Early Retirement Tax Planning 101

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Complaining about taxes is our national pastime. Many people think others aren’t paying their fair share. At the same time, we’re all certain we’re paying too much.

Cut taxes with simple tax planning to retire sooner

Nearly everyone complains about taxes. Few people take the time to actually understand the tax code and learn the easy, legal and low risk ways they can reduce their tax burden by tax planning. For the first decade of my career, I was guilty of this.

I spent a lot of time over the past five years learning the ins and outs of the tax code while planning my early retirement and writing about it. Thinking about the tax consequences of my financial decisions has become second nature. This makes me an outlier.

I recently reviewed the blog posts I wrote last year and began laying out my editorial calendar for 2019. Most of the topics I write about have a tax planning component.

So before going further into topics that involve advanced tax planning, it makes sense to take a step back to reinforce a few foundational concepts that form the basis for all tax planning decisions.

*Throughout this post, I use 2019 tax rates, assume tax rates won’t change and ignore inflation to demonstrate basic principles without adding unnecessary complexity or speculation.

Marginal vs. Effective Tax Rates

Not all earnings are taxed at the same rate. For example, in 2019, a married couple, without children, filing their taxes jointly, pay no federal income tax on their first $24,400 using the standard deduction.

They can earn another $19,400 and pay only 10% income tax on that amount. The next $59,550 is taxed at 12%. As you earn more, rates of taxation increase incrementally to 22%, 24%, 32%, 35%, and finally 37% for the highest earners.

These percentages are known as marginal tax rates. Your last dollars earned will be taxed at their marginal rate.

The average rate of taxation is your effective tax rate. The effective rate is calculated by dividing total tax paid by your total earned income.

Let’s demonstrate with a hypothetical scenario. A couple earning $200,000 and not utilizing tax advantaged investment accounts or itemizing deductions would pay $30,493 in federal income tax. A visual is helpful to see how we get that number.

Earned IncomeIncome Tax RateIncome Tax Owed 
$24,4000% (Standard Deduction)$0
$200,000 (Total Income)Effective Rate = 15.2%$30,493 (Total tax due)

Tax Deferred Investing

The second thing to understand is having a high savings rate gives flexibility for tax planning. This allows you to defer taxes on a percentage of your income, enabling substantial tax savings in the year money is earned.

Let’s apply this concept to our example couple earning $200,000. They could save the maximum amount allowed in two 401(k) accounts ($19,000/person in 2019) and a health savings account (HSA) ($7,000/family in 2019). This means they could avoid paying taxes on $45,000 of their most heavily taxed money.

Their marginal tax rate, the highest rate they are taxed, decreases from 24% to 22%. Far more importantly, their effective tax rate, the percent of tax they actually pay, decreases from 15.2% to 10.2%. This translates to a tax savings of over $10,000 in a single year. Let’s break it down again.

Earned IncomeIncome Tax RateIncome Tax Owed
$45,0000% (Tax Deferred Saving)$0
$24,4000% (Standard Deduction)$0
$200,000 (Total Income)Effective Rate =10.2%$20,449 (total)

If you spend every dollar you earn, you lose the ability to defer taxation of income and control when and at what rates it is taxed. Developing a high savings rate works greatly to your advantage when tax planning. This is a great incentive to lower your cost of living and develop a high savings rate.

Timing Strategies

Conventional thinkers say you are not really saving all this money in taxes. You are simply deferring taxation and will have to pay later.

Part of developing the high savings rate that enables early retirement means developing a lower cost lifestyle. Retiring early means we have many years with little or no earned income. This combination allows spreading out taxes over long periods of time at lower tax rates, possibly as low as 0%.

Let’s return to our hypothetical couple, who shifted taxation of $45,000 that would have been taxed at 22-24%. This saved them $10,044 in the year they took this action. This also allowed them to invest the tax savings where it could go to work for them for years or even decades, rather than watching the money disappear to the tax man.

Assume with a paid off mortgage to minimize housing costs, they could live comfortably on $45,000 per year in retirement. If they took the $45,000 they deferred when working and used it to meet retirement spending needs when they had no other income, their taxes would be $2,084. This is a real tax savings of $7,960. No fancy tricks and no advanced knowledge are required. Let’s look at it in table form again.

