How long does it take to crawl out a hole you dug? How long to formulate a plan? Execute it? Reach your goal? Financial independence (FI) is a goal most people have. Some want it bad at a young age and work toward that goal. Others wait until Father Time ticks closer to the traditional retirement age. Still others get a wakeup call when their body fails in some way.
Before this blog I was a tax Endorsed Local Provider (ELP) for the Dave Ramsey organization. His story resonated with me. I agreed with Ramsey that debt is the acid which destroys the vessel that holds it. Ramsey is fanatical against any kind of debt; I am a bit more moderate in the faith. Still, debt is a problem for many people.
Before FI can be achieved debt first needs to either be eliminated or seriously curtailed for most people. The Ramsey plan is to eliminate all debt and invest in actively managed mutual funds offered by a financial advisor. If you read that last sentence carefully you will begin to understand why I could no longer in good conscious be a Dave Ramsey ELP. Ramsey’s philosophy is right on so many levels and wrong on so many more.
Debt in and of itself is not bad. It’s just a thing. Too much debt is the real issue. Credit card and similar high interest debt is caustic, no doubt. A home mortgage can make all the sense in the world. Even a small, short-term business loan is a positive in many instances. A blanket faith in no debt is something I don’t subscribe to. When very wealthy people borrow for a home or investment it is frequently the right choice. Borrowing $10,000 for working capital in your business instead of selling a profitable income producing investment I will argue is a good call, especially when you consider the tax consequences.
Every so often I say something that starts a firestorm or causes my inbox to overflow. Since the laws of nature state I am one human being and have a limited amount of time to read and answer emails, most emails go unanswered unless from a current client.
It may have been something I said in a podcast or new readers enjoying a deep drink of my lovely prose triggering the question in question. (Yes, I wrote that intentionally.) The latest question storm revolves around retirement plans. The questions are all the same with slight nuances. As a human being with limited time to dedicate to cold call questions, I left most unanswered and the few I did respond to were given quick and to the point answers. And as I fired off these quick answers it occurred to me I misinterpreted the question asked in some cases. A fresh blog post on the subject should clear that up. If not, some ointment might also do the job.
The question stuffing my email is this: Can I have more than one retirement account? My accountant told me I can’t contribute to an IRA if I have a retirement plan at work. Is she right? We will address this line of questioning in a bit. There is a small twist to the question from some readers. Can I have two retirement plans in my business or side gig? I sent many a quick answer as follows: In most cases there is nothing in the Code disallowing such action, but it would be impractical to do so. My answer is wrong! I should have left questions unanswered if I didn’t have time for an adequate response.
On a recent ChooseFI podcast where I was the guest speaker I mentioned the possibility the backdoor Roth and her sister tax strategy, the laddered Roth, could be going away. Many people heard me say it WAS going away. That is false. It is only a proposal at this time.
Because so many potential tax law changes now whispered in the halls of Congress have the potential to cause great damage to those in retirement or working an accelerated program toward financial independence (FI), now is the perfect time to review those with the highest possibility of happening. A word of caution before we begin. These are only ideas floating around Congress. They are NOT current tax law! Not all ideas whispered in the halls of Congress become law, but all laws start as a whisper in the halls of Congress. There is a difference.
Most ideas for tax law changes never see the light of day or are significantly modified before becoming a law. Some ideas become law in a few years, other may take a decade or longer before working through both houses of Congress and signed into law by the President. As we review the ideas now floating around Congress I will give my opinion on the likelihood the change will take place and how soon.
Remember, this is one guy’s opinion. My opinion carries weight because I have decades of experience. I also rely upon sources outside my own viewpoint, such as continuing education courses I’ve attended, The Kiplinger Tax Letter, and calls to several Congressmen. (It should be noted I rarely get to speak with an actual lawmaker. Usually I speak with a staff member. They can still be very helpful with potential tax law changes working through the system.)
Show me a successful person and I’ll show you someone with deep seated pain. Pain is a powerful motivator. Few can reach lofty heights and keep pushing without underlying pain driving them forward.
Steve Jobs said you have to be “. . . insane to do this. . . ” when he discussed why he worked so hard to achieve so much because “. . . it hurts so much.” He expanded the insanity to include all successful people. It doesn’t matter what it is you are the best in. Being the best and marching forward after attaining the top is an exercise in pain regardless the field.
Some are satisfied with “good enough”. They are the lucky ones. Normal people attain a certain level of success and sit back and enjoy it. You see these people everywhere. They are the upper middle class people lucky enough to have reached the level of “having it” or “made it” without the grinding pain from earlier in life driving them on.
Then there are the people we see in the news on a regular basis. These are the business leaders and entertainers who never are satisfied with their performance even when they have reached so high they have cut new ground. They climbed to the top of the mountain and started building the mountain higher. What drives these people? And are you one of them?
Old dogs can learn new tricks. Preconceived notions are not reality or facts.
Several years ago life was going fine for me. Business was good, the sky was sunny and I thought I had a firm grasp on how the world worked. An avid reader, I chanced across a blog that pulled me in deeper than any before. Normally I read several blogs with no blog standing out from the crowd. I digest what I can and move on. Then along came Mr. Money Mustache.
Some blogs are better than others. Quality is frequently an issue, but personal taste is too. To make matters worse, this Mustache guy had a serious following. High quality suited to my tastes with a massive audience started me questioning some of those preconceived notions.
Most issues I was in complete agreement with. There was one stand-out: retirement and what the word meant. At first I had an identity crisis. Was I really retired all along and didn’t know it? Is it wrong to have gainful employment?
The only way to figure this thing out was to attend personal finance conferences with like-minded people. That was two years ago. In the beginning it made the confusion worse and the crisis more acute. Then I developed my own definition of retirement to suit my needs. Finally, last weekend, I made what I feel is the final leap in my evolution toward a retirement definition I can use in my personal life.