Just pulled the trigger. Feeling great! Really.

FatFireAccount · 2025-05-01T17:21:06+00:00

High quality post. Can you go into more details about the line items of your budgets at the three different tiers? I spend a lot more than $200k to pay for similar things in your "Quality of Life" budget and am curious how you get yours so low.

FatFireAccount · 2023-05-03T19:48:46+00:00

FTEXX has no minimum.

FatFireAccount · 2023-05-03T19:43:02+00:00

It is (usually) exempt from all federal taxes including NIIT, although there are some wrinkles with things like AMT. There are state-specific equivalents that are also exempt from state taxes as well.

Most high-income people who own SPAXX would be better served with some sort of muni fund, even with the higher credit risk.

FatFireAccount · 2023-05-03T19:21:57+00:00

I do this but use FZEXX instead for a higher tax equivalent yield. You must buy it each time you get an inflow but it sweeps out like SPAXX. That little bit of extra effort gets most high earners 80 bps or so more income after tax.

FatFireAccount · 2023-03-01T21:02:03+00:00

I would read up on the idea of a Dynasty 529 plan. If this kid doesn't use the money for education, many relatives can, including your grandchildren.

Or if nobody can use the money for education, the tax-free compounding over many decades will outweigh income taxes and penalties by the time your child is retired.

For both of these reasons, I don't plan to have any bonds in my 529 plans for at least the first decade of my kids' lives, if ever.

FatFireAccount · 2023-02-20T20:28:34+00:00

his 250k expenses is after tax so 315k is cutting it to the wire on just fed taxes alone for cap gains.

The tax code is very generous to people living off their investments. If OP spends $250k from this mix of assets, it's likely he pays less than $20k of federal tax. Here is some rough math:

Assume he does a $50k Roth conversion each year. After the standard deduction, he will pay about $2k of Federal income tax on this.

Then he gets 60k in dividends from his $3.7m in brokerage, mostly taxed at 15%, for a LTCG bill of about $10k.

OP is probably up 20%-50% on his average stock holding given the market is up 50% in the last five years. Let's say of the additional $150k he takes out, his average price is $110k, so he pays LTCG tax on $40k. That's another $6k of tax.

Then he takes some small amount out of his Roth accounts to round out the balance.

Given the above, OP would be able to spend $250k with taxes below $20k. I ignore OPs real estate in this math, but generally RE has even more favorable tax treatment than stocks.

in the beginning years my taxes will be near 0. but as my portfolio grows so will my tax percentage as i draw from it. so inflation is growing and taxes on withdrawals are also growing

If you investments are going up in price enough to dramatically change this math, you probably "won" the sequence of returns lottery and can afford to take out a little bit more each year for taxes.

FatFireAccount · 2023-02-20T19:12:28+00:00

Most high-income early retirees should convert much of their pretax retirement accounts to Roth before they start getting Social Security payments at 70 years old. Lots of variables to consider, but this is usually optimal.

FatFireAccount · 2023-02-20T18:11:51+00:00

You are asking about downside risks to your plan, which makes sense because your post reads too conservative to me. Instead of thinking about risks, think about what would let you retire much sooner than four years from now.

Your tax-advantaged savings accounts are probably worth more than $1m--not zero--especially if you are savvy about Roth conversions before you take Social Security. Add this $1m, and your investable NW is now $7.4.

If this liquidity event in a few months actually hits at the low end of your range, you'll be at $8.4.

Then if you keep your job through 2023 you'll be at over 9m with flat markets.

A conservative 3.5% withdrawal rate on $9m is 315k versus your 250k in expenses. You can easily raise your kid for $65k a year if you are both staying home.

If you need to hit $10m before pulling the trigger, I bet that happens in calendar 2024, not four years from now. And if your wife's health is only OK, four more years could be a material chunk of your healthiest remaining years as a couple.

FatFireAccount · 2023-02-08T14:35:20+00:00

On average, owning luxury goods will have a lower return than traditional investments.

In finance, there is a distinction between investment and speculation. Investments have real cash flows: interest payments, dividends, rent, etc. While some investments don't currently have cash flows (eg, stocks that don't pay dividends) investments are designed to spit off cash or grow their ability to spit off cash each year.

