IRA DO NOT avoid this 7.65% so you can think of that is an instant return!
• You can invest your funds just like an IRA. If your employer plan doesn't have great investment options you could do a rollover of your funds once per year into a preferable plan. (I choose to use https://www.healthequity.com/ because of the low fees and great Vanguard options)
• You could also research the ability to not take reimbursements immediately. (essentially you can save receipts and take the money out years down the line - we don't do this for some personal strategy reasons)

Hopefully that is helpful! When ranking my "savings" strategies #1 is decidedly getting your Employer Match in a 401. #2 for us is MAX OUT HSA Other's strategies may differ but I think this sets us up VERY well for the future.

 

[amalone1013]

For someone looking at early retirement, a large concern could be future medical costs and being able to withdraw tax-free from this account is huge

This is huge! This never crossed my mind at all.

You can invest your funds just like an IRA. If your employer plan doesn't have great investment options you could do a rollover of your funds once per year into a preferable plan. (I choose to use https://www.healthequity.com/ because of the low fees and great Vanguard options)

I didn't know you could do a rollover with an HSA. Learning things!

 

[SouthFayetteFan]

This is huge! This never crossed my mind at all.

I didn't know you could do a rollover with an HSA. Learning things!

On the rollover - I'm not sure my employer's is crazy about a direct transfer (there are fees and it seems difficult). So, I actually take the distribution and do a Rollover myself which is governed by certain laws/restrictions (the primary ones being only once every 12 months AND you have to put the funds in the new HSA account within 60 days OR you'll be subject to the 20% penalty). I just let our funds sit in the employer HSA checking, build up and once every 12 months move them over passing through my checking account.

 

[SouthFayetteFan]

This is huge! This never crossed my mind at all.

I didn't know you could do a rollover with an HSA. Learning things!

Here's a simple article on doing an HSA rollover: https://thefinancebuff.com/how-to-rollover-an-hsa-on-your-own-and-avoid-trustee-transfer-fee.html

It references the "Trustee Transfer Fee" which is the thing my employer's plan has that I don't want to pay, lol. They think they've trapped your money except MUAHAHAHA I have another strategy, lol. If you do this, just don't play around with that 60 day thing. Get the money IN and OUT quickly (or is that OUT and IN quickly, lol)

 

[GlamMistress]

This is huge! This never crossed my mind at all.

I didn't know you could do a rollover with an HSA. Learning things!

Yep my #1 personal finance goal for 2019 is to invest my HSA funds. I was going to do it midyear but I had some health issues and panicked because I didn't know if I would need the money so I waited. Things turned out just fine and it isn't really responsible to just leave a giant piled of cash sitting, not growing. I still haven't decided which company I want to use. Some of the fees seem kind of high. I will look into Health Equity as @SouthFayetteFan mentioned.

 

[amalone1013]

Yep my #1 personal finance goal for 2019 is to invest my HSA funds. I was going to do it midyear but I had some health issues and panicked because I didn't know if I would need the money so I waited. Things turned out just fine and it isn't really responsible to just leave a giant piled of cash sitting, not growing. I still haven't decided which company I want to use. Some of the fees seem kind of high. I will look into Health Equity as @SouthFayetteFan mentioned.

I moved mine to an investment earlier this year, but I need to go back and read the details. Good to know there are options.

 

[SouthFayetteFan]

Yep my #1 personal finance goal for 2019 is to invest my HSA funds. I was going to do it midyear but I had some health issues and panicked because I didn't know if I would need the money so I waited. Things turned out just fine and it isn't really responsible to just leave a giant piled of cash sitting, not growing. I still haven't decided which company I want to use. Some of the fees seem kind of high. I will look into Health Equity as @SouthFayetteFan mentioned.

So with Health Equity, I believe I pay $36 annually to have the account. I did a lot of research before choosing them.

I am in the self-driven investment accounts and have 3 Vanguard funds where I place my money. The Vanguard expense ratios are 0.02%, 0.05% and 0.05% respectively. These are in the "Choice" investment category and have a 0.02% monthly fee from Health Equity which essentially works out to be 0.24% annually and was one of the best (if not the best) I found out there. Based on my 81/13/6 allocation in theory my fees should be roughly 0.2657% of the annual portfolio balance.

 

[SouthFayetteFan]

So with Health Equity, I believe I pay $36 annually to have the account. I did a lot of research before choosing them.

I am in the self-driven investment accounts and have 3 Vanguard funds where I place my money. The Vanguard expense ratios are 0.02%, 0.05% and 0.05% respectively. These are in the "Choice" investment category and have a 0.02% monthly fee from Health Equity which essentially works out to be 0.24% annually and was one of the best (if not the best) I found out there. Based on my 81/13/6 allocation in theory my fees should be roughly 0.2657% of the annual portfolio balance.

Health Equity has a million webpages and PDFs if you try to search for this stuff.

THIS IS THE BEST PAGE: https://healthequity.com/indexinvestor/
(and here's a supplemental fee schedule: http://resources.healthequity.com/Documents/F93_Member_Fee_Schedule_20151007.pdf_

It explains how it works quickly and concisely.

• If you transfer in $1,000 within $90 they waive the $36 fee for the first year.
• 2bps monthly fee (0.24% annually I referenced earlier)
• You can invest everything over $50 (super low minimum!)

ALSO - if anybody else has a good HSA provider please share. It's always good to know what options are out there to SAVE $$ on FEES!!!!

 

[platamama]

Does anyone here use a roboadvisor, and are you happy with it?

 

[georgina]

I'm going to try to do more detailed record keeping this next year, as the money I spent is substantially higher than this. Your housing cost is very small. Maybe I should move to Pennsylvania!

But, even in my retired state, I'm still not spending all of my retirement income, for which I'm thankful. Even though my numbers looked good, I was slightly anxious about actually giving up my job. As it turns out, I'm still saving!

PA does not tax pensions, which is very nice! We will be moving to VA in a couple of years (hopefully) to be closer to expected grandchild(ren?) so I will miss that and the low cost of living.

It's interesting reading everyone's housing costs. My DS pays $2000 a month for a 1 BR apt in Redmond, WA (home of Microsoft). He has very few other expenses (no car) so for him it is doable. He does have a washer/dryer. Before that he was on the upper East side of Manhattan in a studio for $1875 (paid by the pound to have his laundry done.) DD in San Francisco pays about $1500 a month plus utilities in a shared 5 BR house! Again, no car, and as a software engineer with few other expenses she can manage it.

DH is retired and will defer his SS until age 70, so I am working on converting his traditional IRA money (rolled out of his 401k) to Roth over the next few years while our income is fairly low. He does have a traditional pension and retiree medical benefits, which are not given to younger employees of his company

 

[georgina]

Does anyone here use a roboadvisor, and are you happy with it?

My DD uses Wealthfront. She has only been in it for 6 months, so it is hard to rate. I think the management fee is .25%, with the first $5000 free and another $5000 free for using a referral link. Personally I hate paying for someone to manage my money, but she is not interested in the day to day investment decisions. My DS I have in a Target Date retirement fund at Vanguard with no extra management fees (other than what is involved in running the fund)>

 

[QueenIsabella]

The only thing I want to add on HSA's is, you get a card, like a credit card. You can use it for any medical expense, like co-pays. Most important, don't overlook the big ones--we used our account for eyeglasses/contacts. With 6 people needing corrective lenses, it was a huge help. You could probably also use it for dental work/orthodontia, but please double-check your own plan on that.