Being flippant about healthcare is short sighted, particularly if one plans to spend a majority of their adult life unemployed, thus reducing their later employability (which even in the best of circumstances is not great).
Brushing it off as a no big deal joke IS going to backfire.
Isn't this pretty much covered under healthcare reform? The old days of being denied an independent insurance plan are long gone, as are preexisting conditions and all that jazz. Anyone can go onto a healthcare exchange and sign up.
And although not cheap, they're living off the interest of one million dollars. So even if they do have to draw off that for premiums and other medical costs, they'll still be in pretty good shape.
You can still go on an exchange and sign up DURING open enrollment, but the plans are generally expensive and require co-insurance and high deductibles. So you might be looking at a plan that costs $500/month for a family with a $10K deductible. if you are only spending $40K/year, that could definitely eat into your budget for the year if you run into an illness.
Such an awesome story!! It's really inspiring. I don't think I'm white this extreme... Love my 1,800 sf house and indulging in skiing. But it makes me think about what we need to set aside. I hadn't don't the calc on 25x expenses before. Does that account for inflation?
Yes, it does. If you have 20% of your portfolio (5 years expenses) in something relatively low risk/low reward, you should still earn 8% of your portfolio's value annually. 4% of that goes to offset inflation, 4% to live on. The 20% low risk investments lets you buy more during a slump and weather the storms. Alternately, you can keep it all in stocks and you should earn about 10%, which is 4% for inflation, 4% to live on, and 2% to reinvest for bad years. It's a pretty common figure and in theory leaves you actually a really good bit of wiggle room for the bad years.
Do you have any book recommendations that explains this a little more? Something relatively easy to understand would be great.
I'm wondering what the time limit (visas) for these countries are..,you can't just take up residence in any country, when you want & for as long as you want. But sounds fun pre-kids....I daydream of doing something like this & we could swing it financially probably....not from saving or being thrifty but through buying real estate in booming cities. But I'm not that into non-luxury travel anymore & having kids makes travel a PITA until they are like 6yrs old (then you have to worry about school). Yeah, I still like the idea of financial freedom & owning minimal stuff...but long term wandering is probably not for me. I spent 1mo backpacking Europe & I was over travel for a very long time after that. Lol. We'll see what they end up doing long term. I watch a family on YouTube who basically did the long term travel thing with kids and maybe 9 years into it, you can tell they are Settling down (in Costa Rica).
But, I did side-eye this: "mosquitoes as big as bats" - uhhhh, the biggest mosquito in the world is 1.5".....ok, I'll put my judgement aside for a moment....
Apparently there are some very small bats. See, for example, the bumblebee bat, which is (you guessed it) about the size of a bumblebee.
I looked around the blog yesterday. Apparently they had almost 100K of income last year and paid no taxes (like $0-$200). His explanation is a little confusing to me but I am definitely following up on his strategies.
He wrote that they are going to start traveling the world again when their kid is 6 months old and has his own backpack or something like that....that made me lololols.
This is one of those things that sounds appealing to me in theory, but that I suspect I would probably hate in practice. Especially with a kid in tow.
I used to occasionally read a blog about a couple who live on a 44 ft. catamaran with their two small kids, sailing the globe and writing articles for boat magazines to pay the bills. I would think "wow, that sounds so awesome and carefree! We should do that." Then I would realize that being alone on a small boat with my H and kids for days on end, away from friends, family, and the comforts of home, would probably not be my cup of tea. That is kind of how I feel about this as well.
"But all of our income comes from dividends and interest. We just live off them. I do a pretty active tax management of those assets, so in 2013 and 2014, we paid $0 tax while also converting about $20,000 a year to our Roth IRA to make that money tax-free forever. I’ve published our actual tax returns on the blog the last few years to show what that looks like in practice. Our plan is to, over the next 30 years, to convert our entire 401(k) into a Roth IRA so we pay no tax going in and no tax going out, so overall, we’ll be looking at $3 million in income over the next 30 years all tax-free."
