Pay no ($0) taxes legally on up to $144,900 income by understanding the tax code and how adjustments to income, tax deductions like the standard deduction, tax credits, medicare tax, social security tax, FICA tax, capital gains, tax loss harvesting, tax gain harvesting, wash sale rule, and traditional retirement accounts work.
Keeping your emergency fund in savings like Dave Ramsey and Suze Orman recommend is costing you $1.5M! Here’s how much to save in an emergency fund by investing it in stocks in a Roth IRA like Graham Stephan suggests but also where to keep your emergency fund to keep it safe.
You should save this emergency fund as your first financial priority after paying down high interest debt like credit card debt.
68% of works aren’t engaged in their job and likely dread the idea of working until their 60s. Using Mr Money Mustache’s shockingly simple math behind early retirement, I’ve been able to lower my expenses (as tracked by Mint.com) enough to retire in 2 years by age 35.
His math assumes a $0 net worth but if you have debt or assets, you can use OnTrajectory.com to calculate your years until retirement. The Trinity Study indicated a 4% withdrawal rate will survive a 30-year retirement, but by retiring in our 30s we’re talking closer to a 60-year retirement! Using Karsten Jeske’s, Big ERN from EarlyRetirementNow.com, calculations, a 3.6% of assets safe withdrawal rate, or saving a nestegg of about 28 times your expenses, has a 95% chance of outlasting a 60-year retirement.
Why do you want money?! To most people that sounds like a pretty silly question: we want money to buy things!
The truth is people want money for different reasons and for different times of their lives. Some want to save for a wedding, buy a house, get a degree, save for children, go on a vacation, pursue a hobby, take a sabbatical, enjoy semi-retirement, or retire early.
Carrying debt while investing is known as “leverage.” Leverage can increase your net worth if you’re investing borrowed money at a higher return than the interest rate you pay to borrow the funds. However, high return assets such as stocks come with high volatility. Rather than using bonds to decrease your risk exposure, consider paying down debt.
You invest for the long-term. Long-term, stocks outperform bonds. Why do you care about short-term volatility? Shouldn’t you invest 100% in stocks and wait out any market underperformance? Yes, and no. It depends on how much you need to protect it from “retirement date risk” and “sequence of returns risk.”
All four are retirement plans classified as “defined contribution” plans. All four are offered by employers through a third party financial institution called an “administrator” as a tax-deferred investment vehicle to encourage you to save for retirement. So what’re the differences?
A common misconception is that 401(k)s and IRAs save you from income tax. They don’t, but they do save you from capital gains tax. With compounding, the additional earnings from tax-advantaged accounts over taxable accounts can be large.
Gains from sold investments, known as capital gains, are taxed lower than income. Interest and dividends are taxed as income unless the government considers the dividends “qualified”.
Treasury bonds correlate less with stocks than do corporate bonds, making treasuries an ideal portfolio ballast. Specifically, intermediate-term treasuries provide the highest yield for the least volatility. The Vanguard Intermediate-Term Treasury Fund is the best bond fund for most portfolios.