The Secret Math Behind Early Retirement

Early retirement often seems impossible. It's difficult enough these days to retire at age 65, so the thought of retiring early is a pipe-dream for most people. Yet somehow this dream has become a reality for some diligent savers. In extreme cases, a few people have retired at an age when most of us are just getting started.

One well-known example is the man behind MrMoneyMustache.com, who retired at age 30 after just nine years of working. While he is the exception to the rule, he thinks that should change. He views early retirement as something most people can attain.

To understand how it works, let's take a look at the math behind early retirement. These numbers have implications for all retirees, not just those looking for an early exit. 

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So even if you think you're too late for early retirement, these strategies will still improve your retirement finances.

The math. How quickly you can retire depends on how much you can save. If you are able to save the often-recommended 15 percent of your take home pay, it will take about 45 years to retire. This conclusion assumes investments earn a real return (after inflation) of 5 percent, and that you live off of 4 percent of your nest egg once you do retire.

Now let's say you are a frugal and committed saver. If you are able to save 30 percent of your take home pay, your working years fall to about 30. At 40 percent the necessary work years before retirement falls further to about 20. And if you are able to save 50 percent of your take home pay, you'll begin enjoying your golden years in less than 20 years. As my mom would say, now we're cooking with gas.

The magic behind this math is the result of three related factors. First, as the saving rate increases, the amount saved increases more quickly. Second, with the passage of time, the nest egg benefits from compounding of investment returns. Finally, as the savings rate rises, the amount of money needed for living expenses goes down.

Let's get real. I know what you're thinking. The math may be accurate, but saving 30 percent or more of take home pay is impossible. Don't tell Mr. Money Mustache or the bloggers at "Early Retirement Extreme" and "Can I Retire Yet?" The fact is that early retirement is a reality for many people, including those who earned an average income during their working years.

While each early retirement story is unique, many share several common themes. Early retirees shun certain expenses many of us take for granted, such as expensive cable and cellphone packages. They tend to spend less on cars and transportation, often living close enough to work to either bike or walk. They also spend less on food, eating out less frequently than most. Finally, they are often more self-sufficient, choosing to handle home and car maintenance and repairs on their own, rather than paying others for these services.

Implications for baby boomers. For those already approaching retirement, stories of early retirement may at first blush seem unhelpful. After all, baby boomers are long past retiring at age 30. However, study after study reveals that many older Americans are not prepared financially to retire. The principles behind extreme early retirement may be the answer. If extreme saving can enable some people to retire at age 30, the same methods can help prepare those in their fifties to retire by age 65.

Article written by Rob Berger who is an attorney and founder of the popular personal finance and investing blog, doughroller.net. He is also the editor of the Dough Roller Weekly Newsletter, a free newsletter covering all aspects of personal finance and investing, and a weekly podcast.

Kindle FREE Days, Tax Loopholes, Tax-Free Living & Retirement

 Learn how to legally reduce your taxes, now or during retirement.  Tax loopholes used by the wealthy for decades explained in detailed.  Free in the Kindle Store on Amazon on October 16th through the 20th, 2013.  You can read on your desk top or laptop by downloading the free Kindle App which can be found on the right side of the page on Amazon.  Tax Loopholes, Tax Free Living & Retirement

Download on FREE days, October 16th through October 20th.

California is NOT Tax-Friendly for Retirees

The Bottom Line

NOT TAX-FRIENDLY

One of Kiplinger's top ten least tax-friendly states for retirees, the Golden State is a retiree's tax nightmare. Although Social Security benefits are exempt, all other forms of retirement income are fully taxed. California residents pay the highest income taxes in the U.S. The statewide sales tax is high, too. Real estate is assessed at 100% of market value.



How to Live Tax-Free in Retirement



State Sales Tax

The state sales tax increased to 7.5%, from 7.25%, as of January 2013. (The rate hike is temporary and is set to expire at the end of 2016.) Rates are higher in cities and counties with special taxing districts; with the addition of local taxes, the total can reach 10% in some cities. (Food and prescription drugs are exempt.)

Income Tax Range

Low: 1% (on up to $14,910 of taxable income for married joint filers and up to $7,455 for those filing individually)

High: 13.3% (on more than $1 million for married joint filers and for those filing individually)

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.

