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Financial Samurai

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Shoot To Retire By A Certain Age, Not By A Certain Financial Figure

Updated: 03/10/2022 by Financial Samurai 54 Comments

Shoot to retire by a certain age, not by a certain financial figure. Time is finite. Money is not. You can always make more money, but you can never make more time.

Live until 60 and then say good-bye. This has been my mindset ever since I moved to San Francisco in 2001. I know expecting to die by 60 sounds a little depressing, but it’s a rational framework to help prepare for your financial future.

By expecting to die 20 years before the median American male life expectancy, I’ve forced myself to accumulate wealth faster in order to enjoy life sooner. Some of you might be thinking, “why not make money and enjoy life fully at the same time?” I agree, it can be done.

But I’m talking about doing the extremes, like going to business school for three years while working 60 hours a week, instead of taking a two year vacation from work.

Or saving 50-75% of your after tax income every year. Or starting a side hustle that takes an extra 20 hours a week that might one day grow large enough to tell your micromanagers to screw off!

It’s much better to shoot to retire by a certain age so you can increase your chances of living the life you want after retirement.



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Personal Capital Review 2022: Best Personal Finance Tool

Updated: 04/04/2022 by Financial Samurai 61 Comments

I’ve been using Personal Capital’s free financial tools to track my net worth, manage my cash flow, and optimize my investments since 2012. Let me share with you the most thorough and honest Personal Capital review about their free financial application.

From 2013 – 2015, I was also a consultant for the firm. Therefore, I have intimate knowledge of their people, their technology, and their product. I still keep in regular contact with all the senior management.

It’s my belief that Personal Capital is hands down the best free financial tools you can find online. It helps you manage your finances and achieve a more secure retirement. I’ve tried everything from Excel, to Mint, a plethora of other financial apps, and nothing comes close to Personal Capital’s tools.

With Personal Capital, you can do the following things for free:

  • Automatically track your net worth
  • Analyze your investment portfolios for excessive fees
  • Analyze your investment portfolios for proper asset allocation
  • Track and manage your income and expenses
  • Run various retirement planning calculations to ensure a better financial future

Personal Capital currently manages over $15 billion in managed client assets. They also track over $950 billion in assets for over 2.2 million registered users for free. This amount is a testament to their money management capabilities and product offerings.

Their competitive advantage is that they built their company from the ground up with technology at its core. As a result, they are much more flexible in tailoring offerings to meet consumer demand. Let’s move onto the detailed Personal Capital review.



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5 Things To Do With Lower Expected Returns Going Forward

Updated: 04/11/2022 by Financial Samurai 50 Comments

With stock market volatility back, lower expected returns are a good possibility. Since 2009, investors have been able to make lots of money relatively easily. However, to expect double or triple-digit annual returns going forward is not wise.

In August 2020, when I came out with the Financial Samurai Safe Withdrawal Rate Formula = 80% X 10-year bond yield, I was largely ridiculed (review the 370+ comments).

As someone who went through uncertainty and doubt after I left my finance job in 2012, I encouraged new retirees to play it safe the first couple of years as they got used to change. The change can often be very jarring as you search for a new identity and adjust to a new routine.

A guest post I had written about my new safe withdrawal rate formula for another site was taken down as the host was pressured by his readers because my suggestion was considered too extreme. Meanwhile, another blogger called me unflattering names in his rebuttal.

I was disappointed, yet fascinated at the same time about how difficult it was for some people to think differently. As an investor and financial freedom seeker, it is always good to think about multiple scenarios.

The base case scenarios should be: Realistic, Blue Sky, Bear. From there, you can model out your finances to increase your chances of living your best life.



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The Minimum Investment Portfolio Balance To Start Feeling Free

Updated: 04/04/2022 by Financial Samurai 77 Comments

How big of an investment portfolio should I have to be financially free or start feeling free? This is one of the most common questions people starting on their financial independence journey ask.

Sometimes telling them they should accumulate at least 25X their annual expenses or 20X their annual gross income may seem too daunting. As a result, they may get discouraged and not even start.

