511 | Take the Next Step

ChooseFI | Financial Independence Podcast

Jonathan Mendonsa & Brad Barrett | Choose FI Media, Inc

Investing, Business, Careers

4.8 • 5.2K Ratings

🗓️ 23 September 2024

⏱️ 63 minutes

🔗️ Recording | iTunes | RSS

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Summary

Your retirement tax burden is probably far lower than you think. Most people drastically overestimate what they'll owe in federal taxes once they stop working—often assuming they'll face the same high marginal rates they pay during their peak earning years. Brad and Ginger break down the difference between effective and marginal tax rates, showing why retirees frequently land in surprisingly low tax brackets when they structure withdrawals strategically. This episode also covers their recent Alaskan cruise and the frustrating reality of using travel rewards for cruises, plus community wins that highlight the power of staying the course on the path to FI. Key Topics Discussed [00:01:05] Recent Travel Experiences Ginger shares her recent trips, including a family rollercoaster trip and an Alaskan cruise that exceeded expectations despite initially being on her husband's bucket list. [00:04:00] Navigating Travel Rewards Brad discusses the challenges of using travel rewards for cruises. Consider using Capital One Venture Miles for travel expenses, as they can help offset costs if coded as travel. [00:26:27] Understanding Retirement Taxes The hosts transition to discussing retirement taxes. Brad explains the difference between effective tax rates and marginal tax rates, advising listeners to focus on their effective rate in retirement planning. Many people overestimate their federal tax burden during retirement, assuming they will pay much higher rates than they actually will. [00:55:27] Community Wins Inspiring community stories showcase personal achievements in financial independence, including one listener reaching 50% FI status after implementing advice from the ChooseFI community. Key Quotes "Many overestimate their federal tax burden significantly." [00:28:35] "Your effective tax rate is going to be minimal." [00:33:09] Chapters [00:00:00] Introduction and Recent Trips [00:01:05] Cruise Experience [00:04:00] Navigating Travel Rewards [00:26:27] Understanding Retirement Taxes [00:55:27] Community Wins Terminology Effective Tax Rate — The average rate at which an individual is taxed on earned income. [00:28:35] Marginal Tax Rate — The tax rate applied to the last dollar of income earned. [00:29:52] ▶ Listen Next: Ep. 513 — Make Your Own Dividend | Essential Listening

Transcript

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0:00.0	Hello and welcome to Choose A5 today in the show we have another fun roundup episode where Ginger and I talk through just a whole bunch of really interesting topics just as it relates to those of us on the path to Fy. And man, we are said to talk about a lot of things.
0:15.0	We're going to talk about some recent trips.
0:17.0	We just took taxes in retirement and how you might actually be paying a lot less than you anticipate.
0:22.0	The preferential rate of capital... how you might actually be paying a lot less than you anticipate.
0:23.2	The preferential rate of capital gains,
0:25.8	which is really interesting.
0:26.8	The rule is 72, Coasefye, doing hard things,
0:30.4	a book I'm reading called The Gap and the Gain, plus of course, questions and wins from you, the community,
0:36.0	the lifeblood of what we do here at Chisifai.
0:38.0	This is going to be a fun one.
0:39.0	And with that, welcome to Chisifai. Welcome to Choose a fine. Ginger, it is so good to see you.
0:48.6	Ginger, it is so good to see you.
0:50.4	These are always the highlight of my week. So yeah, this is going to be fun.
0:54.1	Yes, and I know we're both feeling very happy and relaxed because we just got back from trips.
1:00.5	Yeah. Right? Yes, I know I I talked about a couple trips that I was taking so took a big trip to Colorado and then I actually just did another roller coaster trip with my daughter Anna so that's been fun. Yeah that's basically the last two weeks now so I definitely want to go into it but you are now a cruiser.
1:20.4	It's what I hear from you. Yes, yeah, we just got back from our Alaskan cruise.
1:25.0	It was a seven day adventure and we went because it was on my husband's bucket list so I was like very happy to go but it
1:35.4	wasn't like a thing that I was dying to do but then it turned out I loved it it was
1:40.3	so great so yeah it was it was one of those things I wanted to kind of talk about it a little bit because it's one of those things that we really weren't able to optimize.
1:50.6	You know, we just had to like hand over a bunch of cash because points don't work with that kind of thing
1:55.9	but we're like okay well we're gonna do it one time but there were so many advantages and one question I really had was okay our child is eight is this
2:04.9	really the right time is this a you know gonna be a good fit for him and it was so
	...

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