Not that I want to beat a dead horse, but I’m still shocked by the math in my last CoastFIRE article. To reiterate: if you were a married couple making $150,000 and maxing every single retirement account you could get your hands on, you ended up reducing your available cash by 52%, while only gaining around $10,700 in additional tax savings. Which becomes less relevant once you reach your “coast” number — which in the article was $500,000 by age 39. Basically, $150,000 post-taxes was around $118,000 and the 4% rule withdrawal from their investments in traditional IRAs in retirement at 59 was also around $116,000.

The numbers aren’t perfectly exact, and there is nuance to them — especially if Roth accounts are involved, or taxable brokerage accounts — but the premise of how much is actually being saved by shoveling it all into retirement accounts every single year forever was what the real question was.

Anyway, with that introduction out of the way, and some very frank and negative feedback from the Coastfire subreddit, I feel compelled to continue this exercise. My oldest has reached 17 this year, which means we no longer get a refundable tax credit for her. The current tax law allows a refundable cap of $1,700 per child under 17. Which means if you are below the $400,000 MFJ phase-out threshold, you can receive $1,700 in tax refund per child, otherwise you get $2,200 credit (a flat reduction in federal taxes owed). This is a key part of maxing pre-tax retirement accounts. Basically, you’d get money back you never paid in, this is very hard to reach while actually living off of any income, but it’s a side tangent to what I’m talking about.

Still, the max reduction in taxes for three children (with one at age 17) is $4,900 ($2,200 per child, $500 for the 17 year old). In order to owe that exact amount in taxes we would have to make $77,000, before standard deduction. This would give a $0 federal tax bill. If we cap a 401(k) this year that takes it to $101,000, double IRAs, $116,000, and HSA would put us at $125,000 ish in order to max those retirement accounts and pay $0 in federal taxes.

So basically, my family in our scenario would have to make $125,000 for the year, and put $48,250 into pre-tax retirement accounts in order to zero out our federal tax liability for 2026. That, is a much more attractive scenario than the $13k saved in the last article. This saves $10,640 in federal taxes (because the previous article had no children), and then some state and FICA tax savings.

The thing to remember, is that tax planning, while vital to your pocket, doesn’t mean it’s worth lowering your income just to save taxes. More money is more money. I guess it’s back to the gaming grind.

TLDR: I’m still not sure of the break point for me between CoastFIRE and true FIRE.

~~Miniwing~~
Parent, Stoic, Investor