Tag: fintech

Do you worry about taxes and how they impact your financial goals? Whether you’re on a FIRE path or retiring traditionally, there are many critical tax topics to consider. In this episode, Jason talks with financial planner and CPA Sean Mullaney, creator of the FI Tax Guy blog. We talk about common tax misunderstandings, the power of solo 401k accounts, Roth conversions, and tax loss harvesting.

Show notes may be found below the video

Note: The discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual. Eric, Jason, and Two Sides of FI do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc. and their services.

Show Notes

Essential Background
If you’re not familiar with Sean’s great blog, “The FI Tax Guy: The Tax Efficient Path to Financial Independence“, you’ll definitely want to check it out. He’s been posting there for over four years, so there’s a wealth of information available. We’ll link to some essential content below, including a few articles we referenced in this episode. In addition, Sean also has a YouTube channel.

Sean’s book: “Solo 401(k): The Solopreneur’s Retirement Account” – Navigating retirement for solopreneurs is not easy—strategically save with the Solo 401(k). If you’re self-employed, saving enough money to retire can feel complicated when you wear both the employer and employee hats. Get educated and empower your retirement with Solo 401(k). In this book, Sean Mullaney, a financial planner and licensed CPA, cuts through the complexity and boils down what solopreneurs need to know about saving for the future. The Solo 401(k) plan allows self-employed entrepreneurs to reduce taxes and strategically save for retirement. This guide will give you the valuable insight you need to create, navigate, and optimize your own Solo 401(k) plan with tax planning you may not have considered.

Key Posts From The FI Tax Guy Blog:

• FIRE Tax Strategies for Beginners – Are you new to financial independence (FI or FIRE)? Are you steeped in financial independence, but confused about tax optimization? If so, this is the post for you. This post works on the 80/20 principle: sure, there’s a ton of knowledge, expertise, and hacks out there, but often times 80 percent of the benefit can come from 20 percent of the knowledge. 
• The Special Tax Loss Harvesting Opportunity for 2022 – There is a tax loss harvesting opportunity in 2022 that has not existed in recent years to the scope and scale it exists today: tax loss harvesting with bonds and bond funds. In most recent years, many bonds and bond funds have not had significant built-in-losses. 2022 is different: now there are plenty of bonds and bond funds in taxable accounts with significant built-in-losses. 
• The Advantages of Living On Taxable Assets First in Early Retirement – The FIRE community loves the accumulation phase. Build up assets towards the goal of financial independence. Questions increasingly creep in when it comes to the distribution phase. Members of the FIRE community wonder: what do I live on when I get to retirement? This is particularly true when one reaches early retirement prior to age 59 ½. In this post, Sean discusses the options and the reasons he believes that for many, the best assets to live off of first in early retirement are taxable assets.
• 2022 Year-End Tax Planning – In this post, Sean shares the primary tax planning items for the year 2022 as he sees them. Topics covered include tax loss harvesting, Roth conversions, tax gain harvesting, HSA contributions, RMDs, and more.
• The Four Backstops to the Four Percent Rule – We’ve talked plenty on 2SFI about the 4% Rule (of thumb) and what our own strategies are with respect to withdrawal rate. This post adds a wrinkle to the discussion: the four backstops to the 4% Rule for early retirees. What if worries about the adequacy of the 4% Rule for early retirees can be addressed by factors outside of the 4% Rule safe withdrawal rate? And what if those factors quite naturally occur for early retirees?  Read on to get Sean’s thoughts on why this may be the case.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

• Jason’s FI Blog
• Eric’s business: 30X40 Design Workshop
• Eric’s YouTube Channel
• Our podcast

Note: This post has been updated to include our episode with our follow-up conversation, in which we we review our take-homes from that conversation, and react to comments and feedback we received about the episode with Karsten.

What would you do if you ran out of money in retirement? It’s hard to imagine a scarier outcome, and yet many on the FIRE path may be at risk for this if they get their portfolio withdrawal rate wrong. In this episode, Eric + Jason talk with Karsten Jeske, the creator of the Early Retirement Now blog. Known by many as “Big ERN”, he is an economist who is well known to the FIRE community for his extensive work in characterizing safe withdrawal rates (SWR). In this episode, we dig into Karsten’s free, powerful SWR Toolbox, and discuss topics including the downsides of FIRE calculators, 100% stock portfolios, the bucket strategy, why dividend investors are wrong, and his own post-FIRE life. If you’re interested in FIRE, you can’t afford to miss this information-packed episode!

