The Sunday Best (7/21/2019)

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

 

Some people just don’t know when to quit. Seriously. Take Cubert from Abandoned Cubicle, for example. He was supposed to be be done by now and hanging out at breweries with me at the Tip o’ the Mitt where he’s got a vacation rental. Instead, he remains a cubicle fugitive. Why? Early Retirement Countdown Reset (Again).

 

Amy from Life Zemplified didn’t waffle on her decision. And, yes, she does hang out with me at northern Michigan breweries. We were at this one just yesterday with our spouses and the Adcocks, in fact. How’s life since retirement? After The Cubicle: Life Is Good, Just Not Quite Zemplified.

 

Did somebody say waffles?!? The Waffles on Wednesday published their first blog post in nearly two months. What took so long? They were busy downsizing, packing up, and preparing for a sabbatical of indefinite duration. They’re not calling it FIRE but not saying it’s not in Turning the Page.

 

The WoWs must be Bob Seger fans with a title like that. Or maybe Metallica? Both? One thing I do know is that there are a lot of Seger fans in Michigan. I get that he’s from here and all, but do you really have to play him every hour on the hour? I can scan through the dial and hear Turn the Page, Against the Wind, and Old Time Rock’n’Roll on three different stations in this place. I don’t dislike the guy or his Coors Light band, but I miss being back in Minnesota where we overplayed Bob Dylan and Prince.

 

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The physician known as The Happy Philosopher (not to be confused with the happy Physician Philosopher) also posts sparingly these days, but when he does come up for air, he has something important to say. In this post, the part-time radiologist explains Why a Physician Should Work Full Time.

 

What if you don’t want to work full-time? Is it better to work part-time now or later? I worked out the math in this post, and Passive Income MD worked through the psychological and social considerations in Work Less Now or Work Less Later, What’s Better?

 

Did somebody say Physician Philosopher? Oh, yeah… that was me. He’s also talking about now or later (not to be confused with the candy that’s like really hard Starburst they call Now & Later). Live Now or Save for Later: The Now or Later Fallacy.

 

Retire now with $1 Million and you could have $150 Million later. That’s what Michael Kitces of Nerd’s Eye View came up with as a best-case scenario in The Problem With FIREing At 4% And The Need For Flexible Spending Rules.

 

Everyone is talking about FIRE these days. When DaveRamsey.com published a piece from Chris Hogan, I had to read. The article is misleading (we’re all extremely frugal), promotes his book (Everyday Millionaires), and doesn’t actually refer or link to anyone in the FIRE Movement, but it does make some valid observations. What Is the F.I.R.E. Movement?

 

The FIRE Movement is here to stay. People like to say it’s all because of this amazing bull run we’ve had, but nothing we’ve seen in this millennium has even cracked the top 10 in annual returns. Ben Carson gleans some wisdom from those even better days in Lessons from the 10 Best Years in Stock Market History.

 

Do you miss Rockstar Finance? Or enjoy this weekend roundup? Get top-notch curated personal finance articles every day from my friends Zach, Michael, Ty, J.D.,and Jim:

 

One article recently featured on Apex Money came from this site. If you like your Roth IRA, you should love a taxable account. How a Taxable Brokerage Account Can Be as Good or Better Than a Roth IRA.

 

On Thursday, we had a somber reminder that cancer attacks from many angles. The Financial Burden of a Rare Cancer

 

Which Assets Should You Spend First in Retirement? The White Coat Investor asks a good question and gives great answers.

 

I Bought the Farm

 

Well, not the whole farm, but I do now own the equivalent of 2 acres of corn and soybean producing farmland, purchased via AcreTrader.

I grew up in a small farming community in Southern Minnesota, so it’s pretty cool to be able to quickly and easily invest in income-producing farmland in this manner.

 

 

The farm I invested in is currently producing crops (a.k.a. income) and I expect farmland to continue to be valuable. Everybody’s gotta eat!

Like other similar investments in other industries, you do need to qualify as an accredited investor to invest with them, meaning an income of $200,000 a year as an individual / $300,000 as a couple, or a net worth excluding your primary home of $1 Million.

If that’s you, please consider looking into AcreTrader and other crowdfunded investment opportunities. Registering with your email address just to view available opportunities often leads to a referral fee, supporting our charitable mission.

 

The FIRE is Spreading

 

Yesterday, we had a little afternoon meetup with bloggers Steve & Courtney Adcock of Think Save Retire & Astreaminlife, Amy & John Black Blacklock (Amy has Life Zemplified, and roles in Women Who Money and Womens Money Talk. We were also joined by a local reader who is a regular contributor to the fatFIRE Facebook group.

While it was one of the warmer days of the summer, it’s probably 15 to 20 degrees cooler than much of the rest of the nation, and of course, we had refreshing craft beers to chill with. The Ka Hoki Punch was exceptional, and I’ve got to get my free beers in before I’m no longer an investor — I’ll have more to share on that at a later date.