I am curious about how he avoided taxes on converting 401(k) to a Roth, amongst other strategies.
I don't get this part... How do you avoid paying taxes both going in and out?
Our plan is to, over the next 30 years, to convert our entire 401(k) into a Roth IRA so we pay no tax going in and no tax going out
Imagine you are living off your initial Roth IRA contributions, which you can withdraw tax and penalty-free. Your income is $0. You can then convert a little over $24K from your old 401(k) to a Roth IRA, increasing your taxable income from $0 to $24K. The standard deduction + exemptions for a 3 person family mean you file your taxes but owe nothing. In 5 years, the rollover amount counts as an "initial contribution" and can be withdrawn tax and penalty-free, and the earnings are tax free at full retirement age. If they have any additional writeoffs, such as stocks outside a retirement account sold at a loss (and in a bad year, you'd likely want to sell those instead of something in your retirement accounts), they'd be able to convert more tax free. Not sure what their strategy is to get all the way up to $40K/year, as I haven't read the blog yet.
wise_rita and elleblue - their blog only made $2k last year!!! That's hardly equivalent to a job!
Clearly, you haven't been part of any of my fee negotiations with my clients!
Anyway, I have to admit that while I'm not particularly tied to amassing a bunch of "stuff," I have a penchant for living in expensive cities and spending money on everything those cities have to offer- good food, theater, museums, etc. and the accompanying exorbitant babysitter costs so that I can do these things unencumbered every once in a while. I also like to take frequent vacations, because even when I was living abroad, I still spent an equal amount of time exploring my new home city and exploring other cities and countries a short plane or train ride away from that city.
These interests make me a very unlikely candidate for saving everything I make and retiring to San Juan del Sur at the age of 40. Ideally, I will still keep an apartment in a big city when I am retired AND spend some time traveling the world. For that, I think I need to keep working quite a bit longer.
Our long term goal is to retire early, and not travel! I feel like an anomaly.
I will definitely be checking out this blog and looking into some of his investment strategies. My goal is to trade of student loan payments for increases investment payments that will generate income. I'm hoping to branch out of retirement savings into index funds in the next two years.
share.memebox.com/x/uKhKaZmemebox referal code for 20% off! DD1 "J" born 3/2003 DD2 "G" born 4/2011 DS is here! "H" born 2/2014 m/c#3 1-13-13 @ 9 weeks m/c#2 11-11-12 @ 5w2d I am an extended breastfeeding, cloth diapering, baby wearing, pro marriage equality, birth control lovin', Catholic mama.
I have no interest in "retiring" to live a frugal and ordinary life at home.
But this? Traveling, exploring, wandering? This is so very appealing to me. I don't think we will ever actually jump ship, but it's fun to dream about.
They are basically living off their investment income, not the $2K in blog revenue. I am impressed with his Roth conversion strategy and that he is willing to publish their tax returns- I will definitely check out the blog.
But it is an interesting concept to move to a country with socialized medicine and then not have to worry about healthcare costs.
The only issue I see with this idea is that most countries with specalized medicine restrict access to it to residents and they type of visa that would allow you to access it isn't necesarily easy to get and they generally don't give them away to people without jobs.
Even if they were able to somehow get a residency visa in a country where they have access to state funded health care they'd likely be screwed on their no-tax front. I know our retirement tax situation is a nightmare because we have tax-free accounts in CH which the U.S. government considers taxable and the Swiss government considers our Roth earnings taxable. Tax advantages are slim-nonexistent when you're dealing with two countries' tax codes and one of those is the US.
I don't get this part... How do you avoid paying taxes both going in and out?
