Happy Monday, readers! I just wanted to make you aware of my last podcast appearance at the Teach and Retire Rich podcast with Dan Otter and Scott Dauenhauer. I also need to update our 2016 savings rate numbers that have changed due to some unexpected income on last year’s W2 forms.
Teach and Retire Rich Podcast
This was my second appearance on the TRR podcast. Previously, I was on episode #18 (also below). This time Dan and Scott wanted to know what we’ve been up to since we quit our jobs last May. Take a listen:
You might notice between minutes 17 and 18 there is a break in the conversation. I was answering Dan’s question about our sources of income. About that time we were interrupted with a knock on my door. As a result, the podcast went a little off track; just know that I was basically providing the information from this post. We ended the podcast agreeing that we should do another podcast in six months, preferably from Mexico. That sounds great to me.
2016 Savings Rate Update
Last week we finally received our 2016 W2 forms. Because we had effectively zeroed out our paychecks for all of 2016, I assumed that we had also zeroed out our W2 forms…WRONG! To our surprise, we found out that we have $6,722 of taxable income that we had not planned on. That means we’ll be contributing $6,722 to our IRAs for 2016. To make this contribution, we’ll have to use some of the money from our 2017 72t distributions. The primary reason we’ll do this is to keep our 2016 income within our “free money + 10%” income target of $43,300. Here’s our 2016 savings with the IRA contributions:
As you see, our new savings number is $93,080 for 2016. This additional income also increases our savings rates to the following percentages:
You can take these numbers any way you like. Some people like them while others don’t. It does seem a little crazy to use retirement income from this year to fund last year’s retirement account. As I said, we’ll do this final savings maneuver to maintain our tax efficiency. Since our 2017 target income amount is $45,000, we should be able to manage without much financial strain.
What would you do? Would you not fund the IRAs and pay the additional $1,000 in federal income tax, or would fund your 2016 IRAs with 2017 retirement income?
|Health Savings Account: We use Elements Financial to access commission-free, low-cost Vanguard ETFs at TD Ameritrade.