046R Selectively Hardcore

046R | Selectively Hardcore

In today's podcast we discuss our takeaways from Episode 46 with Ms. ONL from Our Next Life plus community feedback and voicemails and a discussion of travel rewards.

In Today’s Podcast we cover:

  • A recap of Episode 46 with Tanja from Our Next Life
  • Brad and Jonathan are on their way to Fincon – the annual financial bloggers conference
  • Jonathan’s upcoming trip to South Africa with his family using travel rewards points
  • Tanja’s reveal of her identity after being anonymous for the entirety of the blog’s life
  • What do you want out of life and how are you going to approach that question in the leadup to FI?
  • The ‘internet retirement police’ and people making money in early retirement
  • ‘We are some of the luckiest people in human history’ as Tanja described
  • The safety Mr. and Mrs. ONL have built into their FI plan
  • The different stories and plans our various guests have and how there is no ‘one size fits all’ plan for Financial Independence
  • How they are selectively hardcore about certain things like their heating bill
  • Corrections and feedback from episodes 43 and 43R
  • Updates on Mega Backdoor Roth options including feedback from William
  • Brad’s feedback on Keith from The Wealthy Accountant’s thoughts on the Mega Backdoor Roth and the Roth IRA conversion ladder going away
  • Discussion of Roth versus traditional IRA and marginal tax brackets plus info on the Earned Income Tax Credit
  • Email from Giselle from our ChooseFI community and her question about spending now versus the future and frugality versus enjoyment
  • Brad and Jonathan’s response to Giselle about how we view the path to FI as a positive and gives us more control over our lives
  • Giselle’s question about using travel rewards points for a 2 week trip to Europe and when to get started and how to avoid issues with mileage expiration
  • Voicemail from community member Joel listing all the incredible changes he has made since finding the ChooseFI podcast
  • Itunes review and book giveaway

Links from the show:

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3 thoughts on “046R | Selectively Hardcore”

  1. Looking forward to the chat gentlemen!

    To those looking for a cliff notes version of earned income tax credit (EITC), here’s how much free money you get from the gov’t if you get your earned income low enough through 401k/457/403b contributions. The below assumes all kids are < 17:
    1 kid: 4,373 @ 23.7k earned income (after 401k/457/403b/HSA deductions)
    2 kids: 7,572 @ 23.7k earned income (after 401k/457/403b/HSA deductions)
    3 kids: 9,269 @ 23.7k earned income (after 401k/457/403b/HSA deductions)
    4 kids: 9,025 @ 29.6k earned income (after 401k/457/403b/HSA deductions)
    5 kids: 8,619 @ 36.3k earned income (after 401k/457/403b/HSA deductions)

    In general, effective marginal tax rates are 31% (you give up $0.31 in free money for every $1 increase in earned income) to the right of the points listed above, meaning most people with low/moderate incomes will want to avoid those regions through jacking up their retirement contributions. It's a counter-intuitive feature of the US tax code; the poor with many kids have higher effective tax rates than the rich.

    To the curious, play around here:

  2. Dear Jonathan & Brad,
    Love the podcast! In regards to the letter from Giselle, the teacher making BIG contributions to her 403b and 457b, but concerned about having money to enjoy life and to buy a ‘nice’ washing machine:
    If she is truly maxing out both accounts, then she might qualify to pay NO income tax and get money back from the government in April.
    Gross Income $50K
    – her 403b (max, so $18 K) and 457b contributions (she is debating amount)
    = AGI of $14 (this is low enough for Earned Income Tax Credit if no other income and she is single w/ no kids)
    – Personal exemption, standard deduction
    = Taxable Income of $3200
    Tax burden of $320 (Federal)

    Her Earned Income Tax Credit would be much greater than that amount, and she could spend the balance of it on a washer.

    Just a thought. Advice for entertainment purposes only. Consult a qualified tax professional. I’m not an accountant or lawyer, just thought it was interesting that this question came right after EITC discussion…

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