Earned IncomeIncome Tax RateIncome tax Owed
$24,4000% (Standard Deduction)$0
$45,000Effective Rate =4.6%$2,084 (total)

Having a high savings rate allows for dramatic tax savings in the year money is earned, accelerating the journey to financial independence with simple tax planning. This enables an arbitrage opportunity, shifting taxation of those dollars from high rates in the year they are earned to much lower rates when you need the money and don’t earn income.

Roth IRA

To this point, I’ve focused on the advantages of investing in tax-deferred vehicles. Tax-deferred accounts allow you to defer income in the year it is earned, allow investments to grow without annual taxation, then pay taxes when the money is taken from the account. Tax-deferred saving is advantageous if you anticipate being in a lower marginal tax rate when you will need this money.

But there are advantages to Roth accounts as well. A Roth IRA gives tax diversification and more flexibility when developing strategies to withdrawal money.

Roth accounts require you to pay tax in the year money is earned. Investments in these accounts then grow tax free forever and are withdrawn without further taxation. Low wage earners paying little or no income tax may benefit by using a Roth IRA rather than tax-deferred accounts.

After filling up tax-deferred savings options such as work sponsored retirement accounts and health savings accounts, you still have the opportunity to utilize a Roth IRA. This is simple if you’re income is below the IRS limits for Roth accounts. Even if you have a higher income, you can still utilize a Roth IRA by adding one step. This is known as a backdoor Roth contribution.

Taxable Investments

The next principle is that not all income is treated equally by the IRS. Earned income from a job is taxed most heavily. The more you earn, the less friendly the tax code is. As we shift from earned income to income created by investments, the tax code shifts further in our favor.

For now, let’s focus on paper investments consisting of stocks and bonds. I favor holding these investments in low cost index funds or exchange traded funds (ETF) in large part because they are simple and tax friendly.

Most investment income (qualified dividends and long-term capital gains) is taxed at only three rates: 0%, 15%, and 20%. The tax rate is 0% for those with incomes roughly equivalent to the top of the 12% marginal tax rate. Interest and short-term capital gains are taxed at your marginal tax rates.

This tax structure gives further incentive to learn to live well for less, allowing you to pay little or no tax on investment income.

Living Better for Less

The US tax code is friendly to early retirees. Even if you don’t desire a traditional retirement, strategies like semi-retirement, cutting down to part-time work or having one spouse retire before the other when you can live on a lower income can allow you to earn income with greater tax efficiency.

Keeping taxable income in the lowest marginal tax brackets produces a low effective tax rate, and it allows most investment income to be taxed at 0%. Some people can get hung up on the idea of living on a “low income,” so it is worth exploring what that means in relation to the tax code.

Without doing anything to lower your taxable income, a married couple with no kids could earn or take distributions from tax-deferred accounts up to $103,350 utilizing the standard deduction in 2019, before reaching the top of the 12% marginal tax bracket.

According to the most recent US Census data, the average American household income is $59,039. Being able to live on over $100,000 with little tax liability allows you to live far better than most, even if your spending looks like everyone else’s.

When you don’t have to earn an income, you can drastically reduce income taxes and eliminate payroll taxes. Once you’re financially independent, there is little need for life or disability insurance. A retiree can eliminate the costs of working such as commuting, work clothing, etc. Many people choose to pay off the mortgage before retiring as well.

This allows a large portion of retirement spending to go towards items like travel, entertainment or anything else you value. You can live better than most people, while spending far less. Not needing a large income enables you to pay little or no taxes.

Tax Benefits for Higher Spenders

Some people desire a lifestyle of higher spending in retirement. You could spend well over $100,000 each year by supplementing taxable income. Saved cash, basis on investments (the amount contributed prior to growth) and money from Roth IRA accounts can all be withdrawn completely tax free. This tax diversification allows you to use income from a variety of sources to keep your tax burden low.

Lower spenders can utilize these sources of income in combination with tax-deferred income or earned income up to the standard deduction to completely eliminate income tax once they cut their earned income.

Save Without Sacrifice

You can use tax advantage investments to pay less tax while working. You will pay little to no income tax once you cut back paid work. This crushes one of the largest expenses most people have throughout life with absolutely no sacrifice … unless you enjoy paying taxes.

Further Reading

If you want to explore this topic further, my tax avoidance strategies were heavily influenced by Brandon, aka the Mad Fientist. You can read through his full archives on the topic here.

Darrow has written on this blog about why he doesn’t fret about taxes. He’s demonstrated how low his taxes are in early retirement, without applying much effort to reduce them. Check out his posts from 2014, 2016 and 2018 to see how low his effective tax rate has been.