There was a couple there with a few kids about the same age as ours on the patio below, and my wife invited them to join us. When they realized we were a mix of healthcare workers and early retirees, the father told me he’s been following a couple of blogs that we might have heard of.

The first one? Physician on FIRE. Yep — heard of it. Also The White Coat Investor. I’ve heard of that one, too, but I love that he mentioned mine first. That rarely happens.

I’ve had a few moments like that where someone mentions my blogs or figures out I’m the Physician on FIRE — including once in Mexico and another time with our 401(k) rep, and it never gets old. It’s good to know that the word is really getting out there and that people are getting value from the site.

We could have stayed at the brewery all day, but the threat of a thunderstorm had us moving on mid-afternoon. The Adcocks had to truck it across the Mackinac bridge, and it can be closed to trailers in inclement weather. We’ll likely meet up again in the U.P. before they start to make their way west.

 

CBC

enjoying summertime in northern michigan

 

As they say on ChooseFI, the FIRE is spreading. And it’s getting Hot in Herre.

 

The Chase Sapphire Preferred Card

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The Chase Sapphire Preferred is my top pick for your first rewards card. It offers a welcome bonus worth at least $750 when used to book travel (after a $3,000 spend in 3 mo) and other great perks you can learn about here.

 

A Recommended Insurance Agent

Pattern

Pattern provides simplified tools and training to protect doctors finances, families and futures.
We do this primarily in two ways:
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  • – Expert educational webinars and seminars –  We partner with experts in taxes, job search, legal issues, and debt… to provide valuable honest content for residents, fellows, and early career physicians.
We want to help doctors eliminate confusion, defeat misinformation and guide them in the next steps to take financially.

 

 

Have an outstanding week!

-Physician on FIRE

18 comments

  • Mine is a mixture of assets, each according to it’s relative need and relative timing and relative tax optimization and unfolds in epochs. The extracted income mix is optimized for tax load in each epoch and doesn’t follow “rules of thumb”. Right now it’s Brokerage mixed with TLH for a zero dollar tax bill while Roth converting. Roth conversion does generate taxes however, but at the lowest possible rate since that’s the only taxable event. I will leave a small TIRA with mostly bonds and let that go to RMD at 70, and claim SS then. The TIRA will behave as a semi inflation protected annuity, providing decades of quasi inflation protected income at a controllable tax rate. My income will be topped off from aliquots from the brokerage. The Roth (like the cheese) stands alone and won’t be tapped for a decade or two unless there is an emergency or if I run out of money (say a decade of 10% inflation) or stagflation like we had in the 70’s. Spending down is a dynamic situationally intense, almost year by year process that doesn’t lend itself well to static rules. It is not the reverse of accumulation but it’s own animal.

    • hdo

      So it sounds like, if you had retired a bit earlier and started Roth converting before 59 1/2, you would have taken Roth ladders over SEPP due to the increased flexibility. Correct?

      I’m facing this very first-world problem now at age 38. Problem I have with the Roth ladders is that predeclaring how much income I think I’ll need 5 years from now isn’t particularly flexible either. So the price of that “flexibility” is the need to save even more money in taxable before starting.

      • It’s a function of how long you let things grow, and the rate of growth and the kind of taxes you pay. If you SEPP a IRA with a high growth rate and use a RMD removal schedule you wind up paying ever increasing taxes on your money. Once you RMD in earnest at age 70 you will have a huge IRA and huger taxes throughout your life. If congress further soaks the rich, you will get a double soaking, RMD% increases each year and the tax bracket increases so the taxes increase x increase that’s increase ^2. If you live 20 years post RMD fergitaboutit when it comes to taxes. You have to plan to end of life not just 5 or 10 years and you only get to keep what they say you can keep.

        If you Roth convert the taxes are paid and the growth is tax free, not tax deferred. You keep it all. As long as you own a IRA you’re in bed with the government and they call the tune, not you. You pay what they say. With a Roth you kick the government out of bed. You pay taxes up front but later in retirement the Roth growth goes to the moon and the IRA is hugely stilted because of ever higher taxes. So growth curves cross at some point in the future. Late in retirement Roth wins, early IRA wins. So when do you plan to die? When does your wife plan to die? If you’re both dead by 80 SEPP. If you die at 80 and your wife goes to 95 her tax bracket can jump 2 brackets upon your death. In that case clearly Roth conversion is the ticket. That’s what you have to game out.

        In my case my younger wife comes from long lived people and she’s healthy as a mule, but beautiful as a palomino so I want her taken care of without the government in her bed when I’m dead, so I’m Roth converting nearly everything but 500K which will act as an annuity, paying the taxes and kicking the government to the curb. I

        have no problem owning a large brokerage. In fact it’s the largest account I own. I also own some decades worth of tax loss harvest which I can pair with the brokerage to remove money tax free, just like a Roth, till the TLH is gone. I made too much money to get any tax break on the money going into my IRA’s so it’s taxed going in just like a brokerage. A brokerage coming out is tax advantaged with lower to zero cap gains, compared to the progressive taxation on ordinary income. So with an IRA at my tax bracket you’re taxed going in as ordinary income and taxed coming out as ordinary income but at a double progressive rate due to the progressive nature of RMD and the normal progressive nature of ordinary income. With a brokerage and some TLH or if you stay in the 12% bracket, you are taxed going in as ordinary income and not taxed coming out. I this case a tax optimized brokerage with no cap gains. kicks hell out of a IRA. So far I’ve converted 700K of brokerage to cash and haven’t paid a dime of taxes. Homey likes his brokerage. Optimizing Retirement is more complicated than it might otherwise seem.

