How do I invest for financial independence retire early? What investments go where? Find out the steps today plus stay until the end where I share the biggest mistake made towards FIRE.
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Hi, I’m Jessica and I love talking about financial freedom after experiencing burnout early in my pharmacist career. We talk passive income and simplifying on this channel to combat stress and burnout. If you haven’t seen my burnout story or our debt-free journey while in residency/fellowship, please click those video links below.
- Optimize Investments for FIRE: consider goals, timeline, taxes, account types
- Types of accounts: 401(k), Roth 401(k), Solo 401(k), ROTH IRA, Traditional IRA, Simple IRA, SEP IRA, 457, 403(b), HSA, Custodial Account, Brokerage account, 529
- Selecting my accounts: long-term growth, FIRE goals, taxes
- Prioritize tax deferred account example within 401(k) vs. brokerage with $20,500 over 10 years
Step 1 Invest: 401(k)
Invest up to employer match.
Invest up to yearly contribution limits ($20,500 in 2022).
Step 2 Invest: Roth IRA
Invest up to yearly contribution limits ($6,000 in 2022).
Step 3 Invest: HSA
Invest in Health Savings Account (HSA) if available.
I do not have an HSA because it is not the most beneficial health insurance coverage for my family.
Step 4 Invest: 401(k)
Finish investing to yearly contribution limit if you stopped to focus on Step 2 and 3.
Invest up to yearly contribution limits ($20,500 in 2022).
Step 5 Invest: 529 / Custodial
Invest in 529 Plans if you have children.
Invest in Custodial accounts if have children.
These are for generational wealth building.
Step 6 Invest: Solo 401(k) or SEP IRA
If you own a business, invest from the profits in a Solo 401(k) or SEP IRA. Check with regulations and CPA for what account is best for your business type.
Step 7 Invest: Taxable Brokerage
This has no contribution limits.
This account can be used early on in retirement while wait for Roth Conversion Ladder.
Step 8 Invest: CASH / CD
During financial independence retire early journey, have 3-6 months of expenses in cash.
When it is close to retire date, save up 2 years of expenses in cash. Bear markets typically last 18 months and this will be funded LAST in your FIRE journey to hold you over during first years of financial independence retire early phase.
The Biggest Mistake made towards FIRE?
Keeping too much cash on hand. Many times, we keep more than the required cash on hand – that could be 3 months of expenses or 6 months of expenses or 12 months if you have a very unstable job market/skillset.
Watch more financial independence retire early (FIRE) videos on our YouTube Channel Today!
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FREE Podcast and Burnout Kit: https://drjessicalouie.com/podcast
FREE Financial Starter Kit: https://drjessicalouie.com/kakeibo/
Pharmacy Resources: https://www.findyourscript.com/shop/
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// CHECK OUT THESE VIDEOS //
How I’ll Retire Early // Financial Independence Retire Early as a Pharmacist:
How we Paid off $380,000+ in MEDICAL and PHARMACY student loan debt AS FAST AS POSSIBLE using the KAKEIBO Method:
Passive Income Ideas Video: https://youtu.be/PE9-TiFOm80
7+ Income Streams: https://youtu.be/9ruhNsBy9Kc
Money Traps to Avoid in your 20s: https://youtu.be/SD0OsCWbxzM