first time financial independence help

Quote from jmag034 : I originally thought this guy had a few good points but the more I read the more I wish he would stay out of the finance forum. He is giving terrible advice and is spewing on about his made up world where he can support a family on 10k a year. OP if you plan on working for 8 more years of your life saving every penny and living like a pauper for the rest of it, then by all means take his advice. Sorry ViciousTide but your advice just isn't practical for 99.5% of people. Take advantage of the company 401k match. It's free money and it allows you to put some money away in a place that you won't touch for retirement. You say don't contribute to a 401k until after you are financially independent? HE WOULD BE LIVING ON PASSIVE INCOME - WHAT MONEY WOULD HE INVEST? In fact, I would recommend a Roth IRA in addition to the 401k and start saving now! We don't know the tax policies of the future so having some money in your retirement years that is not subject to taxes is advantageous, especially if you work hard, save, and have a nice big stream of retirement income.

1) $10k/year/person in passive income. I never said the entire family is supported, only you. Your Wife can work for her savings too and contribute to her retirement, or you both can save/invest faster together for both retirements and even the retirement of the whole family.

2) Saving more money isn't terrible advice. I don't live like a Pauper either. I have a paid off used car, though i prefer biking. I have a paid off 3 bedroom house for $150k in a low property tax state, though i would prefer an RV for more Mobility, so thus occasionally rent out my paid off house for more passive income.

3) To live off of passive income, you are invested.

4) Hey if you want to work till you die and not see that passive money till your too old to enjoy it, then sure go ahead and put in $16.5k into your 401k each year. They are even raising the ceiling, so you can devote more.

And as the nation goes further into debt and more jobs are cut, Taxes will have to raise to extreme levels to ever pay off this debt, or we could just wipe it all clean again, since the world depends on our currency.

5) Either way your being taxed on Income Tax whether now or later. While passive income is being taxed at investment tax rates. I rather retire and be at FI income tax brackets at say 40, and be taxed on investments, then wait for skyrocketing taxes for all classes, later in life.

6) the near future is easier to forsee then the far future. So the closer you get to FI with a Taxable Account, the more you can react to Policy Changes, like Income Tax going up, or Social Security disappearing. You have a lot more options with your Money now, and in a decade could move out of the country if you desired with your Account and your Passive income it generates. Or you can keep working just to put money into the 401k until age 62.

7) Once you find your state of happiness and passive income is very generous, why continue to work/ waste your time earning lots more money?

IMO: I rather do whatever i desire and find many passionate ambitions to pursue at a younger age and closer to the present, then have Millions of Dollars received the day before i die or for the last years of my life.

Thanks everyone. I ran through what I expect to be spending every month and it comes to $2900. That's including apartment, insurance, car payment, groceries, eating out, gas, 401k, utilities, cell phone, medical, renters insurance, and car maintenance.

Turns out my employer doesn't match 6%, they give you 6% no matter what. I don't have to contribute a dime to get them to contribute. Do I still put in 6-10%?

Quote from omghaxcode : Thanks everyone. I ran through what I expect to be spending every month and it comes to $2900. That's including apartment, insurance, car payment, groceries, eating out, gas, 401k, utilities, cell phone, medical, renters insurance, and car maintenance. Turns out my employer doesn't match 6%, they give you 6% no matter what. I don't have to contribute a dime to get them to contribute. Do I still put in 6-10%?

Thats really a sweet deal with the 401k.

With that sort of setup I wouldn't contribute anything to the 401k and just let that employer contribution accumulate.

Open a Roth IRA and contribute to that instead. You're in probably the lowest tax bracket youll ever be in.

Quote from omghaxcode : Thanks everyone. I ran through what I expect to be spending every month and it comes to $2900. That's including apartment, insurance, car payment, groceries, eating out, gas, 401k, utilities, cell phone, medical, renters insurance, and car maintenance. Turns out my employer doesn't match 6%, they give you 6% no matter what. I don't have to contribute a dime to get them to contribute. Do I still put in 6-10%?

As you are at a young age - still put in 10% or more if you can afford it. Why?

• 401K reduces your tax requirements
• If you get into the habit it is automatic savings (if you plan to live until 62) - many will say wait until later but I think as you have more responsibilities it is more difficult to take that chunk out of your paycheck. With 401K - you never know it is missing because you never received it (auto deducted).
• IF you manage your 401K portfolio correctly that money will grow and in 10 yrs worth a lot and in 20 yrs worth a bunch more. It is a risk as

it can flop but if you contribute 10% that indicates 16% of your income set aside for later in life without much effort/thinking on your part.

If you earn only 75k annually and work until mid50s - without any growth in your 401K that would translate to approximately 1/2 million. Consider that is 10 cents of every dollar plus the company match - you can see how good it might be when you retire (especially if your 401K investments grow)

If you want to know whether it is a good venture - ask anyone 2x your age do they have 16% of their salary available to invest towards retirement today? If you can go higher I would go higher as it is best to invest now while you are young and don't need the money.