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  • Martdoc

    Another great roll up of articles, thank you! On month 10 of a 12 month tour in Baghdad, Iraq, I look forward to The Sunday Best every week (and pray the DoD is not blocking sites that day).

  • Thanks for the mention and great visit! Nice way to spend a few hours, good conversation and beer with friends and meeting some of your readers. Hope to see you all again soon!

    • I’m glad our paths crossed, and I have a feeling that will happen again very soon. It was fun to see you and meet John. We’ve got a great FI community online and I love it when it moves offline, as well.

      Cheers!
      -PoF

  • It’s funny. We were over RV’ing near Traverse City and with all of the neat little breweries and previous hints, I figured “I bet POF freshly retired to this area”. It is a beautiful area and has a great vibe. Other than the radio stations 😉

    • 105.9 KHQ (shouldn’t there be a 4th letter?) likes to put about 3 to 5 songs on repeat all day long.

      Other than that, we’ve got it pretty good, and we’re a bit further to the north and east where it’s a lot less busy. The Cherry Capital is way overcrowded for my taste.

      Cheers!
      -PoF

  • Wow for the Wow’s!! And hey, you’re bringing together people all over the globe-we just spent an awesome two days with a fellow dual physician couple spending the summer in Peru and Colombia. Your FB group connected us! Having 6 kids together was an adventure and we all had a blast. So thank you!

  • That has got to be an amazing feeling when someone mentions your blog not knowing it is you. I can only imagine the surprise when you reveal that you are the blogger behind it.

    Never heard of being able to actually own a portion of a farm as part of a syndication. Pretty cool concept. I know owning a farm has some major tax benefits and federal subsidies as well so I presume this gets passed down to the individual investors.

    I sympathize with Abandoned Cubicle. Reaching FI is one thing, but to make the step of RE is a whole different ball game. One more year syndrome is definitely going to have a major impact on me as I draw closer myself.

    • I’ve had it happen both ways. When someone said “you’re the Physician on FIRE, right?”, I was flabbergasted. My kids had appeared in some photos, and he recognized them. But I was very much anonymous at the time.

      I’ve also had it the other way where the other person mentioned it, and I got to say, “yeah, that’s me.” It’s so much fun that I almost want to remain somewhat behind-the-scenes so I can continue to experience the occasional moment like that!

  • GJS

    Hi, regarding Acre Trader, could you please help me with the math…

    I know the returns are not guaranteed, but let’s assume the following…

    Gross Cash Yield = 3.5%
    Net Annual Return = 8.4%
    Ownership duration = 5 years

    Let’s say I invest $100 000 on Jan 1st, 2020.

    How much money will I have after 5 years? Can you please show me the math?

    Thank you!

    • Hi, this is Michael with AcreTrader. Thank you for understanding that nothing is guaranteed. I will give a brief overview of the hypothetical you have requested:

      First, explaining net annual return:
      We calculate net annual return as simply your net distributions (in this case ~3.5% less 0.75% management fee, taxes and insurance = ~2.5%) plus expected annual appreciation of almost 6.0%. We use long-term averages for the annual appreciation calculation.

      The above would net out to around 8.4% annually.

      Assuming dividend reinvestment, the ending figure would be roughly $150,000 ($100,000 compounded annually at 8.4% over 5 years). Without dividend reinvestment, you would receive ~$13,000 in cash payments over 5 years (2.5% times land value each year) and the ending value would be roughly ~$133,000 ($100,000 compounded at 5.9% annually for 5 years), for a net of $146,000.

      To reiterate, the above is simply hypothetical, as actual results will vary. Please don’t hesitate to reach out any time directly with us. Thanks!

  • That Ramsey/Hogan article was basically click-bait. Making sure they get some “FIRE” hits. While I feel sorry for folks who don’t learn correctly about FIRE and that’s it’s possible for many, I on the other hand love that I live in a world where it will probably always be rare. If 50% of the world FIRE’d, it would get too much attention, including government/tax attention, and it would change our lives. The way it is, even with so many of us blogging, we are still pretty stealth, and will probably remain so for the rest of our lives.

    • Lynne

      Good point about the tax implications. When too many people are enjoying the situation, the powers that be in government see it as an opportunity to tax it more. Even now they have bandied about the concept of forcing Roth mandatory distributions upon the original account owner. That messes up one of the advantages of a Roth IRA; no RMDs.

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