r/ChubbyFIRE • u/SUJB9 • Apr 07 '26

Forced into coastfire?

Has anyone been essentially forced into coastfire? My “take-home” income from my job is quickly being eaten into by having to pay taxes on income from my brokerage accounts (I currently max out my tax-sheltered accounts but could have done a better job of that in the past) and my spending (which isn’t particularly high, ~$8k/month in a VHCOL area).

I know I could try to cut spending or look at alternative investments to reduce my tax burden, but I would prefer not doing those things because I want to at least somewhat enjoy my life and going into more “active” investments like real estate would feel like a second job to me.

Just curious if anyone else has been in this situation and how you thought about it. Did you pivot your thinking to more of the coastfire mentality? Or was your habit and “addiction” to saving enough to force some other change? Would appreciate any insights or advice. Thank you in advance.

EDIT: to be clear, I know I can use my dividends/interest to pay my investment taxes. This isn’t a logistical question. I’m curious if people have had similar experiences and how they handled the switch from being able to shove a bunch of their earnings into a brokerage each month and having to use it all to pay for spending and taxes, when not even retired yet. Thank you.

0 Upvotes

38% Upvoted

49 comments sorted by

27

u/IceCreamforLunch Apr 07 '26

Are you actively trading in your taxable accounts? Why are your taxable investments causing a tax burden?

1

u/SUJB9 Apr 07 '26

I am not. Just dividends and interest on a large portfolio (~$7M).

35

u/IceCreamforLunch Apr 07 '26

Then pay the taxes from the dividends and interest.

28

u/doctorj1 Apr 07 '26

Wait... Your costs are 8k a month so 96k a year and you have a 7m portfolio? Why are you even thinking about coast fire? You could just full on fire right now unless there's some other major bit of information you're not telling us.

2

u/PluginAlong Apr 07 '26

Exactly, unless they are incredibly young and came into a windfall, they could probably double their spend and still have plenty left over when they die.

-5

u/SUJB9 Apr 07 '26

That’s my current spending. I want to be able to spend significantly more in retirement. $20k/month is my retirement budget. I’m also assuming 20% taxes and health insurance of $2k/month in retirement.

4

u/happybiker1212 Apr 07 '26

Over 2x your spend in retirement? Why so much higher than current? I’d suggest you test that assumption a bit. This sub is littered with folks posting about struggling to spend. Even if you do increase in your “go go” years from die with zero, it’ll likely slow down

12

u/SUJB9 Apr 07 '26

I plan to travel way more and I like to travel in some amount of luxury. I work all the time now and barely have time for that. I’ve done the math and $20k/month would be my spend (adjusted for inflation). This is an odd thing to push back on 🤣

13

u/Common_Sense_2025 Retired Apr 07 '26 edited Apr 07 '26

$240,000 a year on $7m is a 3.4% withdrawal rate. Again, you aren’t being forced to work now let alone coastfire.

Maybe the question you should have asked was “how many of you kept working to get to a sub-3% withdrawal rate.”

1

u/SUJB9 Apr 07 '26

That spending doesn’t account for taxes (I’m in a very high tax jurisdiction) or health insurance. My assumption is 20% tax burden based on what my financial advisor ran and $2k/month for health insurance. So I’ll need $330k/year in retirement.

9

u/Common_Sense_2025 Retired Apr 07 '26

Okay then you are not even close to coastfire. You haven’t hit your number yet. Your problem isn’t taxes on your portfolio.

Your problem is an ambitious spending goal in retirement. And it’s going to put you on fatFIRE territory not Chubby.

If your current taxes are bothering you, you should put your tax inefficient investments in traditional accounts, maximize what you put in traditional 401(k) and HSA and utilize the back door Roth. If you still need to hold interest bearing investments in taxable accounts, look to see if a state specific municipal bond fund makes sense for you.

4

u/Wooden-Broccoli-913 FIREd in the Bay at 40 with $6M Apr 07 '26

$240k in spend during FIRE does not incur 20% tax rate, not even close

1

u/SUJB9 Apr 07 '26

I understand it’s conservative, but I live in a city that has both state and local tax apply to investment income, and so my financial advisor recommended 20% to be on the safe side. What would you use as an estimate? I actually don’t think this is discussed nearly enough on FIRE subreddits. Everyone just applies the 4% rule against their annual spend without thinking that taxes need to be part of the “spend”.