Our plan is to, over the next 30 years, to convert our entire 401(k) into a Roth IRA so we pay no tax going in and no tax going out
Imagine you are living off your initial Roth IRA contributions, which you can withdraw tax and penalty-free. Your income is $0. You can then convert a little over $24K from your old 401(k) to a Roth IRA, increasing your taxable income from $0 to $24K. The standard deduction + exemptions for a 3 person family mean you file your taxes but owe nothing. In 5 years, the rollover amount counts as an "initial contribution" and can be withdrawn tax and penalty-free, and the earnings are tax free at full retirement age. If they have any additional writeoffs, such as stocks outside a retirement account sold at a loss (and in a bad year, you'd likely want to sell those instead of something in your retirement accounts), they'd be able to convert more tax free. Not sure what their strategy is to get all the way up to $40K/year, as I haven't read the blog yet.
Thanks for explaining this. That is fascinating and certainly gives me something to think about.
I don't get this part... How do you avoid paying taxes both going in and out?
Our plan is to, over the next 30 years, to convert our entire 401(k) into a Roth IRA so we pay no tax going in and no tax going out
Imagine you are living off your initial Roth IRA contributions, which you can withdraw tax and penalty-free. Your income is $0. You can then convert a little over $24K from your old 401(k) to a Roth IRA, increasing your taxable income from $0 to $24K. The standard deduction + exemptions for a 3 person family mean you file your taxes but owe nothing. In 5 years, the rollover amount counts as an "initial contribution" and can be withdrawn tax and penalty-free, and the earnings are tax free at full retirement age. If they have any additional writeoffs, such as stocks outside a retirement account sold at a loss (and in a bad year, you'd likely want to sell those instead of something in your retirement accounts), they'd be able to convert more tax free. Not sure what their strategy is to get all the way up to $40K/year, as I haven't read the blog yet.
I get this, but I don't see exactly how it is sustainable for multiple years. Even assuming current contribution limits, contributions to Roths are only $5500/yr. The article strongly implies he had not been contributing before 30, so even if we give the benefit of the doubt and say 10 years of max contributions, that's only $55k. It doesn't sound like Winnie could contribute, and if so, not very long. I don't see how they could make it more than a year or two initially with this strategy, but maybe I am missing something?
I have friends from high school who sold it all and bought a motor home and travel with their 4 kids. He's an IT consultant and can work from the road. She's an artist and blogs. Their initial timeline was a year, but it has been about 4-5 years now. She has a FB page and is working on writing a book about it and she blogs as well. I love reading their posts and seeing where they travel. However, this is nothing I could do long-term and I give them a lot of credit for being able to do it.
I have friends from high school who sold it all and bought a motor home and travel with their 4 kids. He's an IT consultant and can work from the road. She's an artist and blogs. Their initial timeline was a year, but it has been about 4-5 years now. She has a FB page and is working on writing a book about it and she blogs as well. I love reading their posts and seeing where they travel. However, this is nothing I could do long-term and I give them a lot of credit for being able to do it.
So do they home school the kids then or are the kids little enough to not worry about that yet?
I have friends from high school who sold it all and bought a motor home and travel with their 4 kids. He's an IT consultant and can work from the road. She's an artist and blogs. Their initial timeline was a year, but it has been about 4-5 years now. She has a FB page and is working on writing a book about it and she blogs as well. I love reading their posts and seeing where they travel. However, this is nothing I could do long-term and I give them a lot of credit for being able to do it.
So do they home school the kids then or are the kids little enough to not worry about that yet?
The kids are teenagers, they call it "road school". They usually set down roots in an area for awhile and apparently there is a whole group of people out there that do this and they meet up and live in the same campgrounds, invite to houses, etc. Their kids have gone to local proms, one is touring schools in CA to look into getting into makeup/effects for movies, etc.
Seems way to early to retire. Life has a way to throw a monkey wrench into the best laid plans. I'd be very worried than if I did have to go back and get a full time job , I might have a hard time from finding one with technically being unemployed. Plus I don't think schooling would benefit my kids (2 of mine have ASD) and private bought insurance would never work for us. Reminds me of people on House hunters international who pack up and move to a tropical location with no job prospects. Me personally would like to have enough saved that most things I wouldn't have to worry about blogging or changing for the most part my lifestyle. 50 years of retirement based upon a few years of saving seems like a stretch unless you won the lotto or you have millions in the bank.