Others have a different take on the topic. For those who want to optimize retirement taxes, Jeremy writes at Go Curry Cracker how to never pay taxes again. He then summarizes how he’s actually accomplished it in his first 5 years of early retirement.

Portions of this post are excerpted from my upcoming book, Choose FI: Your Blueprint to Financial Independence. The book explores lessons from a variety of people who have achieved financial independence quickly to demonstrate key principles that you can adapt to your own life.

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  1. Can you be sure to include info on single folks as well as couples? Thanks so much!

    • Chris Mamula says


      I always debate how many examples to share. There’s a trade off between making examples as relevant as possible for everyone vs turning people off with too much detail. Another example is using $200,000 household income. This will be high for some, and low for others. I picked it simply because it provides a nice round number for illustrations. The key is understanding the concepts and then applying them to your own situation. Thanks for the feedback.


  2. Very good overview on tax planning for retirement. I must point out however that a couple saving $45,000 per year in tax deferred accounts and investing wisely for many years will likely accumulate enough assets resulting in high RMD’s after age 70 that would have them in a HIGHER tax rate than when they were workiing. Particularly since both deferreed income and investment returns from deferred tax accounts are taxed at INCOME tax rates, I believe the Roth 401K’s and Roth IRA’s are the best options for high savings rate individuals at any age when they are available.

    • Chris Mamula says


      RMD’s are one of the many topics on my short list after working through this with my dad recently. His lack of understanding of the basics is what prompted me to publish this post first.

      That said, I would tend to disagree with you for early retirees who are only maxing out these accounts for a few years to a decade. For someone doing that over a standard career what you say makes sense. This is again a more advanced planning topic that is specific to the individual.

      • Excellent post Chris; well laid out to illustrate the simplicity of the approach.

        Regarding RMDs, I think you’re closer to accurate than Tom but, both are somewhat simplistic descriptions of the RMD problem IMO. I know you plan future posts with more detail so, I look forward to those. But, the way RMDs are always described (almost as a financial bogey man; the “Tax Torpedo”, etc.) has always bugged me. And, describing “early” retirees as contributing to deferred accounts for so few year that they needn’t be concerned about RMDs is, IMO, simplistic at the other end of the spectrum. The fact is that for many retirees, in a wide band of portfolio values & retiree income requirements, RMDs are a “marginal” problem, IF the retirees have followed other basic saving/investing advice described here and elsewhere (use all saving vehicles-tax deferred, tax free & taxable; choose an AA that fits your risk tolerance, LBYM, etc.). If one does those things, there is more than enough flexibility to turn the “tax torpedo” into a “tax firecracker.” As an aside, iORP is a great tool to see how RMDs will affect you; it may be much less than previously thought.

  3. Chris,
    Thanks for your quick response and explanation. Appreciate it!

  4. Jeanne Tobias says

    Thanks for the article….articles! I retired a few years ago and still love reading your articles about how to retire early. They help me stay on track and help to give me a better understanding of what I need to do to continue to be retired! And, just because I no longer work doesn’t mean I may stop planning!
    Thanks tons for this last article, for some reason I loved it, even though I knew the difference between effective and marginal tax rates you really hammered it home. …helping to ensure I stay on track!!!

    • Chris Mamula says

      Agree that we never stop learning. One of the big bonuses of writing for this audience is that I often learn as much or more from the collective wisdom in the comments as I do when doing my original research to write the posts.

  5. Elizabetth says

    Super helpful and I was able to do a rough estimate of my tax situation this year.

  6. Thank you for a timely and clear analysis

  7. It always amazes me that the overwhelming majority of people believe that tax calculation and planning is some form of black magic. It’s just basic grade school math. The implementation on the actual tax form (“add line 3 to line 27, subtract from line 9, copy the result to line 30 if > 0”) is artificial complication and apparently intimidates. Or the tax number pops out of TurboTax somehow and no one bothers to consider where it came from.

    Estimate your ordinary income (everything except qualified dividends and LT capital gains). Subtract standard or itemized deductions, and calculate the tax based on the various brackets. Then consider qualified income (dividends and LT capital gains) as being “on top of” the ordinary income, and calculate its tax using its (different) brackets and rates. Add the two taxes together and you’re done. It’s so easy, and it’s not “fretting” to have this trivial knowledge. The tax impact of every potential new dollar of income or every potential deduction can be easily considered.