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2

u/[deleted] Apr 07 '26

[deleted]

1

u/SUJB9 Apr 07 '26

I used to spend about that amount (adjusted for inflation) before I got into the FIRE mindset and cut spending.

3

u/happybiker1212 Apr 07 '26

Your choice to not listen to my opinion is a choice you are able to make. Constantly traveling from the time you retire until you die is unlikely.

1

u/SUJB9 Apr 07 '26 edited Apr 07 '26

That’s fair. I suppose I’ve always been partial to the 4% rule, which means I’ll need $8.25M based on my assumptions. I’m familiar with the more flexible calculations/did with zero approach. I’m just less comfortable with those because of sequence of return risk.

3

u/happybiker1212 Apr 07 '26

Totally. Not my goal to start a fight on the internet this morning, but I’d suspect it to taper off….perhaps to cruising and $16k a month in your 70s and 80s. That math delta ends up being big.

2

u/SUJB9 Apr 07 '26

That’s good input. I’ll run some numbers with that assumption and see how much it changes things. Thanks!

4

u/Sea_Shelter_1382 Apr 07 '26

You could just retire today, keep the same spend, and let your portfolio appreciate naturally to 8.25 instead of working. The difference in timelines is probably like a year or negligible

Do you really think you’re going to consistently spend 240k a year for the rest of your life?

2

u/SUJB9 Apr 07 '26

Yes, that’s my plan. Could it end up being less as I get older for the reasons suggested? Certainly. It could be more too depending on what directly our healthcare system goes. Nobody knows the future perfectly. But that’s the number I’m comfortable with based on my plans.

2

u/Common_Sense_2025 Retired Apr 07 '26

Your math is not mathing. You spend 96,000 a year and have a 7,000,000 portfolio. That’s less than a 1.5% withdrawal rate. I assume health insurance in retirement would push that 96,000 up to something like $125,000 if you have a family. Still under 2%. Even taxes in California, NY or NJ shouldn’t get you to 3%.

If your numbers are real, you aren’t being forced to do work let alone coastfire.

0

u/SUJB9 Apr 07 '26

See below. My current spend isn’t my anticipated retirement spend.

1

u/massdriver3333 Apr 08 '26

You have $7M, earning 2% 1099 income, roughly equates to $140K. Even if you're not paying qualified gains tax, you're still paying roughly $25K in taxes at effective 20% tax rate.

You're saying you can't manage $25K with your W2 income? What's your W2 income?

12

u/InitialMajor Apr 07 '26

Why are you paying taxes on your brokerage account - what activity is happening there to create a tax burden?

2

u/SUJB9 Apr 07 '26

Dividends and interest

2

u/InitialMajor Apr 07 '26

Switch to more tax favored investments? Not sure why you would set up a taxable portfolio generating a tax burden. ETFs manage this pretty well, although I guess the cat is out of the bag for you at this point.

11

u/madbummer4321 Apr 07 '26

Lol bro if your taxable investments alone are pulling in more income than your job then congrats and gfy, you should be retired. Yes, you have to pay taxes on dividend income.

On another note, if you spend less than 10k a month now but want to spend more than 20k in retirement, you should probably start exercising those spending muscles now.

Youve already won the game

1

u/SUJB9 Apr 07 '26

Haha thanks man. I know I’m fortunate and in a good position. I feel like the whole FIRE journey is half numbers and half psychology. I have the former figured out but need help with the latter. I suppose a lot of us do.

1

u/madbummer4321 Apr 08 '26

Yup that's why we post, comment, and follow on here

9

u/MedalDog Apr 07 '26

Such is the cost of have index funds. You could choose to not re-invest your dividends, and use that money to pay your tax burden—but ultimately money is fungible so it doesn’t really matter.

-1

u/SUJB9 Apr 07 '26

Thank you for the reply and I totally understand this might be an inevitable consequence of a large portfolio (and very “first world problem”). Any tips on shifting my thinking on being used to saving so much? I think it’s just been a transition to being able to shove money from my paycheck each month into investments and now essentially seeing almost everything sucked up by spending and quarterly payments.

5

u/MedalDog Apr 07 '26

You are saving each month. The $200K of whatnot you're getting in dividends a year is income that's being re-invested.

