The Sunday Best is a collection of articles I’ve curated from the furthest reaches of the internet for your reading pleasure.

Every week, I scan hundreds of headlines, read dozens of posts, and bring you the best of the best to save you time and mental energy.

Financial Independence (FI) is a primary focus, but it’s an awfully broad topic. I tend to approach FI and early retirement from a fatFIRE perspective and through the lens of a physician, so expect to see those biases in the selected articles.

Related topics that have become recurrent themes include early retirement, selective frugality, tax issues, travel, physician issues, and of course, investing.

For more great articles, take a peek at The Sunday Best Archives. Now let’s get to the best… The Sunday Best!

 

 

 

The Sunday Best

 

The SECURE Act has passed. The Stretch IRA is eliminated, RMDs are delayed for 18 months, and you can contribute to retirement accounts at any age, among other changes. Get all the details from Kitces.com. SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges.

 

When you practice locum tenens, you’ve got some unique challenges, as well. Chad Chubb of Wealthkeel gives us 7 Financial Planning Tips for Locums Docs.

 

One list of financial tips deserves another. Here’s one from Everyday Health on how to spend less on your healthcare. 10 Tips to Help You Save Money on Healthcare Expenses.

 

As someone who travels overseas for months at a time and appreciates a good deal, I took interest in this post from another physician traveler who blogs at You Be Three. Bargain Shopping While Traveling Abroad.

 

 

Ether to FI doesn’t travel a ton, but his financial goals are rather unsettled. He talks about that while reflecting on his previous 11 posts and updating his net worth for all to see. Ether to FI: Moving Targets & a Net Worth Update.

 

Speaking of targets, are Target Date Funds a good option for your investments? The Physician Philosopher touches on the Pros and cons of Target Date Funds. For me, there’s more con than pro, but I understand the appeal and they can serve a purpose.

 

Financial Independence also serves a purpose, and The Fioneers reflect upon it in a year-end review. 2019: Defining the Purpose of Financial Independence.

 

Like many before me, I used financial independence to afford an early retirement. So did Sam, the Financial Samurai. He shares The Surprising Benefits Of Early Retirement I Never Anticipated.

 

Rich and Regular also took a look back at the year that has been. It’s been a great year for the couple, and they relate the 5 Lessons That 2019 Taught Us.

 

Here’s a 6th lesson from 2019 and it’s one I never considered. SemiRetired MD shows you How to Get Your Student Loans Forgiven with Real Estate.

 

Passive Income MD paid off his student loans and now he invests in a wide variety of real estate and other investments. Why he feels It’s So Important to Diversify Your Real Estate Portfolio.

 

Dr. Peter Kim makes a Cameo appearance on the blog of Compound. Location, Location…Vocation? Why Doctors Make Great Real Estate Investors.

 

Sarah Mayo of Crowdstreet sees real estate investing as an answer to volatility. Concerned About Stock Market Volatility? Commercial Real Estate Might be the Answer. Personally, I’m in stocks for the long haul, and I expect the volatility, but I do invest in commercial real estate.

 

The White Coat Investor invests with Alpha Investing in a fund that will invest in 10 to 12 real estate deals throughout the country, an easy way to diversify with one investment. He describes his thought process behind it in How To Do Due Diligence on a Real Estate Fund – Alpha Investing Fund I.

 

 

Year-End Tax Planning

 

When I was a W-2 employee, there wasn’t a whole lot of tax planning to do. My income was what it was, and there wasn’t a whole lot I could do to alter what I was going to owe the government in taxes.

There is one big exception. When I realized I would be retiring early and lowering my income, I decided to build up our donor advised fund balance while I still had a six-figure income. I worked through the tax benefits of doing so in The Best Way to Donate A Hundred Grand.

Now that I have a mix of W-2 income and sizable 1099 income, I have a little more wiggle room to optimize my tax situation at the end of the year.

It gets complicated quickly, but building a tax-planning spreadsheet helped me figure out what moves might make sense at the end of the year, and there are a lot of moving parts.

I donate a substantial portion of my website profits, and that now means an annual six-figure donation to our donor advised fund among other donations. However, I am limited to donating 30% of AGI in appreciated assets, and I like to donate Vanguard mutual funds.

In 2019, I had enough W-2 income to raise AGI high enough that the 30% limitation was not an issue. In the future, I could also do Roth conversions to boost AGI and allow for the donation of more appreciated assets.

An additional consideration is the child tax credit, which for me as a married man with two children under 17, phases out from $4,000 to zero over a MAGI of $400,000 to $480,000.

The Sec. 199A Qualified Business Income (QBI) deduction introduces yet another wrinkle. With taxable income under $321,400, it’s pretty straightforward. The deduction will be 20% of QBI. That is, unless my taxable income is lower than my QBI (which it will be due to the huge itemized deductions from the six-figure donation).

In the case of taxable income being smaller than QBI, the Sec. 199A deduction will be 20% of taxable income (rather than 20% of QBI).

I figured out rather late in the game that I could convert my entire individual 401(k) balance to Roth in the 24% federal income tax bracket. Doing so would raise my taxable income to as much or more than my QBI, effectively increasing my Sec. 199A deduction. It would also allow me to donate another $30,000 or so in appreciated assets.

If ETrade gets its act together and approves the application I submitted in time, I will go ahead and make those two moves on Monday or Tuesday before the closing bell.

You can see where a spreadsheet could come in handy. I built one that makes sense for me, but it wouldn’t necessarily make sense for others. Next year, a few weeks earlier than now, I’ll write up a full post on year-end tax planning. It might be impossible to create a universal spreadsheet, but I could share mine and talk through the steps of creating it.

You can see a preview of what my current spreadsheet looks like without the numbers. Note the sheet does not calculate the Total Tax due. I use an online calculator like TurboTax Taxcaster for that and the state tax is pretty straightforward, particularly in Michigan where it’s a flat 4.25%.

 

 

The labels aren’t perfect, but it gets the job done. “Close enough for government work,” as they say. So much for simplifying the tax code.

If you have any ability to manipulate your final taxable income via itemized deductions or Roth conversions, there are two business days left in 2019 in which to do so. Use them wisely.

 

 

Happy 2020!

 

When I started thinking about retiring early, I had “2020 vision” as in I thought that might be the year I start living my next life. I got ants in my pants and finished things up a few months early.

I hope you’ve all enjoyed the holiday season. We had three wonderful holiday celebrations in the last week and put well over 1,200 miles on the Armada.

We asked for fewer gifts that could not be consumed, and we predictably came home with a lot of consumables. We’ve got some serious eating and drinking to do if we want to burn through our take before we leave for Spain a week from Tuesday, but I imagine most of it will keep.

To counteract the effect of the holiday binge, my wife and I continue to train for a half-marathon. I got in runs of 2, 2, 3, 4, and 8 miles over the last week, taking off only the days in which we spent 10+ hours in the car. A streak of mild weather in the upper midwest has made for a nice introduction to outdoor winter running.

As you make your New Year’s resolutions, try to make them something you can actually achieve. My goal is to run a full marathon in 2020. What are yours?

 

 

 

Have an outstanding week!

-Physician on FIRE