Property Taxes

Property is assessed at 100% of market value. The maximum amount of tax on real estate is limited to 1% of assessed value. Note, though, that property is generally only reappraised when it changes ownership or has new construction (a property’s assessed value is typically equal to its purchase price adjusted upward each year by 2%). Under the homestead program, the first $7,000 of the full value of a homeowner's dwelling is exempt. Median property tax on the state's median home value of $384,200 is $2,839, according to the Tax Foundation.

Tax breaks for seniors: The Homeowner Assistance program, which provided property-tax relief to people who were blind, disabled or at least 62 years old and met certain minimum annual income thresholds, has been halted and has not been funded by the state in recent years.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

Read more

Legally Avoiding Taxes in the Dinar Revalue, Is It Possible?

Regardless of what the IRS says, now or in the future concerning the revalue of the Iraqi Dinar, you have to realize that savvy taxpayers do things differently, legally, but different. There is a new book in the Kindle Store of Amazon which explains in everyday language how savvy taxpayers avoid and lower their taxes.  Tax Loopholes Tax Free Living &Retirement;  http://www.amazon.com/dp/B00DQGIU3Y  Written by a tax professional, the book will improve your knowledge on how to protect yourself from serious tax consequences if you have invested in dinars

If you are waiting for the revalue of the Dinar, a better solution would be for you to be in constant study of how the wealthy handle money.  The book Tax Loopholes, Tax-Free Living & Retirement explains in detail how the wealthy manage large sums of income. Yes, it is legally possible to avoid serious tax consequences when the Iraqi Dinar revalues.  No it won't be easy.  Yes, it is very legal and has been done for decades by hundreds of thousands of taxpayers.

This isn't to say that you won't need an attorney to accomplish the same task, however it is to say that you will have a better understanding of what you will expect your attorney to do.  You certainly will be able to ask intelligent questions and present yourself as a savvy investor.

The biggest question(s) in the dinar forums include 1) how to exchange your dinars for US currency and 2) if your gains will be taxed as ordinary income or capital gains?

Again, these are the wrong questions, in reference to taxes.  The question of "how do I protect my income from major tax liabilities" would be the best question.  This is a major difference in how the wealthy think and how many of us who want to be wealthy think.  The wealthy want to know, not how I'm going to be taxed, but how do I legally AVOID being taxed? 

Time to Retire and Forgot to Save for Retirement? You're Not Alone

If you are nearing retirement and you forgot to save for retirement, you're not alone.  Below are some facts which will help you to understand the situation hundreds of thousands of baby-boomers are in:

• 26% of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.

• One survey that covered all American workers found that 46% of them have less than $10,000 saved for retirement

• A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year(s)

• According to a survey conducted by the Employee Benefit Research Institute, "60 percent of American workers said the total value of their savings and investments is less than $25,000".

What does all this mean?  It means baby-boomers aren't financially prepared to retire.  There are thousands of baby-boomers who are going against all odds and retiring offshore, in luxury.  The web site: Forgot to Save for Retirement.com  Now What?  is five years old this year.  The site is celebrating with an upcoming Book on retiring on less than $1000 a month, offshore of course.  Visit the site and learn how hundreds of thousands of baby-boomers are retiring in luxury, in spite of financially concerns.  We'll keep you updated on the new book and will let you know when it's published.

Kindle Free Days; Tax Loopholes Tax-Free Living & Retirement

Download for free the new book:  Tax Loopholes, Tax-Free Living & Retirement in the Kindle Store on Amazon.com.  Free Days:  July 10th to July 14, 2013.

Tax Evasion is illegal. Tax Avoidance is NOT. This book explains in detail what hundreds of thousands of Americans have done, legally, for decades. This book will show you how U.S. taxpayers, combine the Earned Income Exclusion and Offshore Corporation(s), with the IRS’s blessings, to legally lower or eliminate, their U.S. tax liabilities. The book uses easy to understand language and explains the details and the overall picture which allows U.S. taxpayers to use the IRS Form 2555 to legally eliminate their income taxes. The IRS, of course, has the final say on all Form 2555 elections. This book will explain the tax law and the hurdle(s) one must jump to live a tax-free life,in easy, every day language.

Some would say this isn’t honest or fair. You may be correct. However, let’s explore how it’s done before we join millions of citizens in protest over these tax laws.