BTW - Annually you can change your selection for 401K to reduce the percentage. One other bit - if you do decide to contribute 6-20% towards your 401K make sure you change your Federal tax deduction as 0 or 1 will result in too much of a tax return towards April 15. You can use the IRS website to calculate the tax savings and change your deductions accordingly. You do NOT want a huge federal tax return annually (over $500) as that translates to your giving US Govt an interest free loan every year because you didn't change your W4.

Quote from omghaxcode : Thanks everyone. I ran through what I expect to be spending every month and it comes to $2900. That's including apartment, insurance, car payment, groceries, eating out, gas, 401k, utilities, cell phone, medical, renters insurance, and car maintenance. Turns out my employer doesn't match 6%, they give you 6% no matter what. I don't have to contribute a dime to get them to contribute. Do I still put in 6-10%?

If they don't offer a match above the 6% they straight out give you then don't contribute anything at first to your 401(k) until you've maxed out a Roth IRA.

I know the difference between a Roth IRA and a 401k but I am not sure which is better since I've heard conflicting statements. Once I'm retired, is my tax bracket lower or higher? Which do I get involved in?

Quote from omghaxcode : I know the difference between a Roth IRA and a 401k but I am not sure which is better since I've heard conflicting statements. Once I'm retired, is my tax bracket lower or higher? Which do I get involved in?

It depends on if you think taxes will be higher, lower, or the same once you retire as well as if your income will be higher, lower, or the same once you retire.

Right now, believe it or not, our taxes are relatively low. Also, we have some really big national budget items that aren't trending in a good direction, financially speaking, such as Medicare, Medicaid, and, to a lesser degree, Social Security. These are HUGE expenses that cannot keep going the way they're going without breaking our country. If they are not reduced significantly, the only other solution is to bring more money into the government. This is not a political statement, but, rather, simply financial facts. So, I would put my first monies into a Roth IRA and pay the taxes now, rather than later when taxes are very likely to be higher.

(* Yes, one of the ways to bring more money into the government is to increase the size of the economy and, therefore, the tax base, but I'm not counting on this saving the country's budget. I think higher taxes are in our future.)

But when I retire, won't my taxes be very low since I have no income other than how much I decide to remove from a 401k?

Quote from omghaxcode : But when I retire, won't my taxes be very low since I have no income other than how much I decide to remove from a 401k?

I don't know. That's up to you to decide how much income you'll have when you retire. But, remember, the other part of the equation includes the tax rate itself.

If you're concerned about taxes and inflation eating your future savings, then you need to hold assets outside the financial system. Copper, land, silver, rare art, etc. That's financial "independence." Dollar denominated financial products are dependent. If you think there's just one true "safe haven" I think the market makers are one step ahead of you.

In other words, it boils down to risk and confidence. The days of parking you nest egg on a bank balance sheet, kicking back and relaxing are dead. Because if they cannot outright tax, they'll outright steal it through inflation or capital controls.

Don't have kids.
Don't pay her debt unless you are married.
Max out 401k.
Max out IRA- Roth if possible
Don't have kids.

I would never pay a girlfriends student debt or any other personal bill of hers. Keep your money seperated, if she respects you she will have no problem with this. Besides, she will feel better about herself if she paid for her student bills. Its a reflection of her hard work as a student and soon-to-be school teacher. Thats her personal journey, not yours and you should not intefere with that. Support her school work, not her school bill. Oh, also dont be so darn frugile. Yes save while your young but still have fun. Go to resturants and pamper yourself at the spa and pay other people to do things you know you can do, why?, because your time is more valuable than money. Find a healthy balance.

If you want to retire at age 40, then socking all your money into a 401k or IRA won't help you very much.

It will help the Billionaire 401k Hedge Fund Managers make more Billions with no risk to them, because it's not their money they are playing with, it's yours.

But if you plan on working all your life and not have investment money take over making your income for you, then tying up your money into a tax deductible fund controlled by others, is a somewhat reasonable thing to do to though you will still pay rising fees for other's to play with your money.

Cash for investments now is the best strategy. Just look at the Past. Taxes were sky high after each war, especially WWII. Imagine America getting into a few more wars with the national debt we are in, rising inflation costs, and regulating laws and control over the people that are being implemented. Even if you worked for 40 years, saved up $3 Million in a tax sheltered account, and didn't die from health issues or accidents. you'll have to withdraw based on your tax bracket.

At this rate, the poorest tax brackets will have to be taxed more and more! From 15% to 50%, while the Richest income tax brackets will be taxed 50%-90% (as they flee and go overseas with their off-shore accounts, leaving only the Poor and Middle Class to pay higher and higher taxes).

Wouldn't you rather have your cash taxed now, invest it now, and live off investments now, so then you can jump around the world if need be when taxes skyrocket in America? Or do u want to be chained to higher demanding work with less pay and more layoffs while throwing your cash into a chained Fund, controlled/fee'd by companies and government other then you, and have your savings be at the mercy to government control, the rising tax rates, and inflation rates?

I say retire NOW, and Piss on the Regulated 401k/IRA/HSA Funds that have Age Restrictions, withdrawl restrictions, fee you, and limit your rate of returns to their whems while passing on all the Risk to your Accounts.