    I realize that this site favors mutual funds but their distributions are unpredictable and make tax planning difficult. My approach uses mostly dividend-paying common and preferred stocks, where the income (and its growth) are very predictable.

    • Chris Mamula says

      Agree that the basics of tax planning are pretty simple. However, few people are taught this stuff anywhere. The IRS makes the rules pretty clear for those willing to learn them, but they have no incentive to help you figure out how to pay less taxes so you must take the initiative.

      There are things that are not simple, such as determining the impact of Roth conversions. This is particularly true when there are competing interests, lowering future tax burdens vs. giving up ACA subsidies now. Another example is deciding what to do with a sub-optimal investment strategy in a taxable account where you have to weigh ongoing fees and taxation vs. the tax impact of selling to switch to a different strategy. Still, to make an informed decision (guess) with these more complex scenarios, you must first understand the basics.

      Agree that owning individual stocks is very tax friendly (assuming you plan to buy and hold). However, so is an index fund strategy. I’ve paid exactly $0 in capital gains taxes or interest on my index funds since I owned them by choosing careful asset location in addition to allocation.

      • That’s absolutely correct. if you don’t get the basics, how can you do any worthwhile planning?

        All mutual funds make distributions, which are taxable in an after-tax account. They have to. Even index funds. I don’t know what you own, but for example it looks like Vanguard index 500 pays out about a half-percent each quarter in income distributions.

        • Chris Mamula says

          Index funds distribute dividends, as do individual stocks. They do not (or at least have not as long as I’ve owned them) created any capital gains (short or long term), nor have they produced any interest payments. Having unfortunately owned actively managed funds in taxable accounts, I learned the hard way they produced all three in addition to dividend income. As I’m sure some people are realizing this year, you can have these capital gains and interest income even in years when the funds lose money and you don’t sell anything.

          Most of the gains from broad based total market index funds (or individual stocks) comes in the form of capital gains. This is essentially a way to defer taxes in a taxable account until the time that you need to sell. This can be very tax friendly, since long-term capital gains may be taxed at 0% for those with low incomes.

    • I agree with you to a point, but when you start lobbing in taxation of Social Security benefits and Medicare (IRMAA) adjustments, it can begin getting messy very quickly!

  8. Thanks for this super helpful summary Chris! We’re working on tax efficiency now – I’ll share with our team – maybe we can point to this as a resource.

    • Chris Mamula says

      Always happy to work together with what you’re doing with NewRetirement. Seems like the calculator continues to gain momentum for you. Congrats!

  9. I have been following you for awhile. One mistake I made was not opening a ROTH IRA during my working career. I did take the tax savings of regular retirement savings vehicles using them to save more. I am converting some of my 457B account to a Roth IRA just filling up my 12% marginal tax bracket. My pension and our (wife too) Social Security provide a little over 90K income a year . I need much less to live on. I can move about 20K per year until my RMD age. This is another tax angle. Thanks for your advice over the years I am one who profited from it.

    • Chris Mamula says

      I also underutilized my Roth accounts for years b/c sub-optimal investment/tax strategy artificially inflated our income above the limits for contributing and I wasn’t aware of the backdoor option. Sure glad I paid those thousands of dollars in fees for lousy investing advice so I could pay thousands more in unnecessary taxes. (Insert sarcasm!)

  10. Johnny Mawer says

    Chris: I’ve been reading your posts for a while now and I get the feeling a lot of your writings are for folks that wish to retire early. I’m not in that boat. I’ll be 64 in a couple months and want to retire before summer so I can have adventures while I’m still healthy and active enough to do them. Can you recommend any fellow bloggers that might help me plan going forward to maximize my finances and minimize my tax burden? Someone like you, but more focussed on those that already have savings.

    • Chris Mamula says


      Darrow originated this blog. He is also an early retiree, though with a bit less extreme story than mine, leaving his job at 50. You should definitely check out his “Can I Retire Yet” book. Full disclosure, I won’t make a penny (though he’ll make a few bucks) if you buy it. Here is a review of the book that I wrote before we ever met. You can also click around our archives for plenty of samples of his writing.

      Another blogger that writes good content who is an early retiree, but with a less extreme story (recently retired at 55 I believe) is Fritz Gilbert who writes at the Retirement Manifesto. Here is a link to his site.