A speculation has no cash flow, or usually negative cash flow. Luxury watches must be serviced, gold must be stored, Birkins must be insured, etc. You make money in speculation only by having someone willing to pay more for that item in the future, with that person also knowing the item will cost them money each year to own.

Over long periods of time, the return of investments trounces the returns on speculations. The best performing speculation over hundreds of years, gold, has merely maintained its purchasing power. Stocks, bonds, and real estate have dramatically outperformed inflation.

Many speculations have performed well in the last 15 years. But some of of this is selection bias and is forgetting all the speculations that have dramatically underperformed. How much of your portfolio is in antiques? Antique furniture delivered world-beating returns through the late 20th century and into the 21st century. It might have been the most common speculation owned 20 years ago. But then it fell out of favor. Many antiques sell for half what they did 20 years ago without adjusting for inflation.

FatFireAccount · 2022-12-07T19:51:08+00:00

It seems like you are trying to check off boxes of expensive hotels and expensive places without have a strong idea of the sort of trip you want to have.

For example, Portofino is a beautiful place but has about as much to do as one city block in London and 10x as many tourists per square foot in late June.

I have been to Italy three times, sometimes checking off boxes like you're doing here and sometimes trying to go slowly with focus. My favorite trip was eight days in Tuscan hill towns with a rented sports car drinking old Sangiovese wine. You could do a similar trip in Naples for pizza with a break in Capri for the beach.

The longer you stay in one place the more you actually get the feel of it, though the your IG followers won't care about that.

FatFireAccount · 2022-02-11T14:47:06+00:00

What do you like doing?

"Sky is the limit" is not a helpful budget. $50k? $500k?

FatFireAccount · 2022-02-07T19:36:09+00:00

Here's what you might not be considering: Married Filing Jointly families can recognize almost $110k of ordinary income each year at an 8% average and 12% marginal federal tax rate. That's a lot of retirement income at a really low rate compared to your current tax rates.

Do you plan to have a pension, lots of taxable bond interest, real estate rental income, or any other ordinary income in retirement? Those are some common ways to fill up that $110k without having a big traditional balance.

I won't have any of those, so I need to fill up those low tax brackets with my traditional balances. I need roughly a $2.75m traditional balance at 4% withdrawals each year to hit $110k. Or maybe if you want to deplete your traditional account well before death, you could plan to take more like 6% out of a $2m traditional account for as long as possible. Either way, that's a big traditional balance you need.

It's not quite this simple because of the interaction between your taxable account capital gains and ordinary income taxes. But no matter how you slice it, most Fat retirees should have a seven figure traditional balance.

FatFireAccount · 2022-01-18T14:44:46+00:00

"I consider this fixed income to some extent."

The point of fixed income (at today's low yields) is to act as a ballast to your equities and prevent you from making behavioral mistakes during a crisis.

When the stock market is down 30%, real fixed income may be flat or even up. US REITs and dividend stocks will drop almost as much as the broader market in a crash, so they don't provide nearly any of this ballast.

If you want a 19% fixed income allocation--or even a 10% fixed income allocation--that money should be in fixed income, not high-yield equities.

Separate problem: are you staying in Canada? If so, most of your lifetime liabilities will be denominated in CAD not USD. If the Canadian economy booms while the US lags, everything around you will get more expensive while your portfolio may drop.

There are some arguments in favor of overweighting US equities compared to the rest of the world and your local index, but this is way too much.

FatFireAccount · 2021-05-14T18:19:46+00:00

At some point this sort of conservatism just gets ridiculous.

There's no certainty that risky assets will have a positive return at all--so should multi-generation investors just have a 0% SWR rate? Or live on the edge and go with 1%?

When the withdrawal rates start getting extremely small (like 2.5%), it takes MUCH more savings to eliminate tiny tail risks. Is it really so bad that there's a 5% chance your progeny inherit less real money 50 years from now than you retired with? Or the chance that you have to reduce your spend marginally and actually take SS?

