The Intersection of FIRE and Disney

[Frwinkley]

As in you'd put more funds into your 401k/IRA's or you'd do more Roth or? Would love to hear more about what you would do differently.

I can't speak for the poster you asked the question of, but we are hoping to do some Roth conversions while our income is lower (just pension income), prior to collecting social security.

 

[georgina]

As in you'd put more funds into your 401k/IRA's or you'd do more Roth or? Would love to hear more about what you would do differently.

Agree with Frwinkley that it is good to try to reduce the pre-tax 401k and IRA money so the required distribution at age 73 is not too big. Converting some to a Roth IRA each year can soften the blow. DH retired at 63 and didn't start taking social security until age 70, so we had 7 years of lower income to try to reduce the amounts. I didn't convert it, just made some withdrawals, same income tax is due either way.

DH worked for the same company for 37 years and had a large 401k, which we rolled into an IRA when he retired. His company's matching contributions were in stock. In my research I stumbled upon the Net Unrealized Appreciation rule for the stock, when you roll it all out entirely you only have to pay ordinary income tax on the cost basis, and pay lower capital gains rates on the rest when you sell it sometime in the future. So at the time of the stock withdrawal, we only had to pay ordinary tax on 20% of the value, as 80% was gain. Haven't sold any of it yet, but I've been using it for charitable donations so we don't have to pay any more tax on it.

 

[wabbott]

I agree with the previous two posters about converting IRA/401Ks to Roths prior to RMD (Required Minimum Distribution) age, and when/if there is a period of low income. In retrospect, we should have done some of this.

 

[QueenIsabella]

Yeah, I WISH I could do Roth conversions! There's just no "low tax bracket" space for us! (Waaah! First world problems!).

On the good side, we've been strongly encouraging the kids to invest in their Roths. DD21 has a Roth 401k at work that she puts 10% into--company match is in a regular 401k, but it helps. And both my girls are getting windfalls this year--payouts from trusts set up by their grandmother that hit at certain times. I've mentioned to both that, since this was "found money", throwing the max into their Roth for the year was a good thought. On the good side, DD29's fiance, who's a finance guy, had already told her she needs to up her Roth game (she does have a retirement account through her job).

 

[wabbott]

Part of the issue I had with Roth IRAs is the old, old CPA proclamation that one should "never, ever" pay taxes before they're due. That was taught in accounting classes because one never knows what the next legislative/congressional session would bring in future changes, and might affect your situation.

Also, I was leery of the Powers That Be reneging on their promise of not taxing withdrawals in the future. It wouldn't be the first time.

 

[dawnball]

We are just staying the course and not moving anything around... kind of a Boglehead approach. One thing that has come up for us recently after having a death in the immediate family is lighting the fire under all of us to get trusts/wills set up, find a good match in a lawyer, etc... fun times.

What is FIRE philosophy about inheritance, do you aim for no money left when you die, or aim for inheritance for the next gen? As an intersection of FIRE and Disney thread, I want the next gen to have both a love of going to Disney (and the memories), and to get some money. lol

You can't really aim precisely enough for either of those, to be honest. We retired with a 50 year time horizon, which is virtually the same as an infinite horizon. In order to minimize the risk of running out of money before (possibly long before) we die, we've also increased the possibility of leaving large amount of money to our kids/charities. Or we might have significant long-term care expenses and need medicaid planning. Once you have a shorter time horizon, there are fewer unknowns and you can make more tactical decisions.

Since both of our parents were also FI (although not all RE), we've seen it from the kid side too. That's caused us to make decisions like supporting our kids at college. They don't need to work during school and will graduate with no debt, an excellent credit score, multiple years of fully-funded Roth IRA, and a car that we'll title over after graduation. They've worked summer jobs and had internships and I preferentially hire them 1099 for my small business so they have a good nest-egg. That's significant privilege we appreciated from our parents, and they should be able to make a good start from there.

 

[dawnball]

I agree with the previous two posters about converting IRA/401Ks to Roths prior to RMD (Required Minimum Distribution) age, and when/if there is a period of low income. In retrospect, we should have done some of this.

Roth conversions are fantastic to surf the ACA subsidy/cost sharing windows.

There's also retaining enough to fill the 12% tax bracket and considering whatever bracket you're in for low-income years. So for 2025, we're looking at ~$47K individual. If I were turning 73 in 2025, I'd have a life expectancy of 26.5 years. So if that's my only taxable income I'd be looking for $1.2- 1.3M in IRA/401K value for the 12% bracket.

 

[QueenIsabella]

Part of the issue I had with Roth IRAs is the old, old CPA proclamation that one should "never, ever" pay taxes before they're due. That was taught in accounting classes because one never knows what the next legislative/congressional session would bring in future changes, and might affect your situation.

Also, I was leery of the Powers That Be reneging on their promise of not taxing withdrawals in the future. It wouldn't be the first time.

This. As Roths become more and more popular, I find it tough to believe that politicians, "starving" for revenue (because--aren't they always?) will let all those untaxed gains pass them by.

 

[georgina]

This. As Roths become more and more popular, I find it tough to believe that politicians, "starving" for revenue (because--aren't they always?) will let all those untaxed gains pass them by.

I don't believe they will attempt to change it for current Roth investments, but could certainly try to amend it for future accounts. Some of my Roth account is from a spousal IRA for the years I wasn't working.It was a good deal to put away money that would be tax free in withdrawals.

