Podcast Appearance & 2016 Savings Rate Update
[caption id="attachment_1279" align="aligncenter" width="700"]
The Remains of Edwina's Paycheck [/caption]
Happy Monday, readers! I just wanted to make you aware of my last podcast appearance at the Teach and Retire Rich podcast with Dan Otter and Scott Dauenhauer. I also need to update our 2016 savings rate numbers that have changed due to some unexpected income on last year's W2 forms.
This was my second appearance on the TRR podcast. Previously, I was on episode #18 (also below). This time Dan and Scott wanted to know what we've been up to since we quit our jobs last May. Take a listen:
You might notice between minutes 17 and 18 there is a break in the conversation. I was answering Dan's question about our sources of income. About that time we were interrupted with a knock on my door. As a result, the podcast went a little off track; just know that I was basically providing the information from this post. We ended the podcast agreeing that we should do another podcast in six months, preferably from Mexico. That sounds great to me.
Last week we finally received our 2016 W2 forms. Because we had effectively zeroed out our paychecks for all of 2016, I assumed that we had also zeroed out our W2 forms...WRONG! To our surprise, we found out that we have $6,722 of taxable income that we had not planned on. That means we'll be contributing $6,722 to our IRAs for 2016. To make this contribution, we'll have to use some of the money from our 2017 72t distributions. The primary reason we'll do this is to keep our 2016 income within our "free money + 10%" income target of $43,300. Here's our 2016 savings with the IRA contributions:
[table id=86 /]
[caption id="attachment_1271" align="aligncenter" width="700"]
Not Enough to Zero Out Our W2 Forms [/caption]
As you see, our new savings number is $93,080 for 2016. This additional income also increases our savings rates to the following percentages:
[table id=87 /]
You can take these numbers any way you like. Some people like them while others don't. It does seem a little crazy to use retirement income from this year to fund last year's retirement account. As I said, we'll do this final savings maneuver to maintain our tax efficiency. Since our 2017 target income amount is $45,000, we should be able to manage without much financial strain.
What would you do? Would you not fund the IRAs and pay the additional $1,000 in federal income tax, or would fund your 2016 IRAs with 2017 retirement income?
[table id=76 /]
Happy Monday, readers! I just wanted to make you aware of my last podcast appearance at the Teach and Retire Rich podcast with Dan Otter and Scott Dauenhauer. I also need to update our 2016 savings rate numbers that have changed due to some unexpected income on last year's W2 forms.
Teach and Retire Rich Podcast
This was my second appearance on the TRR podcast. Previously, I was on episode #18 (also below). This time Dan and Scott wanted to know what we've been up to since we quit our jobs last May. Take a listen:
You might notice between minutes 17 and 18 there is a break in the conversation. I was answering Dan's question about our sources of income. About that time we were interrupted with a knock on my door. As a result, the podcast went a little off track; just know that I was basically providing the information from this post. We ended the podcast agreeing that we should do another podcast in six months, preferably from Mexico. That sounds great to me.
2016 Savings Rate Update
Last week we finally received our 2016 W2 forms. Because we had effectively zeroed out our paychecks for all of 2016, I assumed that we had also zeroed out our W2 forms...WRONG! To our surprise, we found out that we have $6,722 of taxable income that we had not planned on. That means we'll be contributing $6,722 to our IRAs for 2016. To make this contribution, we'll have to use some of the money from our 2017 72t distributions. The primary reason we'll do this is to keep our 2016 income within our "free money + 10%" income target of $43,300. Here's our 2016 savings with the IRA contributions:
[table id=86 /]
[caption id="attachment_1271" align="aligncenter" width="700"]
As you see, our new savings number is $93,080 for 2016. This additional income also increases our savings rates to the following percentages:
[table id=87 /]
You can take these numbers any way you like. Some people like them while others don't. It does seem a little crazy to use retirement income from this year to fund last year's retirement account. As I said, we'll do this final savings maneuver to maintain our tax efficiency. Since our 2017 target income amount is $45,000, we should be able to manage without much financial strain.
What would you do? Would you not fund the IRAs and pay the additional $1,000 in federal income tax, or would fund your 2016 IRAs with 2017 retirement income?
[table id=76 /]
Never heard of the Teach and Retire Rich podcast. I will definitely be binging that for sure!
ReplyDeleteThere is also a book out titled Teach and Retire Rich by Dan Otter. I believe he developed the 403(b) Wise website. It's been around for quite awhile and I think there is also one for the 457 but I'm not sure.
ReplyDeleteBeachbum,
ReplyDeleteDan Otter is the founder of the 43bwise website and author of the book: Teach and Retire Rich. I learned a lot from his 403bwise website as I was trying to understand the Byzantine rules of the 403b world. Dan saved me a lot of money for sure. He used to have a 457wise website, but it looks like the info has been blended into the 403bwise site.
Such an informative and inspirational post. Thanks for pulling into all together.
ReplyDeleteWe have been following your journey for some time now and are very interested in continuing to learn about your transition to Mexico.
We would also love to hear more about how you would recommend others work with their counties to shift 403/457 plans away from annuities. We have voya and valic options only and would just love to have access to vanguard or fidelity or schwab funds.
What keeps a county tied to high cost options?
Greetings Team TSR,
ReplyDeleteMost counties continue to go with high-cost options because their selling point is that they'll do it all: administering the plan, maintaining to endless compliance paperwork, and providing the financial advise (at the suitability level). This means the school districts can check the box and say that their retirement plans are in "good" order (compliant). Obviously, the problems is that such plans usually suck big time due to excessive fees. I see that you have Valic...at least they no longer have surrender charges. I use them when I have to.
I'll write more about Mexico over the next few months. We're going back in a few weeks. Thanks for visiting. Ed