Two Sides of FI Tax Strategies on FIRE: Financial Independence / Retire Early
Dec 4, 2022
Sean Mullaney, a financial planner and CPA known for his blog The FI Tax Guy, dives into crucial tax strategies for achieving financial independence. He unravels common tax misconceptions and explains how solo 401(k) accounts can benefit solo entrepreneurs. The conversation covers Roth conversions, tax loss harvesting, and smart year-end tax planning techniques. Mullaney emphasizes the importance of meticulous planning to optimize tax liabilities while navigating the FIRE lifestyle, making financial goals more attainable.
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Taxable Assets in Early Retirement
- Taxable assets are good for early retirement, providing income flexibility.
- They allow for Roth conversions and may be taxed at 0% if income is low.
Early Retirement Drawdown Strategy
- Spend down taxable assets first in early retirement due to inflation's impact on basis.
- Convert traditional assets to Roth while in a lower tax bracket.
Roth Conversions in Early Retirement
- Perform Roth conversions in the fourth quarter for flexibility and income visibility.
- Consider factors like age, RMDs, and premium tax credits.