Show notes may be found below the videos

Note: This content does not constitute investment advice and is being presented for informational and educational purposes only.

Conversation with Karsten:

Follow-up episode:

Show Notes

Essential Background
One of the key dangers underpinning the importance of safe withdrawal is Sequence Risk (sometimes called Sequence of Returns Risk). Sequence risk is “the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor” – for example, starting withdrawals in a period with several years of severe market underperformance. This is a topic we’ve discussed before but for those new to the topic, check out this post from Investopedia.

Key Early Retirement Now Content
We referenced a number of Karsten’s blog posts from Early Retirement Now in this episode. Below you’ll find links to that content, along with the main landing page for his SWR series. You’ve got enough reading to keep you busy!

But first a little guidance: given Karsten’s extensive knowledge and expertise on these topic areas, his approach employs analysis which some may find unwieldy or even a little overwhelming. Don’t panic! Skim the math and stick with the text, and you’ll find that it’s not essential to fully comprehend all the analyses to understand the messages being delivered.

The SWR Toolbox: This is the free, downloadable tool that Karsten developed and which we discussed in this episode. Part 28 is the post where the revisions to the original calculator are described and the latest tool is linked. To see the history of this tool, you’ll need to go back to Part 7 of the series.

• Safe Withdrawal Rate series: This is the landing page for the SWR series for which Karsten is best known. However, it’s also a 53-part series (now; it will surely grow). So we recommend following the guidance he provides about how to get started. You might begin with a topic of interest found below or listed at this landing page rather than diving into the whole series – though it’s a great read if you have interest in going through the whole thing!
• Equity Glidepaths are a type of dynamic asset allocation plan often discussed in retirement planning. In Karsten’s words, “if we start with a relatively low equity weight and then move up the equity allocation over time we effectively take our withdrawals mostly out of the bond portion of the portfolio during the first few years. If the equity market were to go down during this time, we’d avoid selling our equities at rock bottom prices. That should help with Sequence of Return Risk!”. He covers glidepaths in Part 19 and Part 20.
• Dividend stock strategies are commonly touted in the investment community, yet are seemingly poorly understood. We talked about this idea in our episode, and Karsten has written several great articles on the topic: Part 29, Part 30, and Part 31.
• How often should we rebalance our portfolio? This key topic is addressed in Part 39 of the SWR series. Rebalancing isn’t a panacea for sequence risk, but it’s certainly an important element to consider. As we’ve discussed previously, being consistent + avoiding market timing is essential.
• Is it crazy to hold 100% equities until retirement? Eric asked this question in response to his portfolio moves earlier this year to change his allocation to include 30% fixed income (Two Sides of FI episodes: Part 1 and Part 2). See Part 43 of Karsten’s series for further detail on his position, expanding on what he said in this episode.
• Bucket Strategies is a topic we’ve addressed before on the show, including our conversation with Fritz Gilbert (The Retirement Manifesto). In Part 48, Karsten tackles this topic as well. In the episode, Jason also mentioned an article by Michael Kitces on this.
• Inflation is certainly a topic on everyone’s mind at the time this episode was recorded. In one of his more recent posts (Part 51) Karsten digs deep on this topic. Is what’s currently predicted for the inflation path within historical norms – and is our withdrawal rate modeling at risk? Read on to find out…
• The Retirement Income Style Awareness (RISA) assessment was discussed in our follow-up episode. This tool, by Wade Pfau and the team at Retirement Researcher, came from research performed on individual styles, risk tolerance, and other factors, and is aimed at deriving a personal retirement income strategy. Fritz Gilbert at Retirement Manifesto posted a nice write up on this last year, which we’d recommend. If you’re interested in learning more about this assessment, check out Wade’s book: “Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success”.
• Bonus: If you haven’t had enough yet, we’d recommend Part 26: “Ten things the ‘Makers’ of the 4% Rule Don’t Want You to Know”. It’s written rather tongue-in-cheek, while still being packed with the insight we’ve grown to expect from Karsten’s style of writing. We touched on some of these points in the episode but there are a bunch more not covered that are very much worth reading.

You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.

• Jason’s FI Blog
• Eric’s business: 30X40 Design Workshop
• Eric’s YouTube Channel
• Our podcast