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Use target-date index funds

It all depends on your savings rate, spending priorities, and plans for the long and short term. Either way, educating yourself on any topic in finances is awesome no matter what position you are in. December 20, , am. Thank you for this! Since I should be able to clear the worst of the debt consumer by this time next year! Always around, Mr. MM and always happy to see one of your posts in my inbox. There is an audio version of my book, in my own voice no less. Maybe that would work better for your cousin? Jim, I saw the book up there and was all excited- I bought the book a few months ago, and loved it.

Read your entire stock market series, and have been trying to get my cousin who keeps asking me financial advise to read it. Tara November 29, , pm. In the event of a crash, I will spend the CD money, but so far I have only sold stocks as the market has been good. So far, so good. I live in the PNW and visit Canada typically 2 to 3 times a year. Unless I am missing something I cannot figure out a way to move to Canada without marrying a Canadian. Is there a way I am not considering? I love the US and would miss some aspects of it, but it has become tremendously politically distasteful to me and the fact that as a nation we treat our poor so horribly wealth gap, no universal health care, lack of safety nets has created a strong desire to head north to a country that looks like, at least to the outside, it values its people more.

Henry — My biggest secret to avoiding those problems you mentioned about the US is simply not reading the political news! I still know what is happening and I am doing my best to improve the country, from the position of most advantage: as a relatively wealthy person who also has the good fortune of having the attention of a good number of online readers. So my own personal life is great here. But if my goal is to help reduce the corruption and inefficiency that handicap this country and by extension affect the rest of the world , this is also a good place to live. A very pragmatic post.

Fun to see Collins chiming in. I fantasize about the opposite. I researched housing costs in the Greater Phoenix Area, and was astounded to find out how much further my money would go down here than in the Toronto area where I live. I then checked the housing prices in another half-dozen desirable bedroom communities near larger cities, safe, good weather, etc.

The U. Hmmmm…maybe the grass IS greener on the other side! Kent December 2, , am. Just returned from a month in Arizona, although my preference is at altitude in Tucson. And I fly as the driving would drive me nuts. The month before that I spent in California. So all in all, I sure like the states….

Next stop, Australia. Tough to find a partner who might wish to share the snowbird way of life.. Hey, I love Tucson as well. Australia is great I did 2 months there and a month in New Zealand. Take time to get into the culture, and go everywhere, including the outback. I live in Canada because I was too stupid and lazy to figure out earlier in my life the way MMM did that if you are intelligent, have income earning potential, and are a saver and investor, the opportunities for a more financially lucrative and interesting life experience in general are in the U.

Politics notwithstanding. Like MMM, I learned to tune out the noise and live my own life. Happy travels and wanderings! Married to a Swabian December 9, , am. Yeah, it would be cool to be able to test drive living and working in many different countries. For us, the comparison has been between Germany and the US. Our son has both passports. We moved back to Germany in , thinking the grass was greener over there: infinite engineering jobs in southern Germany, university paid for through high taxes of course and health insurance for all.

The very high cost of real estate combined with high taxes and population density where deciding factors. Especially, so long as one is young, dynamic and healthy. Mark December 8, , pm. I really have to agree with MMM here. Amy November 30, , am. I think a lot of people think Canada takes better care of its needy citizens but that is not true in Ontario. Food is way more expensive in Canada than in the U. The local Ontario food pantries also severely limit how often one can get food to times a year.

Here in the U. We found out from family that our brother-in-law was going to the local McDonalds to get food out of the garbage.

3 Reasons Why the 401(k) is the Wrong Way to Build Wealth?

Our son has cerebral palsy and gets way more help financially through SSI here in the U. Ontario Canada is doing a terrible job of taking care of my brother-in-law who has a severe mental disability. I often hear people from the U. Adrienne December 1, , pm. Amy, That is heartbreaking to read.

We do have our issues here in the US.. Hoping they improve the quality of life for the citizens like your BIL as well. Your BIL is lucky to have you! We have disability, unemployment, etc. Thor November 29, , pm. I just wanted to add that the advise to start receiving dividends is highly country specific. For example in Finland that is terrible advice. You pay only 0. This, obviously, assumes that you bought the shares only a year ago.