Therefore, to boost motivation and momentum, I’ve come up with the minimum investment portfolio amount for financial freedom seekers to shoot for. That amount is $300,000. Once you have accumulated $300,000, you will start to feel financially free.

Let me explain by sharing some key investment portfolio levels based on our personal accounts. Never let a financial review go to waste.



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Using A Health Savings Account As A Retirement Vehicle

Updated: 02/07/2022 by Financial Samurai 30 Comments

You may not realize this, but a health savings account (HSA) can be used as a retirement vehicle. If you’ve maxed out your 401(k) and IRA contributions, maxing out an HSA could be another source of retirement funds.

A health savings account offers triple tax savings because you contribute pre-tax dollars, pay no taxes on earnings, and withdraw the money tax-free now or in retirement to pay for qualified medical expenses.

Given the vast majority of us will incur qualified medical expenses as we age, contributing to an HSA to address these expenses is a good idea.

You can use your HSA to pay for eligible health care, dental, and vision expenses for yourself, your spouse, or eligible dependents (children, siblings, parents, and others who are considered an exemption under Section 152 of the tax code). Qualified medical expenses encompass almost everything you can think of as well.

You can even use the money for nonmedical expenses after age 65, such as buying a Lamborghini. However, be aware this expense will be adjudicated as nonmedical and taxed as ordinary income. Further, be aware if you are under age 65, there is a 20% penalty on nonmedical withdrawals in addition to the tax.



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New Fundrise Performance Track Record Tool To Boost Transparency

Updated: 03/14/2022 by Financial Samurai 9 Comments

Fundrise is a leading real estate investing platform today with over 220,000 clients and $2.5+ billion in assets under management. The firm recently launched a new performance track record tool to boost transparency for individual investors.

With stock market volatility back and negative real mortgage rates, my focus is moving towards capital preservation and investing in diversified real estate funds. The 10-year bond yield’s recent move below 1.4% is a good tailwind for real estate demand.

Fundrise is a proud sponsor of Financial Samurai. Here is their guest post explaining their latest innovation.

New Fundrise Performance Track Record Tool

For all the innovations in investing brought by fintech, the salient question for most savvy investors really hasn’t changed. And that is: What’s the return on my investment going to look like?

Investment firms can’t predict the future, of course. We’ve all read those disclaimers about the limitations of “past performance.” Typically, a finance firm will give you some information about what’s happened in the past and leave it there. And like most firms, that’s what we already offered: data on average historical returns.

We took that data to a new level, unveiling a tool that lets Fundrise members see the actual performance of individual clients in real-time.

Instead of rolling up all individual client accounts into a single, blanket “x%” figure, our tool unrolls our overall performance figure. It lets you view returns for every individual who’s ever invested in Fundrise.

These aren’t accounts we’ve selected to share — they are auto-populated by the tool, which includes every single Fundrise client portfolio that fits the parameters of the chart.



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Your Wealth Is Mostly Due To Luck: Be Thankful!

Updated: 05/13/2022 by Financial Samurai 121 Comments

Are you confusing your good fortune due to your own skill rather than due to luck? I’m here to argue that your outsized wealth is mostly due to luck. Therefore, stop deluding yourself into thinking you’re so great!

As President Obama said in a July 13, 2012 campaign election speech, “If you’ve got a business, you didn’t build that.“

When I first heard Obama say this sentence, I was taken aback. From 2009-2012, I had been working on Financial Samurai for three years from about 5 am – 7 am and from 10 pm – 12 pm after working 12-hour days in finance. If I wasn’t building Financial Samurai, who was?!

I had also recently left my finance job because I wanted to be free. All I really desired to do was write while traveling around the world, so that’s what I did.

But as I’ve gotten older, I’ve come to understand more of what President Obama was talking about. Just like it takes a village to raise a child, it takes a lot of help along the way to achieve your goals. Besides, Obama was referring to not building the roads and bridges that helped your business prosper along the way.

I firmly believe that it was mostly luck (~70%) that helped me achieve a basic level of financial independence at age 34. Of course, effort is also required to get ahead, but it’s not the main reason. There are plenty of people who work much harder than you or I, yet will not achieve what we have.

