Year-End Tax Planning
I’m publishing a podcast episode this Friday with Sean Mullaney, the FI Tax Guy, about 401(k)s, the Mega Backdoor Roth and Premium Tax Credits for the ACA and in a case of great timing, Sean just released his “2022 Year-End Tax Planning” article.
The article lists out numerous essential tax deadlines and considerations you should be familiar with before the end of 2022, which is rapidly approaching!
If you’re looking for more in-depth general strategy on year-end tax planning from Sean, we’ve had him on the podcast the past 3 years to discuss this very topic, so check out Episodes 155R, 274 and 351.
Calling for 2022 FI Wins!
My favorite ChooseFI podcast episode each year is our “Year End Wins” episode where we play voicemails and read emails from the community celebrating your biggest wins of the past 12 months.
If you want to share your wins with the community, hit reply to this email or send in a voicemail and detail out your FI year in review!
I’d love to highlight as many of these as possible on the episode airing at the end of December.
Updates and Corrections
I love the ChooseFI community for so many reasons, not least of which is the emails I get adding to my knowledge on topics we’ve discussed on the show and here in the newsletter.
Two came in this week worth copying directly:
Kyle Mast, a CFP we had on the show in Episode 58, wrote back in response to the section in last week’s newsletter from Ava on Tax Gain Harvesting:
“Just saw this FI Weekly regarding capital gains harvesting. I thought it might be good for you to mention that people need to keep in mind their state income tax rates when doing this. For example, where I am in Oregon, pretty much everyone pays around 8-9% in state income tax, which includes capital gains.
Right across the river in Washington there is no income tax. Some states tax capital gains the same as ordinary income, some different. I wouldn’t want your readers to move forward on this strategy without considering the state income tax first…or at least moving to Washington, Wyoming, or some other state income tax free state. 🙂 “
(Note: Ava did include a section about state taxes in her original email I used for this Cap Gains Harvesting section. It was my error for not including it.)
Becky wrote in with a response to something I said in passing on Episode 406 with Josue:
“Love the podcast. But I was yelling at you in this latest episode! You were talking about the downsides of potentially “locking up” a bunch of money in 457s and 401ks and lumping those together.
A very important distinction between those two investment vehicles it that you can take penalty-free withdrawals from your 457 account at any age after you leave your job. (And you can still have another job, you just have to be gone from the job where the account is from.)
My husband works for the City and County of Denver. We will be FI-ing/retiring in just over two years when we are 57 and 51. It is HUGE for us that we’ll have immediate, penalty-free access to his 457.
So, I just want to be sure you and your listeners understand this huge distinction. Money in a 457 is NOT “locked up” in the way it is in 401k and 403b plans.”
ChooseFI Community Taking Action This Week
- Michael said, “My 1% better this week is scheduling to donate platelets at a local blood donation center. After listening to Episode 394 with Boyd Dunleavey, I have already donated blood a month later and wanted to do more, which is why I’m donating platelets for the first time in my life. That episode had me on the verge of tears with how you and him discussed the importance of donating blood/blood stem cell donation to save lives. I truly love this community and want everyone who is a part of it and the guests that come on the show to know how much they matter and can make a difference!
- Cheri said, “My 1% better this week is way more than 1%! I took the plunge, and retired from my job as a 911 Police Dispatcher. My pension, along with my husband’s full-time job, should be enough for us to get by for the time being. I spent the week slowing down and smelling the roses! Today, I am flying to Louisiana (using travel rewards) to visit my sister and brother-in-law. I plan to take time to enjoy my family, and the holidays this year! I joined the Talent Stacker program last month. The goal is to pivot to a new higher paying career, with more flexibility, and to save, save, save so my husband and I can achieve FI in the not too distant future.”
- Anne said, “I’ve been searching for a new job that is more flexible for my young family. I found one that is remote, more money and of interest to me. The initial offer wasn’t much more than I make now. I had listened to the episode on negotiation and the next day asked for more than I wanted due to the research I did. They ended up doing a market analysis and offered me more than what I asked for which will be more for others that come after me as well. In the end, due to the negotiation tactics I learned on ChooseFI I received $11,000 more in base salary than the first offer I was given!”
- Donald said, “My 1 % better this week was getting my 9-year-old son started in investing by explaining what investing and the stock market are. Setup a M1 Finance custodial account and transferred most of his savings to the account. He was really excited especially when I showed him if he continues to put in half his allowance until he is 18, he should have around $5,000 dollars.”
- Sarah said, “My 1% better is negotiating more time off from work! I recently accepted a job offer after feeling bored and burned out at my long-time job. However, leaving my current job would have put my boss and coworkers in a terrible position, so I was able to negotiate with my current boss to stay onboard — but with 2 additional weeks of vacation per year, a switch to a new interesting project from a project that I had been dreading, and 1 month of unpaid leave starting immediately!”
- Erika said, “My 1% this week was getting a medical bill forgiven. Long story short, I had a $520 medical bill that I noticed was being charged incorrectly. Instead of just paying it, I decided to try to get them to correct it. I have been (politely) calling the medical company and my insurance company monthly, but recently I set a reminder to call them once a week since I was not getting any traction. Eventually, they ended up forgiving the entire bill because they didn’t know how to fix the problem! The lesson I learned is sometimes my stubbornness pays off (literally).”
- Paul said, “Our 1% this week was to increase our 401k savings another 3%.”