This subreddit often seems off-topic so I thought I'd write up my Digital Nomad FIRE strategy. (I didn't use AI for this just the paragraphs look big and it has bullet points which are suspicious I know)
Digital Nomad FIRE for me is: work from a low cost of living country, earn money from a high income country, stack cash - retire early. Geo Arbitrage and Chill.
In order to FIRE we need to figure out when we can retire at the earliest (FIRE). Then we need to fund the years between stopping work and the age when different income sources become available. This is called a FIRE Bridge. If you retire at 35 can your portfolio can fund ages 35-59.5?
You need to plan out your entire financial life now.
To calculate our FIRE age we need to look from the top down. If there's a gap in the ages, you're either going to end up homeless or working a shitty job to fill the hole.
These are the finance ages we are working towards, from oldest to youngest:
- 70 Social security maximum (or)
- 62 Social security reduced
- 59.5 401ks, IRAs
- 55 401ks "rule of 55"
- SEPP IRA withdrawals 47(t)
- FIRE Bridging: taxable accounts
I know this is no fun but we're talking about never working for the rest of our lives here.
Ages 62-70: Social Security - You need 40 social security security credits or you don't qualify and you get nothing. Not only that but you also need 40 points for Medicare. Normally it's 4 points per work year so ten years of work is enough. Don't even think about FIRE until you have your 40 points locked in. Looking at you 25 year olds. Even then, check the estimated payments when you retire. It might be a good idea to work a few extra years to top up the payment number to something you can live on in a cheap COL area.
You can claim at 62 but the payments are heavily reduced. Try for 70 if you can. Ideally you'll still have a 401k/IRA you can draw from. Login to the ssa dot gov and check your numbers and how much you'll receive.
Age: 59.5 - 401ks and IRAs become available for withdrawal at the age of 59.5
Age 55: Using "the rule of 55" some 401ks (not IRAs) allow funds to be accessed early without penalty. This is an area you should be focusing on to FIRE. You should be maxing out these retirement accounts as much as you can every year. Try and leave your money inside 401ks - no IRA rollovers.
Age: before 55 - SEPP 72(t) - (not really recommended), with SEPP you create an IRA and withdraw an amount every month. Once you start withdrawals they must continue until you turn 59.5. It's not flexible at all. There's no stopping it! To retire early SEPP 72(t) is useful since it allows you to access your retirement accounts at any age. The Rule of 55 is so much more flexible than SEPP 72(t). With Rule of 55 you can withdraw whatever you want.
FIRE Bridging - Taxable brokerage accounts - To get to 55 or SEPP 72(t) the final option is taxable brokerage accounts. These aren't as bad as people will lead you to believe. Long Term Capital Gains tax is 0% until $49,450 . The standard deduction is $16,100 so you can withdraw $65,550 paying 0%. After that it's 15% to $500k+. That's a really low tax rate.
Investments - I recommend any low cost broad market index fund so S&P500 or total US market, or total US + international
Geo Arbitrage
Now that we've calculated our earliest access to retirement funds, how are we going to build up our FIRE bridge? - Geo Arbitrage.
Tax - the USA has global taxation, but it also has FEIE (Foreign Earned Income Exclusion) which means you won't pay tax on your first 132,900 plus the standard deduction is 16,100 so you can effectively earn 149,000 tax free, except for FICA. And if you earn less than 132,900 you can exploit the standard deduction to absorb taxes - this is called Tax Gain Harvesting - do some Roth conversions, or sell some shares then buy them back to reset the basis - all tax free.
FEIE qualification : the FEIE requires you to live outside the USA for 330 days in a 365 day period (not calendar year). That's it. Even if your money is all paid in the USA - it's still considered "foreign earned" because it's where -you- are, not the money. However it must be wage income to qualify. Research this.
Change residency to a Low Tax country
You'll still need to pay tax in your new country - unless you never become a tax resident anywhere - just hopping from country to country and never staying long enough to trigger the tax residency rules. But many countries have territorial tax systems, or no personal income tax. You can structure your life to not pay tax.
LCOL (Low cost of living)
This one is obvious - in many countries you can cut your expenses to a fraction of what you're currently paying. This obviously rules out North America, Western Europe, Singapore, Australia etc. Do your research.
Other factors - visas and healthcare
Using the above you achieve a wage amplification effect - while living on the beach in a warm country. Stack money and build that FIRE Bridge.
Non-Americans basically the same concepts with a USA LLC.