The more we can recognize our luck and not take our luck for granted, the more prosperous we’ll become. I encourage you to list as many fortuitous events that have happened in your life. This way, you’ll appreciate more of what you have and fight harder to achieve your goals and freely help others.



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The One Ingredient Necessary For Achieving Financial Independence

Updated: 04/22/2022 by Financial Samurai 150 Comments

In the good old days pre-pandemic, several friends and I liked having beers after each softball game. We got to discussing what is the one ingredient necessary for achieving financial independence at a relatively early age.

Here were some of their responses:

  • Saving aggressively
  • Investing in stocks
  • Investing in real estate
  • Earning side income
  • Taking bigger risks in our careers
  • Leveraging the internet
  • Working ungodly long hours
  • Relocating to areas with huge job growth despite the higher cost of living
  • Starting a business

Many of these ingredients are great for helping all of us achieve financial independence.

However, the #1 ingredient that drove me, which nobody mentioned, was FEAR. More specifically, the fear of failure. The more you fear something bad happening to you, the more you take action to make sure it doesn’t come true.

Let me share some examples to explain what I mean. Then perhaps you can share your own in the comments section below. 



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The Ultimate Source Of Financial Security: Your Strong Mind

Published: 11/08/2021 by Financial Samurai 43 Comments

One of the goals of achieving financial independence is financial security. We want to feel secure financially so we ironically don’t have to think about money so much. As a personal finance writer, however, this is both my blessing and my curse. No matter how wealthy I get, I can’t escape the topic of money.

When you’re spending time with friends or taking care of your kids, the last thing you want to feel is financial dread. Did I make the right investment? Am I going to get laid off during the next round? Will I be able to make my next house, car, credit card, and student loan payment on time? Dread.

The desire for financial security is why I’ve in the past suggested creating financial buffers for your financial buffers. By doing so, if one money soldier goes down, you still have an army to prop you up.



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The Maximum 401k Contribution Limit: What You Could Have If You Max Out Every Year

Updated: 02/05/2022 by Financial Samurai 139 Comments

Mega yacht in Hawaii - The Maximum 401k Contribution Limit: What You Could Have If You Max Out Every Year

The maximum 401k contribution limit for 2022 increases to $20,500 from $19,500 in 2021. Your 401k is one of the three legs of the new retirement stool: you, you, and you.

I’m surprised the maximum 401k contribution limit is jumping by $1,000. Historically, the limit usually increases by only $500 every two to three years.

Inflationary pressures are likely the main reasons for such a high contribution limit increase. For example, the Social Security Administration raised its cost-of-living-adjustment in 2022 by an impressive 5.9% to account for inflation.

If you are 50 or older, you can add up to $6,500 extra per year from $5,500. This is the government’s way of allowing older workers with typically higher incomes to catch up.

Further, the maximum 401k contribution your employer can contribute for 2022 is $40,500. This brings the total maximum 401k contribution between employee and employer to an impressive $61,000.

Always Take Advantage Of The Maximum 401k Contribution Limit

I always recommend maxing out your 401k as fast as you can. Once you get into a max habit, you’ll rack up some big bucks in no time.

Maxing out your 401k is a learned habit that gets easier over time. Given the contributions are pre-tax, you won’t feel as much pain compared to saving with after-tax dollars. In other words, at a 25% effective tax rate, contributing $20,500 will feel more like you’re contributing $15,375.

So many people don’t even bother to try maxing out their 401k because they don’t feel like it’s possible. But once they try, they kick themselves for wondering why they didn’t max out their 401k sooner.

Below is a simple chart to see how much you can accumulate in your 401k by age or years worked if you contribute $19,000 a year starting today.

The chart is obviously more helpful for younger folks, given older folks had lower maximum contribution limits in the past. For example, when I first started maxing out my 401k in 2000, the historical 401(k) contribution limit was only $10,500.

I’ve also included my high-end 401k target amount by age. It is based off continued maximum contributions plus a constant 4-8% annual return. My high-end 401k savings target can also be considered your overall total savings target. It can include after tax savings as well.

The numbers are for “ideal” conditions. We all know that life, recessions, and buying things we don’t need gets in the way of savings and returns all the time.



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