 

[Starport Seven-Five]

Spreadsheet day was good to us: We have officially hit lean FI.

We are starting to encounter a different type of anxiety now. We both have no plans to retire soon and our daughter is 2 so any early retirement will still be somewhat location constrained due to school. We have been inflating lifestyle a bit over the last couple years (mainly with vacations) but we are quickly approaching the point where we need to adopt a pet killer whale or accept dying with 7 figures. Nice problem to have but probably one of the hardest mindset shifts for someone that was taught to be frugal.

 

[Sjm9911]

The pet killer whale is , braces, a car collage tuition for the kido. Don't worry they get way more expensive as they get older. Lol.

 

[wabbott]

Spreadsheet day was good to us: We have officially hit lean FI.

We are starting to encounter a different type of anxiety now. We both have no plans to retire soon and our daughter is 2 so any early retirement will still be somewhat location constrained due to school. We have been inflating lifestyle a bit over the last couple years (mainly with vacations) but we are quickly approaching the point where we need to adopt a pet killer whale or accept dying with 7 figures. Nice problem to have but probably one of the hardest mindset shifts for someone that was taught to be frugal.

Congratulation on reaching your goals!

 

[QueenIsabella]

Spreadsheet day was good to us: We have officially hit lean FI.

We are starting to encounter a different type of anxiety now. We both have no plans to retire soon and our daughter is 2 so any early retirement will still be somewhat location constrained due to school. We have been inflating lifestyle a bit over the last couple years (mainly with vacations) but we are quickly approaching the point where we need to adopt a pet killer whale or accept dying with 7 figures. Nice problem to have but probably one of the hardest mindset shifts for someone that was taught to be frugal.

It's great that you've hit some goals.

Don't worry, expenses are likely to "turn up", ha-ha. In our house, it's travel, 2 college tuitions (down from 3 last year), law school, a wedding, a car for DD22...

And don't forget about long-term care. We have funds for a "million dollar disease", as we call it. If we get lucky and die easy, our kids can have what's left.

I also find that, as I get older, the things that bring me joy aren't "things"---it's being able to treat my kids to a bougie trip to Iceland next summer. Being able to pay for my son to go to Croatia over spring break. Same kid being able to do a semester in Switzerland...and being able to visit him there. My kids graduating without student loans. Those kinds of things make me much happier than a fancy car or expensive jewelry.

 

[dvcgirl67]

It's great that you've hit some goals.

Don't worry, expenses are likely to "turn up", ha-ha. In our house, it's travel, 2 college tuitions (down from 3 last year), law school, a wedding, a car for DD22...

And don't forget about long-term care. We have funds for a "million dollar disease", as we call it. If we get lucky and die easy, our kids can have what's left.

I also find that, as I get older, the things that bring me joy aren't "things"---it's being able to treat my kids to a bougie trip to Iceland next summer. Being able to pay for my son to go to Croatia over spring break. Same kid being able to do a semester in Switzerland...and being able to visit him there. My kids graduating without student loans. Those kinds of things make me much happier than a fancy car or expensive jewelry.

Travel for sure at our house. We hit our FI number when we turned 50....eight years ago. We backed down off being super-savers of 50% of our gross income to closer to 30% at that point, but decided we wanted to continue working to build in a lot more for higher end travel. We're there now, and I'm happy we did it. International travel, particularly higher end travel, has just far outpaced inflation in the last decade.

 

[DanceDisney23]

The pet killer whale is , braces, a car collage tuition for the kido. Don't worry they get way more expensive as they get older. Lol.

This. Plus activities. Eventually your daughter will want to cheer, dance, play travel soccer, whatever. That’s $10-20k per year right there.

 

[Starport Seven-Five]

The pet killer whale is , braces, a car collage tuition for the kido. Don't worry they get way more expensive as they get older. Lol.

It's going to be hard to top our current daycare bill.

We have a 529 set up that should take care of a good portion of college tuition. Hard to predict what that will look like in 16 years though.

I also find that, as I get older, the things that bring me joy aren't "things"---it's being able to treat my kids to a bougie trip to Iceland next summer. Being able to pay for my son to go to Croatia over spring break. Same kid being able to do a semester in Switzerland...and being able to visit him there. My kids graduating without student loans. Those kinds of things make me much happier than a fancy car or expensive jewelry.

This is where I see us going as well. Every few months we talk about it and there isn't any motivation to buy a bigger house or more expensive car. We're going to double our vacation budget next year but I don't see that making much of a difference.

 

[ThereYouSeeHer]

Spreadsheet day was good to us: We have officially hit lean FI.

We are starting to encounter a different type of anxiety now. We both have no plans to retire soon and our daughter is 2 so any early retirement will still be somewhat location constrained due to school.

It's going to be hard to top our current daycare bill.

Have you considered one parent leaving work and homeschooling?

If you can potentially coast towards retirement now, homeschooling would save on daycare costs and remove any location restrictions. We homeschool and live a rather unhurried and unscheduled life. During the day, we have visited museums, parks, libraries, playgrounds, and grandparents. If you want structure, there are homeschool groups and co-ops. When we want to travel, we only have to plan around one adult work schedule.

Having no school schedules dictating our life, having no conflicting work schedules, and using our money to teach and raise our own children (versus paying someone else to do it), is very rewarding. We love the freedom of it all!