Imagine you are living off your initial Roth IRA contributions, which you can withdraw tax and penalty-free. Your income is $0. You can then convert a little over $24K from your old 401(k) to a Roth IRA, increasing your taxable income from $0 to $24K. The standard deduction + exemptions for a 3 person family mean you file your taxes but owe nothing. In 5 years, the rollover amount counts as an "initial contribution" and can be withdrawn tax and penalty-free, and the earnings are tax free at full retirement age. If they have any additional writeoffs, such as stocks outside a retirement account sold at a loss (and in a bad year, you'd likely want to sell those instead of something in your retirement accounts), they'd be able to convert more tax free. Not sure what their strategy is to get all the way up to $40K/year, as I haven't read the blog yet.
I get this, but I don't see exactly how it is sustainable for multiple years. Even assuming current contribution limits, contributions to Roths are only $5500/yr. The article strongly implies he had not been contributing before 30, so even if we give the benefit of the doubt and say 10 years of max contributions, that's only $55k. It doesn't sound like Winnie could contribute, and if so, not very long. I don't see how they could make it more than a year or two initially with this strategy, but maybe I am missing something?
They were investing savings in straight index funds, as well, to increase their investments, and he was pretty much always investing in a 401k. If he was maxing out around $140k and they were living off $40k, that's probably ~$40k to intervest each year after taxes, in addition to the 401k.
Of course, investments are subject to capital gains taxes, but that's not even in the same ball park as wage-based income tax.
How do kids end up making friends if you're travelling around all the time? I would think that's kind of missing out for a kid, even if they're seeing lots of cool places.. They have plenty of time for that. I suppose if there are siblings it might be a little better, but I can't imagine dragging my only child around the world and not giving them the opportunity to have some roots.. but that's just me!
I'm pretty sure there are global health insurance policies that you can buy, I know Bupa does them and maybe Allianz too so they may be doing that. No idea how much they cost though. Also, some countries have reciprocal healthcare arrangements and they may be able to access something like that through Winnie's Taiwan residency. But again, I don't know how they get around the tax issues.
Imagine you are living off your initial Roth IRA contributions, which you can withdraw tax and penalty-free. Your income is $0. You can then convert a little over $24K from your old 401(k) to a Roth IRA, increasing your taxable income from $0 to $24K. The standard deduction + exemptions for a 3 person family mean you file your taxes but owe nothing. In 5 years, the rollover amount counts as an "initial contribution" and can be withdrawn tax and penalty-free, and the earnings are tax free at full retirement age. If they have any additional writeoffs, such as stocks outside a retirement account sold at a loss (and in a bad year, you'd likely want to sell those instead of something in your retirement accounts), they'd be able to convert more tax free. Not sure what their strategy is to get all the way up to $40K/year, as I haven't read the blog yet.
I get this, but I don't see exactly how it is sustainable for multiple years. Even assuming current contribution limits, contributions to Roths are only $5500/yr. The article strongly implies he had not been contributing before 30, so even if we give the benefit of the doubt and say 10 years of max contributions, that's only $55k. It doesn't sound like Winnie could contribute, and if so, not very long. I don't see how they could make it more than a year or two initially with this strategy, but maybe I am missing something?
There is no limit on the amount you can roll over from a traditional IRA/401(k) to a Roth IRA.
I get this, but I don't see exactly how it is sustainable for multiple years. Even assuming current contribution limits, contributions to Roths are only $5500/yr. The article strongly implies he had not been contributing before 30, so even if we give the benefit of the doubt and say 10 years of max contributions, that's only $55k. It doesn't sound like Winnie could contribute, and if so, not very long. I don't see how they could make it more than a year or two initially with this strategy, but maybe I am missing something?
There is no limit on the amount you can roll over from a traditional IRA/401(k) to a Roth IRA.