      Hope that helps.

  11. This is my first year of retirement. I think my best move, as far as tax planning, is to do tax gain harvesting from the highly-appreciated mutual funds in my taxable account, up to the point (around $37,000 for a single person) right before capital gains tax would kick in. My plan was to live on that money, but if the stock market is down, I may just re-buy the mutual funds (re-setting the cost basis) so I’m not selling in a down market, and live off cash/fixed income instead this year.

    Tax planning, and financial planning in general, for these first years of retirement before I start collecting Social Security, is so different from when I was working. And scarier, because it was easier to recover from mistakes when I had a paycheck.

    • Chris Mamula says

      Tax gain harvesting is one of the many moves an early retiree can use to limit their tax burden, though I would consider that a more advanced technique so I didn’t want to go there in this post. It is explained very well in the Go Curry Cracker articles I linked at the end of the post though for readers unfamiliar with what it is and how it works.

      Agree that downshifting from our high savings rate has been harder than anticipated, and we’re spending very little from our portfolio.

    • East Coast says

      Don’t know Laurel’s situation so maybe not relevant, but if high RMDs will make social security taxable, isn’t it generally more advantageous to do Roth conversions over harvesting gains? And along these lines, it sounds like Chris (and Mark earlier) think that RMDs are less of a problem than many assume. I’m one of those people who was told by a financial advisor that it would make sense to max out the 12% bracket with Roth conversions until age 70 when will begin to collect social security. I don’t particularly want to shell out $s to pay additional taxes on Roth conversions for the next 6 years (and I also have long-term gains that I could harvest instead of doing the Roth conversions), so I always begin to wonder when I read that RMDs aren’t often such a problem. I’d be interested in any info on how to assess this for myself (perhaps that i-ORP tool would help….) Thanks.

      • Chris Mamula says

        East Coast,

        These are interesting questions that have variable answers depending on your situation. RMDs may be a big deal, or not a big deal at all. It all depends on your personal situation.

        I plan to write much more about these issues over the upcoming months. However, in talking to people I’ve realized there is a much bigger need to first address the basics so we can build from there.

        Thanks for reading.

      • East Coast-

        There are some excellent threads on Roth Conversions vs Cap Gains Harvesting @ Here is one example:

        I second Chris’s point that what’s optimum is highly dependent on one’s personal financial situation. The iORP tool is an excellent way to analyze several scenarios to see what’s optimum for you.

  12. That’s a good point about whether Roth conversions are better than harvesting gains. In my case, I’ll have a pension starting in three years at 65. It’s not a large pension, but will be enough to make Social Security taxable for me when I start collecting it at 65. When you’re a single filer, it doesn’t take much to push you into taxable territory.

    • Chris Mamula says


      Good point that planning considerations are different for those filing jointly vs. single filers. My wife continues to work part-time, but being able to use a larger standard deduction and wider tax brackets by filing our taxes jointly means we pay very low taxes. Being able to earn some income with way more tax efficiency was an extra incentive for me to leave my work sooner.

  13. oops, I meant when I start collecting social security at 70, not 65..

  14. Good reminder that planning for taxes is one aspect of financial planning that should not be overlooked. This is likely a Tax Planning 201 item … plan any tax gain/loss harvesting as early in the year as possible. If you take gains/losses in taxable accounts, think ahead to where you want to be year-end and plan out your desired year-end outcomes and sell/buy points. Don’t do what I did and find out year-end that you end up selling at below your price point in order to harvest losses to keep marginal taxes on gains at your target. Chris’s advice of investing in low cost, tax efficient ETFs is a good one if you don’t want this headache but recognize that even these investments typically have roughly 1.5% – 2% in taxable gains every year.

    • Chris Mamula says

      Not sure I understand your comment Phillip.

      Tax loss harvesting is basically at the mercy of the markets. You can’t harvest if you don’t have losses, so you kind of have to do it when the market goes down. It may have to go down substantially to have any losses for those not adding new money. Tax gain harvesting you could theoretically do whenever, but you wouldn’t want to harvest too much, so I would think doing it as late in the year as possible would allow for the most certainty/least speculation.

