• Hatton1

    Another great post. The problem is tax laws change. I see your goal is to stay in the 15% bracket but as your wealth expands you might have too much money coming in via dividends to stay there. I am considering roth conversions when I completely retire. I think you have identified two things that worry me. RMDs being applied to Roth accounts and health care premiums. I am 58 and have significant muni bond holdings but still generate lots of money in my taxable accounts. I will probably be fine living off dividends and interest until the government forces me to take RMDs.

    • Thanks, Hatton1. You are absolutely correct that the laws will change. The rules in the 4th quarter may barely resemble what we knew before kickoff. The best we can do is to have a tentative strategy based on what we know now, and revise the IPS annually or as the need arises due to rule changes.

      I’d like to stay in the 15% bracket as long as possible, assuming LTCG remain untaxed in that earned income range. I’d like to be able to do Roth conversions, but the higher the dividends from the taxable account, the less I’ll be able to do. If I’m able to build readership and better monetize this site, it could become an obstacle to my plan as well. I’d welcome the “problem” and wouldn’t let the tax tail wag the dog, but I recognize the possibility. Donating half the proceeds will reduce the tax implications if this site were to someday generate substantial revenue.

  • We have six children and 3 are out of the house, but we still pay for some of their expenses to aid the one who is in college and the one who is a missionary. Our income/expenses did not allow us to set aside funds for college, but we had family that helped. As kids leave and expenses decrease we may be able to set aside funds to help with college. But our own retirement account is still quite small. We have taken some big trips over the years and I will never regret the memories that were built. Of course having six kids makes everything more expensive to begin with. I also can’t imagine not having any one of our kids, although raising a large family in this day and age is not for the faint of heart. As I don’t have my own plan, I can’t really critique yours, but thank you for the motivation to work on one. :O)

    • Hats off to you, Chris! My 2 boys are more than enough to handle most days.

      I won’t fault you for taking big trips and getting the most of your time with your family. You will never be able to relive those years. We are in the midst of a memory-making family vacation ourselves. Just catching up on the blog after the kids have gone to bed.

      I encourage you to start with a simple plan. You don’t need to have all the details worked out from day 1.

      Last, I don’t know how familiar you are with The Millionaire Next Door and the concept of “economic outpatient care”. If you are, excellent. If not, you may want to read that chapter. The message is that financially supporting adult children can be to their detriment (and yours). College tuition is exempt, of course.

  • I am a fan of the vanguard index funds as well. My current approach is to keep it simple and be aggressive with pre-tax allocation to index funds that are fairly aggressive as I still have some time ahead on the horizon. I also figure now is the time to get the habit as we intend to start our family in the next 2 to 3 years and have to adjust the budget.

  • X-Factor

    Nice post, I love the idea of the IPS. Two questions: First, when front-loading your annual 407(b) contribution of $18k in the first few paychecks, have you found that the returns stack up favorably against dollar cost averaging the same amount over the entire year? And second, are you calculating net worth as investable assets or are you including non-liquid assets such as real estate, home(s), etc. in the aggregate? Thanks.

    • Great questions. Frontloading works out better roughly 2/3rds of the time. In down years, you are better off dollar cost averaging. Since we don’t know which years will be down years in advance, choosing not to frontload when you can afford it could be considered market timing, which is generally regarded as ill-advised. See this page on dollar cost averaging from the Bogleheads wiki; the frontload is equivalent to investing a lump sum or windfall.

      For the purposes of retirement planning, I only look at invested assets, the taxable account, Roth accounts, HSA, 401(k) and 457(b). When calculating net worth, I include property and 529 accounts, but I don’t intend to use either of those to fund our retirement. The Donor Advised Fund is not included in either calculation, as the money is only available to be given away.

  • NJDoc

    Firstly, let me say , nice site and I appreciate the hard work bringing important financial info to the Docs of the world.
    I love the IPS and I plan on creating a formal one this weekend. Last year, I did a very brief outline and I find it helpful.

    1) I get the large bond exposure to help even out systematic market risk, but assuming someone was retiring today wouldn’t it be a concern in the face of potentially rising interest rates?

    2) It seems to me that income is key in retirement – thus why not move a decent chunk to commercial real estate? Well run commercial real estate funds can typically produce 7-8% cash on cash returns, with 5-7 yr project IRR’s of 12-14% or higher. The cash flow is largely tax sheltered during the early years, and at the end of the cycle, you will face capital gains tax and depreciation recapture taxation, but still net a tidy return.

    • Thank you for the kind words, NJDoc!


      1) With 10% bonds / cash, at age 40 and within 10 years of an early retirement, I think I’m more likely to be accused of being underweight as opposed to overweight in my bond allocation. Some would argue for 0, others > 30%. I do what works for me, which is 8 to 10 percent. As interest rates rise, the price of bond funds could very well fall, but I figure the expectations are already built into the price.

      2) I’ve got 10% in Vanguard’s REIT fund, which gives me good exposure to commercial real estate. The fund gives me lower risk with less upside. I am tempted to do some individual deals via RealtyShares. I’ve been approved and get the e-mailed opportunities. If I pull the trigger, I’ll let you and other readers know. Going in on an isolated venture can certainly be more rewarding, but carries more risk. I wish I could get 7% to 8% guaranteed, but that’s not happening these days.

  • NJDoc


    Just by disclaimer I have no vested interest in talking about commercial real estate. But, I am happy to chat with you or anyone that is interested in more info.

    REIT’s as we all know are stocks- that means they behave like stocks and are subject to systematic or broad market risk. I am referring to PERE – Private Equity Real Estate. Typically these are funds, not individual buildings, that purchase multiple assets for a set number of years. They can carry some high entry numbers , but with some looking around many will take less than $100K. These are managed by professionals and many companies have extensive track records. At present I am in 3 companies, and am earning between 7 and 8% cash on cash now, with reversion ( closure of the fund) IRR’s projected between 12- 14%. They do exist .

    Just food for thought.

  • fantastic plan! I was reading more about you on this blog. It’s incredible how you just started the blog in 2016. It’s an amazingly informative and fun blog to follow. thank you. you are definitely a thorough planner, not just in personal finance, also evidence in your blogging endeavor. There’s so much I could learn from you!

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