This is probably not true for the US, but I think you have a lot of international readers. I might shift strategies entirely and perhaps own a rental house or a small business that pays me as an employee instead. Or of course, just save more initially to allow for the tax expense. Or move, or live off of public assistance or in the barter economy Yes, unless you have capital losses to balance them out. This just makes it inefficient to own stocks directly or to own funds that pay the dividends yearly. If the dividends are paid into the fund, then it is not taxed and you only pay tax on the actual gain when you sell.

This enables you to always sell those shares that have not gained as much in value, or even get some capital loss on paper even though they are all the same shares of the same fund. Real estate is definitely an option, although rental income is also counted as capital income. The moving strategy is quite viable, since you can always change your mind; if you move to a country with cheaper living expenses but no proper health care and e.

You will be instantly covered by the universal health care regardless of any pre-existing conditions and get treatment. So very different beasts. I found your thoughts on Finland very interesting around higher taxes, but higher social support too. So don't expect any benefit at all for the high taxes. I think moving countries would be an important consideration should they continue to increase taxes. Since for every negative there needs to be a least 1 positive, we have incredibly cheap housing, very high interest rates so living off interest becomes an option.

Still think I might make a move to a lower tax, more business friendly and better functioning place at some point now that we're well into FI. No capital gains tax in New Zealand yet! Though our new government is obviously dying to bring it in. Finn2 May 1, , pm. Realising this is a Ponzi scheme made us to bail out from Finland and move as far as we could to Australia. Not to mention the balmy weather makes life so much cheaper in general less heating, less layers of clothing, less wear on vehicle etc etc. Prefer it here.

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Adam January 1, , am. Ckarion March 22, , pm. In Sweden, it works pretty much as described for Finland, except that we can hold stocks in an ISK account where dividends are not taxed at all provided they are moved to a checking account within the quarter year. So that is a plus for the dividend strategy.

Nate G November 29, , pm. My FI formula is something like this. We in in year 6. Excellent article, MMM! I love how you make a complex, widely debated topic sound so very simple. Most investors do not stay the course. Conclusion almost every time is that if investors would stay invested, they would do fine.

Unfortunately, most do not. Someone needs to invent the seatbelt that keeps you in your investments or the pill that makes us have the Buffett or Bogle temperament. I pray that the FIRE community defies these stats. Exactly Shelley — if you try to jump in and out of the stock market based on news headlines or price movements, you are not an investor, you are a trader.

Stock trading is on average much less profitable strategy although with a wider range of results which are like flipping a coin than just buy and hold investing in index funds. Accumulate throughout your working lifetime, and then live off dividends and possibly tiny sales as needed, as you nee the money later.

How to Control Your Taxes in Retirement - S. 3 Ep.8

I am trusting that not a SINGLE Mustachian reading this would dare sell shares during a stock market crash, hoping to re-buy them even cheaper later. I had an investment sales guy call me around to offer me investment advice. I told him I was doing fine thanks, no help needed. He asked me, What did you do in the crash? And I told him, I bought all the way down, stocks were on sale! Then I kept buying all the way back up! Allwine December 23, , pm. Beware of studies, and give people a little more credit. This topic is complicated by the movement of cash in and out of a stock or fund over time, as well as how dividends are treated reinvested or taken as cash.

Take for instance, cost basis is defined as an adjustable cost that reflects original purchase price of each tax lot, as well as reinvested dividends. You can see how this can create some serious Zombie Data and Junk Science. My wife stopped adding to investments last year and prioritized the paydown of student debt finished in four months! I on the other hand, added to my holdings about times per month all year. Guess what? I bought into a rising and falling market, but she did nothing. I only sold stocks with losses this week in order to harvest losses and rebalance, so there was no jumping around.

Scott Sichler November 29, , pm. I like that you have explained a complex topic here in simple terms but there are good reasons for portfolio diversification that include bonds. You are right Scott — the concept of Asset Allocation and rebalancing can indeed help you benefit from volatility, although the effect is pretty small. A good book! Lucas December 2, , pm. Bonds tend to move up and down in much smaller percentages when compared to stocks. But, bonds can and do move in the same direction as stocks more often than we let on.

Dunny December 11, , pm. You are right, bonds and stocks go up and down together. Bond prices are based on market interest rates. You also have to consider higher taxes on interest income than on dividends and capital gains, and timing of the income taxes annual for interest and dividends versus when you sell for capital gains. Bonds might reduce the volatility but at a cost of increasing net worth.