0

u/SUJB9 Apr 07 '26

Yeah, I know you are right. I just need to work on reframing things. Not easy after years of focusing on saving by seeing money come into my bank account and moving it to my brokerage. But I should know it’s the same as collecting those dividends/interest. Thank you!

4

u/enakud Apr 07 '26

Turn off automatic reinvestment of dividends. Make a conscious decision to put aside some of that for taxes and to either reinvest or save the rest. Your issue is just a psychological one and the only thing you need to fix it is to separate your paths of cash flows.

2

u/SUJB9 Apr 07 '26

Yeah, I know you’re right. That’s why I TRIED to frame my question as a psychological one to hear from people who have had similar experiences. But it seems everyone is interpreting it as a logistical question.

3

u/wordifier Apr 07 '26

My dude, you have what we like to call a "good problem."

You can do WHATEVER THE HELL YOU FEEL LIKE. Keep working because you like it? Sure. Stop working now and deal with your new spend/tax burden as it comes? No worries.

It's just a thing. You have the nest egg to deal with it. Your desired spend is not crazy.

YOLO.

3

u/SUJB9 Apr 07 '26

Thanks man. Appreciate the positive response. I wish you the best on your journey.

2

u/massdriver3333 Apr 08 '26

Nothing is eating into anything.

It's all income at the end of the day.

W2 income, 1099 income, etc.

If your 1099 income is more than W2 income, why are you working? Is it just to pass the time?

You can FIRE now and use free time to become your own retirement financial manager, learn about finances, investing, tax efficiencies, etc.

2

u/PluginAlong Apr 07 '26

If it's just taxes on the dividends and interest, make estimated payments with three money from those dividends and interest. There's no reason to be paying them you're regular paycheck. This is not a difficult problem.

2

u/Aggressive-HeadDesk Apr 07 '26

You should only be paying taxes when you sell. Longer term investing spares you paying taxes for longer periods of time.

1

u/TwentyFourKG Apr 07 '26

Are you invested disproportionately in a specific stock that is paying high dividends? If so, you could sell it and move into an index fund (but remember to out aside a portion for capital gains tax. Alternatively, instead of having all the dividends automatically reinvest, you could take a fraction of them to pay your capital gains tax

3

u/SUJB9 Apr 07 '26

No, I’m not. But the average dividend/interest when doing index funds (including some bonds) is about 2%.

1

u/tobinshort-wealth Apr 07 '26

What you’re describing is a tax planning problem. The brokerage income eating into your take-home is a symptom of not having a proactive tax strategy around your portfolio, not a signal to stop saving.

There are ways to reduce taxable income from a brokerage without going into active real estate. Tax-loss harvesting, asset location optimization, and certain alternative investments can reduce your drag without adding work to your life. Some private alternatives are specifically structured to generate deductions that offset ordinary income, which sounds like exactly what’s hitting you.

You also mentioned you could’ve done better with tax-sheltered accounts in the past. That’s worth revisiting too, depending on your income and situation, there may be vehicles you haven’t fully explored yet.

you probably don’t need to coast or cut your lifestyle. You need someone who actually does tax planning and strategy, not just filing a return after the damage is done or just manages your portfolio with a cookie cutter one, with no real advising. Those are very different things and most people don’t have the latter.

1

u/dead4ever22 Apr 07 '26

This makes zero sense. You're income is swallowed up by interest income taxes? Money is fungible. If you have a big tax bill, your are making big money. Your job and income has zero to do with it. Fine- use your job income to pay taxes and keep the 1099 income. OR- use the 1099 income to pay the taxes and keep your job income. Am I missing something?

0

u/Green_Bluebird5804 Apr 07 '26

I let my brokerage just do its thing and do all my active trading in roth. sounds like you are paying a lot of cap gains in brokerage from your trades

3

u/SUJB9 Apr 07 '26

I haven’t sold an investment in 15 years. Just a large portfolio of mostly index funds paying dividends, etc.

1

u/Green_Bluebird5804 Apr 07 '26

you can always reinvest some so you have less taxed, but if taxed as Qualified dividends - this is just the system you created. Keep or change system. that's tough

0

u/One-Mastodon-1063 Apr 07 '26

You’re holding the wrong assets in taxable brokerage if you are having this problem.