      Feel free to expand on your thinking if I’m missing something that could help other readers (or me 🙂 )


      • Here’s what I did last year. With my taxable account, I did some short-term trades early in the year and harnessed some short-term gains. As the end of the year approached, I realized I will be liable for some short-term gains at a high marginal rate. I had some losses on other stocks that I wanted to dump but didn’t think about loss harvesting until near year-end. NOT THINKING ABOUT TAXES UNTIL NEAR YEAR-END WAS MY MISTAKE. If I planned for loss harvesting earlier, I would have had a longer time span for those stocks to move to my target point (even if that point is a loss). By the time I thought about harvesting losses, I had very little time to choose between not selling and paying a high marginal tax rate on those stock sale gains or take a bigger loss on my losers than I felt was a fair price for those stocks (the market really tanked last December). Sure, I could sell the next year but those losses may turn long-term (and not offset short-term gains but long-term gains instead) and the next year, I may not have enough gains to offset all the losses (and I hate loss carry overs).

        In summary, what I’m trying to say is that if you know you want to tax loss harvest during a specific tax year, don’t wait until the end of the year to think about what actions you may want to take. Start thinking about it as soon as you realize high marginal tax rate gains.

  15. East Coast says

    Harvesting gains resets the cost basis but you’ll be paying tax again if cost goes up. With a Roth conversion, you pay tax once and you’re done.
    I wish this blog had the option to be notified when further comments are posted….

    • Chris Mamula says

      I’ll see if we can switch the comment settings. Happy to do what I can to further the conversations in the comments. They’ve been excellent over recent months.

  16. You said, “Without doing anything to lower your taxable income, a married couple with no kids could earn or take distributions from tax-deferred accounts up to $103,350 utilizing the standard deduction in 2019, before reaching the top of the 12% marginal tax bracket.”. Could you please let me know how you arrived at $103,350? In retirement, you are not contributing to 401K and HSA.

  17. You said, “Without doing anything to lower your taxable income, a married couple with no kids could earn or take distributions from tax-deferred accounts up to $103,350 utilizing the standard deduction in 2019, before reaching the top of the 12% marginal tax bracket.”. I asked you few hours ago how you arrived at $103,350. I read the article again, and I figured out how you got it. You may ignore my previous email.

    $24,400 0% (Standard Deduction)
    $19,400 10%
    $59,550 12%
    Total: $103,350.


  18. I’m a traditional (not early) retiree-retired last year at 61. Even though tax-efficiency is built into our retirement plan, one bit I wish I would have understood more when I was younger was the importance of tax diversification-something you mention in your post. My wife and I dutifully maxed out our tax deferred 401ks annually, including make-up contributions for many years because that was standard advice. I do not remember hearing much about the benefits of saving taxable funds, even though I fortunately did so later on in my career after maxing the tax deferments. We have a nice nest egg, but the balance is skewed toward tax-deferred investments 60% tax deferred, 30% taxable and 10% tax free (Roth)-I think we are not alone in the professional Boomer population. I feel like in our case, this is too much of a good thing. Before I fully wised up to the Roth benefits, our income was too high so what we have is mostly from back door contributions. In our plan, we need the taxable funds to pay income tax (on income and Roth conversions until 70), as well as to pay living expenses for the next few years. (I don’t worry about the stock market-I have better things to do with my time.) I am now working part time consulting (because I want to, not because I need to..) which has the benefit of building up our taxable balance, which I will do until I am 65 and then do the Roth conversions up to the 12% bracket limit until 70. We are in good shape and the problems we have are nice one to have, I am just saying the importance of tax diversification was not emphasized in the financial media and I still think that is somewhat the case. Good luck to all.

    • Chris Mamula says


      Thanks for sharing your perspectives. I agree about the importance of tax diversification. One of the great advantages I see in the path my wife and I are taking is that it opens up so many doors to do creative tax planning.

      Some will criticize my path as “not really retired” which I would agree is true if you limit retirement to both spouses not earning any income and living off only passive investments. However, when we had two full-time incomes, we were getting hammered with taxes while spending our most precious resource, time, working all the time. Now we have one part-time income (my wife’s), a small income from my hobby/work (writing) and that combo covers most to all of our living expenses. This allows us to greatly lower our payroll and income tax burden, our taxable investments are now taxed at 0% due to our lower income, we have decades to do things like Roth conversions and tax-gain harvesting, particularly in years when we have little or no income. At the same time our quality of life is much greater which was the whole point of starting down this early retirement path.

      I plan to write much more about this topic and contrast it to others who followed conventional advice similar to yours. But first, I wanted to lay down this foundational post to link back to, b/c we must master these basic concepts first.