I understand that. But if you have to wait 5 years in order to withdraw those rolled over funds, the first 5 years of this plan, they would be limited to your total initial Roth contributions. The gap would need to be made up of traditional investment income. Which is taxable.
There isn't any place in the U.S. I think I'd be content living on $3K a month, but maybe there are some places abroad where I'd be fine with it, I don't know. We have talked quite a bit about living in another country for at least a few years but I always see myself as coming back to the U.S. to die...but maybe I won't make it that long or maybe I'll end up somewhere else that feels enough like a home to me that the desire to do that will dissipate.
I don't consider MMM truly retire, but I would consider this couple retired. I don't know that it's the retirement I want, but I do find these stories inspiring. We're now 39, retiring in our 30s is not in the cards for us, but maybe changing our lifestyle and goals to make it happen at 50-55 is worth further thought. I do at least start to think that way when I read these stories.
How do kids end up making friends if you're travelling around all the time? I would think that's kind of missing out for a kid, even if they're seeing lots of cool places.
Depending on how long they stay places, I don't think of it as that much different than being raised in a military family.
Good point, I hadn't thought about that.. I was more thinking they would be planning to move every few months, but they did mention in the article that they ended up staying in Mexico much longer than they planned.
For me, I would love to have a lifestyle where I could travel regularly but I would also need to have a home base to come back to for a good part of the year.
How does the tax situation work when they're in other countries? Just because America doesn't consider the Roth stuff taxable doesn't mean another country would, right
General question about 4% withdrawal rate (not really related to them -- something that I wonder about generally) -- does that account for inflation? Like, if I have $1 million does that mean I can safely (well, somewhat safely) pull $40k a year for the rest of my life, even though in 2060 that will buy me a candy bar? Or does it let me draw the spending power of what is $40k in today's dollars but may be $150,000 in the future?
How does the tax situation work when they're in other countries? Just because America doesn't consider the Roth stuff taxable doesn't mean another country would, right
General question about 4% withdrawal rate (not really related to them -- something that I wonder about generally) -- does that account for inflation? Like, if I have $1 million does that mean I can safely (well, somewhat safely) pull $40k a year for the rest of my life, even though in 2060 that will buy me a candy bar? Or does it let me draw the spending power of what is $40k in today's dollars but may be $150,000 in the future?
Depends on where your money is. If you keep money in the market, then the market battles inflation for you. If you keep the money in CDs earning 00.00% like they are today, then you may be in a world of hurt! The actual studies are pretty fascinating to read...they link to them on MMMs site but I don't have them handy on my phone.
How does the tax situation work when they're in other countries? Just because America doesn't consider the Roth stuff taxable doesn't mean another country would, right
General question about 4% withdrawal rate (not really related to them -- something that I wonder about generally) -- does that account for inflation? Like, if I have $1 million does that mean I can safely (well, somewhat safely) pull $40k a year for the rest of my life, even though in 2060 that will buy me a candy bar? Or does it let me draw the spending power of what is $40k in today's dollars but may be $150,000 in the future?
The idea is that it does account for inflation. Typical stock market returns average about 10%. The first 4% go to growing your nest egg with inflation, another 4% for living expenses, and 2% to hedge against volitility (either by keeping some portion of your portfolio in cash or low risk investments, or having extra to add to your principle in typical years).
Being flippant about healthcare is short sighted, particularly if one plans to spend a majority of their adult life unemployed, thus reducing their later employability (which even in the best of circumstances is not great).
Brushing it off as a no big deal joke IS going to backfire.
Isn't this pretty much covered under healthcare reform? The old days of being denied an independent insurance plan are long gone, as are preexisting conditions and all that jazz. Anyone can go onto a healthcare exchange and sign up.
I'm skeptical of an American health insurance plan working outside of the USA indefinitely.
(Though they did bring up international plans down thread.)
And god help us when a Republican gets into office in 2016. "Obamacare" will look very different.