January 2018: Zero-tax Ants in Our Pants

Mr. Grumby and I have both been working since we were in high school and neither of us can remember claiming exempt from tax withholdings since we were teenagers. Here we are a few decades later, both claiming exempt, and planning on a zero (or near zero) tax year for 2018.

 

Partial Year Employment

The first and most exciting reason that we will be able to enjoy this withholding status is that we are only working part of the year in 2018. After we’ve informed both of our employers of the official departure date, we’ll share the specifics here at Grumbysonthemove. Let’s just say we’ve got a few ants in our pants!

 

Final Contributions to Tax Advantaged and Roth Accounts

The second and equally significant reason for our withholding status is our 2018 retirement contribution plan. This is our last opportunity to contribute to our tax advantaged accounts, and we plan to fully fund all of them:

  • 401(k)
  • 403(b)
  • HSA

Because of the awesome tax advantage at withdrawal time, we are also fully funding our Roth accounts.

 

Income: 2018 and Beyond

Outside of rock climbing, the best crash pad is a good cash pad!

We’ve saved over the past couple of years to build a cushy cash pad. As such, we don’t need to rely on our 2018 take home pay to fund our expenses for the rest of the year. Our goal is for our AGI to land as close as possible to $24k. Since that’s the new standard deduction, the tax we owe should be close to zero. And at the end of 2018 we should still have enough to carry us through the end of 2019.

 

 

 

 

 

 

 

Added Bonus of a Low Income Year

The added bonus of a low income year is healthcare subsidies. When we switch from employer-provided health insurance to Obamacare, we expect to pay about $250/month. There are lower-cost plans available, but one important feature for us is decent out-of-network coverage in case we get sick or injured while we’re on the road.

 

2019 Priorities

Looking ahead to 2019, here are our priorities, in no particular order.

  • Maintain low expenses to minimize sequence of returns risk
  • Keep income low enough to qualify for healthcare subsidies (if they’re still available)
  • Maintain 5% cash balance
  • Adjust allocations to maintain “comfort” with upcoming market correction
  • Reduce future tax burden with maximum possible Roth conversion

At first glance, I’m afraid that some of these are mutually exclusive. So at the end of this year we’ll need to look at these again to decide which are most important. For those of you who have already traveled this road, we’d love to hear your thoughts!

 

 

 

 

 

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