The interest rate has to cover inflation as well. Stocks automatically cover inflation as the stock prices rise over time. Steve December 27, , pm. It is pretty clear that US stocks and bonds will not have moved in opposite directions in Pedro November 29, , pm. The spreadsheet and consequently the whole article assumes cost of living will stay the same without the effects of compounding inflation.

My point is that the simulation could be more realistic by applying the assumed inflation to the living cost line on a yearly basis. There are several reasons to believe it will. There are reasons not to. My point is that, were America to crash and burn, people with options can move abroad.

The same skills that got them to FIRE could, and most likely would, leave them in better financial positions than those in the work force waiting to retire at 65, and would also enable them to be successful overseas. At least, I certainly hope not! Rob December 2, , pm. How is this accounted for in the spreadsheet? Jessie November 29, , pm. Great read, MMM! Have health insurance through work?

You have a car accident…the list of potential health concerns can go on and on. How can anyone argue with MMM here? Plus, you can always work again if you need more money. MMM, keep it up! Kandice November 29, , pm. And to understand the different types of coverage. LTD benefits can be the difference between lots of uncomfortable budget slashing and financial ruin. Linda December 2, , pm. MMM — I am an enthusiastic follower of your blog, from New Zealand and have been frugal all my life — I hate shopping and mindless consumption.

I have also been fit and healthy and have previously been scathing of those who have develop health issues -bad diet! However, in April this year at 55, I was diagnosed with Stage 2 breast cancer. I have had surgery and am now going through chemotherapy. This will be followed by radiotherapy, then hormone treatment.

Buying Options

We can ride this out also because our living expenses are low and our mindsets are geared towards frugality. Being frugal does give you choices at times like this, and I have left my job as a preschool teacher, with the option of doing day to day relieving around treatments when I feel well enough.

I would urge those of you who are young, considering FIRE and are living in countries where your healthcare is not paid for to cover yourselves well for chronic illnesses and disability. When you are young, fit and healthy you feel bulletproof. My partner is the same age as me and has been in physical work all his life and played sport for years. He has already had knee surgery, plus he has inherited arthritis developing.

I can see that at some stage his mobility will be seriously affected. Look around you everyone — notice the old, the ill, the disabled. They were once like you. Check out your family history — what do people die of? Save, invest, live life well, but keep your eyes wide open.

Plan for death, and the decline and setbacks that comes before this — sometimes many years before you actually do die. Ben December 5, , pm. One is what you mentioned; long-term disability. Second is long-term care. Medicaid does — but you essentially have to spend down all of your assets in order to get benefits. Goldlandand1cow December 10, , am. My elderly mom was living on her own in her paid for house. She has a modest pension, S. She fell and broke her hip. She would not follow the safety precautions during rehabilitation.

She was diagnosed then with Dementia. Neither one was financial feasible. So for the last 6 years she has lived with us. She will outlive her resources and you will lose her house. Has anyone done this to preserve a house or land? It is too late for us, but wondered if it might help someone else? Glad you have been blessed with good health, and I hope it continues. A healthy lifestyle is definitely important to live a long and productive life. Smokers, for example, die earlier, giving the lower total lifetime health costs. David November 29, , pm.

Hey MMM, Dear god!!! I own some VUS etf. Canadian version of vti In my rrsp. If I sell my house 1 million. Do I just buy VUS all at one at current value and then proceed with model? How do you set up auto withdrawals?? Just have no help or guidance here…. Alex November 29, , pm. You are going to have very minimal taxes, depending on your province, and desired level of spending. Since you mentioned 1M, I will assume you are going to live on 40K. A large portion of that will be from sale of stocks, so your tax liability will come from capital gains and dividends to a small degree.

Thanks so much for the reply Alex! It would prob cost me approx to rent a small plac for my wife child and I. Can 40 k do it?

Meet with a financial planner to assess your situation

I own three rentals town houses all together generate approx 1k per month cash flow after all expenses. So I can add that to income. Nicola Simmons November 29, , pm. You no longer need to live where you live now if you no longer need to be close to a job you no longer have. You could live somewhere lovely, and cheaper, or even in one of your rental units.

