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013 | The Unfair (FI) Advantage Of Teachers | 457b

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Millionaire Educator Shares the Secrets of the 457b

  • Our guest: Millionaire Educator shows us how to invest your money. He shows how teachers, firefighters, police officers and public employees can leverage the power of pretax savings to supercharge their retirement , and become millionaires. Take this information to learn how to invest your money and retires decades before your peers
  • Ed’s journey from a college basketball player to a Spanish teacher
  • Graduate school led to $45,000 total debt at age 33
  • Taught ESL in Saudia Arabia and paid off debt
  • Returned to the US from Saudia Arabia with a $110,000 net worth
  • Had to figure out the concept of FIRE before it even existed
  • Taught in public school in Georgia for the next 7 years
  • The two retirement plans available to public sector employees: 403(b) and 457
  • Teachers can fully fund both of these accounts ($18,000 to each in current year)
  • Putting away this money helps dramatically decrease your taxes
  • In 2007 his net worth was $400,000
  • 2009: Next phase of their retirement journey
  • 403(b) fees are significant, so it was to their benefit to move jobs to roll their 403(b) accounts to a lower fee (‘separation of service’ clause)
  • 457b is a special account as it doesn’t have the 10% penalty for pre-59.5 age withdrawals
  • Phase 3 of retirement plan: Starting in 2014 they worked for 2 years and saved $238,000
  • What they are living on: a) $90,000 from 457s b) 72-T withdrawals from IRAs
  • How to control your tax bracket for big savings (potentially down to $0)
  • Debt avoidance: debt is paid with after-tax dollars
  • Geo-arbitrage and living abroad or even just a lower cost state
  • 457b account is an emergency fund that is pre-tax dollars
  • How Brad and Ed are not “perfect” with their investing
  • Pay increases for teachers when attaining new degrees. Raises that last a lifetime
  • Earning extra money for coaching and extended day teaching to max out retirement accounts
  • How they saved over $100,000 in a year towards retirement accounts
  • Hot Seat Questions

Listen to Brad and Jonathan’s thoughts about this episode on the Roundup Episode 13R.

Links from the show:

Books Mentioned in the Show:

Resources:

The Golden Albatross

If your job offers a pension, then this book is a must-read. Easily learn how to calculate your pension’s objective value and weigh it against the subjective benefits of leaving for more fulfilling work.

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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