Believe it or not, there is such a thing as a tax-free retirement, and more and more Americans are taking advantage of these tax loopholes each year. It’s called the Foreign Earned Income Exclusion, FEIE for short. At the time of publishing the maximum exclusion is $97,600 for 2013 for each taxpayer. The amount of the exclusion increases each year based on inflation. (Exclusion means that you pay zero taxes on that amount)

So what is this retirement tax loophole that nobody’s talking about?

The United States taxes all taxpayers on their worldwide income. This is a fact, this is the law. However, taxpayers who live and work OUTSIDE of the United States can possibly qualify for the Foreign Earned Income Exclusion. Before you close your mind to living and or working offshore, take a look at the facts and understand why so many Americans are making the necessary adjustment, to take advantage of this opportunity.

Regardless if you move offshore or stay in the United States, you can use this book to lower your taxes each year and live a tax-free life or a tax-free retirement. Is it ethical? You be the judge.

First you should realize that Form 2555 Election has been going on for years. It wasn’t until millions of Americans experienced a loss in their retirement funds, due to the recent down-turn in the economy, that the FEIE became so important and popular.

Millions of baby-boomers are now at retirement age. For many Americans, their retirement nest-egg, disseminated right before their eyes..............find book here

Tax Loopholes, Tax-Free Living and Retirement, by C. Ingraham, RTRP

 

  Finally finished Tax Loopholes, Tax-Free Living & Retirement book.  The book is now in Kindle Store; Amazon.  The book will also be published in paperback in the near future.

 

The book was a difficult book to write for one simple reason.  I'm a Registered Tax Return Preparer, and the reason is because I believe in the tax system and how it's suppose to bring value to each taxpayer's life.  When writing this book, it become clear that hundreds of thousands of Americana's are using tax-saving methods which may or may not be ethical.  Never the less, the methods are 100% legal. 

 

The book is written in easy to understand plan English.  In order not to offend the tax attorneys who earn anywhere from $500 to $1200 an hour for this information, I continued to refer readers to experienced tax attorneys when setting up an offshore company.  The reason for this is simple.  There are blurred lines, and the taxpayer is always only one step away from being out of compliance with the Internal Revenue Service.

 

Understanding the process of living a tax-free life or retirement is only part of the process.  Setting up your business structure or your personal finances to accommodate such a process is complex at best, yet doable and rewarding for hundreds of thousands of taxpayers.

 

Its an easy to understand book which explains the (legal)  two-step process used to bring about a tax-free retirement, or a reduced tax liability.  It only takes an open-mind to understand the entire process.  Most taxpayers hear the words  "offshore" and say absolutely not.  Not realizing that taxpayers who remain state side can benefit greatly from the "overall process".

Tax Benefits, Lower Cost of Living in Retirement

Thinking of joining millions of Americans who are moving offshore in order to live a better quality of life on a set retirement income?  You are not alone.  And this is fast becoming a really hot topic.

For more information on offshore tax havens, cheap and safe places to retire, how to manage your money in offshore retirement, health care and much more, you can visit our sister site: http://forgottosaveforretirement.com/   If you look to the far left of the page, you will find a link which thousands of visitors to this site have clicked on.  It's entitled:  "44 Things You Must Know Before Retiring or Investing Offshore.

We are not encouraging the "investing" offshore until you know what you are doing, and your state side Attorney has has an opportunity to look at the paper work.  However, we are saying that a decision to move offshore, or even to make your primary home offshore, could have some serious and positive end results when it comes to taxes.  Learn more: http://forgottosaveforretirement.com/

Tax Havens, Tax Free, No Taxes Legally - Retirement

To lower your taxes legally during Retirement, you have the option of moving to a no-tax foreign country.  And this is how many Americans make their retirement dollars go a whole lot further.

There are states which do NOT impose state taxes, South Dakota and Texas to name a couple.  However, you can save even more when you move to a no-tax foreign country.

You will need to speak to your Tax Attorney or Enrolled Agent to learn about the details

To learn more about which countries American, Canadians, and individuals from the UK are moving to, you can visit Forgot to Save for Retirement and visit, for sure,

How to Retire On Less Than $740 a Month - Yes, Americans are living well, offshore, for less than $740 per month. 

Note:  I'll give you a hint, ..Malta is a tax haven...Andorra qualifies... So does Belize...and, in some ways, Uruguay and the Dominican Republic. However, the world's most user-friendly tax haven? That would be Panama, and my personal  favorite, the Bahamas.  Now, these are what you call real tax havens.  Not for your business, but for yourself.