Where you need to be is very different once you FIRE. Hey Nicola. Thanks for the reply. Yeah I get it…. I know I can move, however, I have a 2 year old…3 soon, and she is the only child so she has some cousins in Toronto and my parents whom are older are near by. I can pack up and move to Nova Scotia and have a place for mth. But we would have no extended family near by. Alex November 30, , am.

How to Retire Forever on a Fixed Chunk of Money

Toronto: 2, Just some thoughts…. Andrew December 7, , am. Has anybody else done any research on this? Ildar Abdulin December 19, , am. Mary Noonan November 29, , pm. I am confused about a couple things regarding Obamacare and the simulation you did at healthcare. Do health care companies not care about your assets? And the fact that your income is from selling off stocks? I have a hard time believing it would cost the same if I was not employed. Ray November 29, , pm. Pete, Medicaid here in California is not means-tested. MAGI only. A lot of early retirees will qualify for it, even when they might not want it.

Our experience with it has been very positive, even though we initially tried to talk the county out of moving us onto it from ACA, which had been ok with paying for. ZeroGBuff November 29, , pm. Medicaid, unlike other forms of public assistance, does not look at assets, only income. Unfortunately, their system appears to be designed for people on disability, court-ordered settlements, etc.

They struggle to understand dividends, self-employment, or really anything that does not pay out a predictable amount every two weeks to a month. In the state of Maine, assets do affect Medicaid eligibility for adults but not children. That means that if you have high assets and low income, your children will qualify for Medicaid but the parents will not.

How to Retire Forever on a Fixed Chunk of Money

That may be changing soon though because we just elected a new governor who wants to get more people on the Medicaid rolls. Kelly March 18, , pm. After 6 yrs we needed to move her to a nursing home due to decline in her cognitive abilities.

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  • We started the Medicaid application process a month before the move and she was approved almost 3 months later with costs from date of application refunded. Before my mom died, a 61 yr old woman moved in who had slipped down a flight of stairs and had a head injury resulting in frontal lobe dementia. We need to take care of ourselves, live without dwelling on catastrophe, but plan for the future. You are correct. Obamacare ACA only cares about income. Especially if the home is already paid off.

    You probably are aware of that already, but probably kept the post more on the simple side. Toby November 29, , pm. But if you DO insist on spending that much, you are correct — you just have to save a bit more to account for taxes. I realize you made a lot of money from your blog and gave some to charity. Without the blog would have you or Mrs. MM needed to return to work once you divorced since the money would be split? Sendug December 1, , am. I realize this line of thinking is just an extension of trying to be prepared for everything, but….

    Learn more about Amazon Giveaway. Set up a giveaway. There's a problem loading this menu right now. Learn more about Amazon Prime. Get fast, free delivery with Amazon Prime. Back to top. Get to Know Us. Amazon Payment Products. English Choose a language for shopping. Length: 68 pages. Word Wise: Enabled. Enhanced Typesetting: Enabled. Page Flip: Enabled. Amazon Music Stream millions of songs. Amazon Advertising Find, attract, and engage customers. Amazon Drive Cloud storage from Amazon. No one builds up a nest egg with the plan to lose 75 percent of it.

    Yet, this is exactly what happened to a startling 28 percent of subjects in the study. How can you avoid a potentially fatal late-life wealth shock? These funds, offered by Vanguard and other investment banks, offer a low-cost way to keep your assets at the appropriate level of risk for your age. You simply punch in the year you expect to retire, and you get the right mix of stocks, bonds, and other investment assets.

    As years pass, the fund managers will rebalance the assets to keep the level of risk appropriate. Some people think they have saved adequately for retirement or that their investments are age-appropriate, only to be in for an unpleasant shock down the road. If you haven't done so before, your 50th birthday is a great time to sit down with a planner, assess your retirement savings, and make a plan for protecting it against a negative wealth shock. Fee-only planners rather than commission-based advisers are great, because you want someone who will recommend the best solutions without any incentive to sell you products that pay them a commission.

    A common way for older people to lose their wealth is an unexpected long illness or disability. Medicare will only pay for a limited amount of nursing home care. If you are worried that you will lose your nest egg to a lengthy nursing home stay for you or your spouse, it may be worth looking at long-term care insurance.

    They often start with a phone call. Familiarize yourself with the most common scams targeted at retirees, such as Medicare scams, fake retirement investment plans, funeral scams, reverse mortgage scams, and the insidious call from a fake grandchild.