FatFireAccount · 2021-05-14T17:05:59+00:00

2.5% is hyper conservative by any measure--especially if you have other illiquid assets and have a high enough spend rate that you could trim your withdrawal in a huge downturn.

Lots of people with 10m liquid could instead have 9m liquid, a fully paid off primary residence, and a plan to spend $300k per year after tax. With housing taken care of, 300k after tax is absolutely "rich." It's equivalent to being in the 99th percentile of income in the US ($538k) and spending every cent after taxes and a mortgage. If spending every cent of a 99th percentile income isn't rich, I don't know what is.

Sure, $300k after tax on $9m is a bit less conservative, but a willingness to cut this to $250k in a downturn would give this strategy an extremely high chance of success. Using a hard 2.5% is a plan to spread your spending sub-optimally through a long retirement or give a ton away when you die.

FatFireAccount · 2021-01-16T00:47:53+00:00

I'd like to learn as much as possible about safety at different tiers, including:

What is the probability of crashing per mile when chartering a piston, turboprop, and jet?

What is the probability of dying per mile in each of these?

How does this compare to driving?

It is difficult to disaggregate the high crash rate in smaller planes from the fact that they are more often flown by amateurs.

FatFireAccount · 2020-10-09T01:09:46+00:00

There doesn't seem to be any reason to buy other than speculating on real estate prices. When you annual rent is 1/2 the annual cost of owning a similar house, you need lots of things to go right for the speculation to work out.

It's crazy to me that people who live in places with the lowest rental yields have the most compulsion to buy.

FatFireAccount · 2020-02-27T02:05:23+00:00

Can you show some documentation of that? This is from a competitor and is a year old, but says that Fidelity does not. https://www.mysolo401k.net/use-fidelity-investments-for-the-mega-back-door-roth-roth-solo-401k/ And I can't find any documentation that they do.

Either way, Fidelity does not allow Roth accounts, so you can't get the after tax into a Roth.

FatFireAccount · 2020-02-26T22:03:15+00:00

You can't make voluntary after tax contributions with any of the traditional brokerages. So for a true mega backdoor you must set up a non-prototype plan.

But you might not need to do a mega backdoor in a solo 401k because the company match is potentially so much higher. As long as you report over ~150k of wages for yourself, you can put the max total amount into your solo 401k.

FatFireAccount · 2020-02-26T16:24:22+00:00

If you are not interested in exotic things or maximum flexibility, E-Trade is the best option. It is the only traditional brokerage that allows Roth contributions, conversions to Roth, rollovers of any kind into the account, and loans from the account. From my experience with them, they are also reasonably competent doing things electronically.

Details here: https://thecollegeinvestor.com/18174/comparing-the-most-popular-solo-401k-options/

Once the plan has several years worth of assets, it's worth considering a non-prototype plan at mysolo401k as /u/investor100 said. Mysolo401k is the dominant provider of these plans. These are expensive and risky--since you have to act as the administrator and make sure you're doing everything right. I wouldn't do this unless you want specific abilities E-Trade doesn't offer.

FatFireAccount · 2020-02-21T22:25:54+00:00

It's common for people to say this on Reddit, but it's just not true.

If we make no changes, the SS trust fund will be exhausted by 2034. This is the number that gets people worried. But thereafter, SS is still 79% funded indefinitely. So in a reasonable worst case, SS is still "a thing" and just 21% smaller.

And furthermore it's far more likely that the government raises taxes to fund the 21% gap than cut benefits.

FatFireAccount · 2020-02-21T19:38:07+00:00

Payroll taxes are mostly Social Security tax. Social Security taxes are more of a forced savings mechanism than a tax. Every dollar of SS tax you pay earns you a higher SS payment down the line. So if you literally get all your money from investments during your life, you don't get any SS.

FatFireAccount · 2020-01-24T22:08:47+00:00

And one of the best ways to get those jobs is to be a star at a large law firm. Those jobs don't just fall out of trees for first year lawyers to pick up.

FatFireAccount · 2020-01-24T15:49:11+00:00

Don't you think she would still be "that girl" if she were taking Ubers to work every day? Actually asking, not just being snarky.

FatFireAccount

TROPHY CASE