Part of Tara & Rob’s cat-full home 🙂

Tara and her husband Rob live in Texas where he’s a high school teacher and she’s an editor with a publishing company. They are happily child-free and cat-full by choice and own their condo. While Rob enjoys teaching, he anticipates needing to make a career change at some point due to the stressors of being in the classroom. Tara likes her job, despite her somewhat stagnant income. The couple isn’t sure if FIRE is their goal or just more flexibility around Rob’s job. They’ve asked for our help with their investment strategy as well as tips for successfully living a frugal lifestyle for the long-term.

What’s a Reader Case Study?

Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comments section.

For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.

The Goal Of Reader Case Studies

Reader Case Studies highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!

Happy hour with a friend!

The Case Study series began in 2016 and, to date, there’ve been 83 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.

I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight, queer, bisexual and polyamorous people. I’ve featured women, non-binary folks and men. I’ve featured transgender and cisgender people. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland, Germany and France. I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.

The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing your brief story to me at

Reader Case Study Guidelines

I probably don’t need to say the following because you folks are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.

There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.

A disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. 

I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.

With that I’ll let Tara, today’s Case Study subject, take it from here!

Tara’s Story

Tara’s beloved hobby

Hello! My name is Tara. I’m 34 and married to Rob, who is 35. We are childless by choice, but adore our three cats. We live in a large city in Texas where I work in publishing and Rob works as a teacher. We got married nine years ago and have lived in the same city since. We rented for a few years after marriage and bought a two-bedroom condo in 2017.

What feels most pressing right now? What brings you to submit a Case Study?

We’re interested in creating a sound financial strategy that allows us to have options for our future. More specifically, we like the idea of reaching financial independence within the next 10 to 15 years and are wondering if this is possible or responsible?

We aren’t sure if we’d like to retire early, work part-time, make career changes, or leave jobs when they cease to be fulfilling. For example, teaching takes a toll on Rob and we aren’t sure if it’s a career he can do long-term for the sake of his mental health. Rob is an introvert, and the strains of teaching may not be sustainable for him. We don’t know if our goal of achieving financial independence is a pipe dream for two people on salaries like ours, or if it is realistic. We are both very privileged, but don’t make a ton of money.

We submitted our situation as a Case Study because we have questions ranging from if our current financial setup could allow us to retire early as well as discrete, specific ways we could save more. We are committed savers, and we would like to see how far we can go and what we could be doing differently. We also want to learn how to effectively balance our savings with the ways we want to intentionally spend money, like travel.

What feels most pressing right now is our overall trajectory and if our current behaviors will help us achieve financial independence, and if so, when. Our financial future will help us think through other questions about our career, lifestyle, and how we live our daily lives. It seems pressing that we confirm we are allocating our investments properly. We also lack knowledge about taxes and want to set ourselves up for future financial success.

What’s the best part of your current lifestyle/routine?

Rob really likes to bake

The best part of our current routine is the time we spend with each other. We are introverts by nature, so most of our free time consists of exercising, going for walks, eating delicious food Rob cooks, watching movies, playing games, or pursuing our hobbies. I play piano and take lessons from a local teacher. This is an important part of my life, and I consider it financially non-negotiable. Rob paints miniatures for tabletop games, a hobby he started in adolescence and resumed during the pandemic. This has been a great creative outlet for him, and has reduced his work-related stress level. It has also boosted his confidence and self-esteem, especially as he has begun to do minor commission work.

We enjoy our freedom and find great companionship in each other and our pets. We enjoy being child-free by choice, and have no plans to change that lifestyle. We intentionally live quiet lives, and we have created an environment that suits our personalities.

What’s the worst part of your current lifestyle/routine?

The worst part of our current lifestyle is Rob’s stressful and demanding career. Teaching is an essential and noble profession, and many people thrive in the classroom. But it doesn’t suit Rob. He’s quiet, prefers to work alone or in small group settings, and doesn’t respond well to stress. He’s been teaching at the high-school level for seven years. For the first few years, we expected his anxiety to eventually dissipate as he became more acclimated to his work. This hasn’t happened and we both think his current career isn’t sustainable for him over the long-term. Rob’s job has afforded us many advantages and he makes a comfortable living as a teacher. In fact, his wages exceed the median for teachers in our area. In addition, he will retire from teaching with a pension, which is a benefit far too few American workers enjoy. That said, we both think he needs to begin planning for a future outside the classroom.

I love my job and work in an amazing environment with a wonderful boss. I work from home, which gives me the flexibility I need to walk dogs in the neighborhood. This is something I really enjoy doing, both because it helps out friends and neighbors and because it helps me make a little extra money.

The one complaint I have about my current work situation relates to my income. My wages have stagnated and likely will not increase in the near future. This isn’t an issue with my job specifically; it is a fact of life in the wider publishing industry. I earn a comfortable income, but it is disheartening to know that the only thing that would allow me to increase my salary is a radical career change. Despite that, I’d hate to leave a job that serves me well and that I enjoy doing. Overall, I love my work and the lifestyle it allows me to have.

Where Tara and Rob Want To Be in Ten Years:

The rare moment of peace in our household


  • Close to financial independence. We aren’t sure if we want to go full FIRE, but we certainly want to have options.
  • We hope to still be on the savings trajectory we are currently on.


  • We don’t see any reason to change our lifestyle and routine. We don’t want to purchase a single-family home and we don’t plan on moving. We are comfortable in our current condo, and like the peace of mind that homeownership brings.
  • The condo lifestyle is perfect for us because we don’t have a yard to take care of or the other stresses that come with a house. We also have great neighbors and are in a good spot in the city. We like that our condo could provide a rental income someday if we chose that route.


  • Rob needs a career change. We aren’t sure what that will look like. He’s creative and prefers to work alone, and in a quiet setting. He might do well with working from home.
  • If we both worked from home, however, we might need to reconsider our housing situation. I do not plan to make any career changes.

Tara & Rob’s Finances


Item Amount Notes
Rob’s net income $4,801 Rob’s net salary, minus the following deductions: health and dental insurance, 401k contributions, and taxes.
Tara’s net income $3,467 Tara’s net salary, minus the following deductions: health and dental insurance, 15% 401k contributions, and taxes.
Tara’s additional net income from dog walking $200
Rob’s annual AP grading income $125
Rob’s Teacher’s Pay Teachers net income $58
Monthly subtotal: $8,652
Annual total: $103,824

Mortgage Details

Item Outstanding loan balance Interest Rate Loan Period and Terms Equity (amount you’ve paid off) Purchase price and year
 Mortgage on primary residence $153,696 3.00% 30-year fixed-rate mortgage $49,804 $203,500 purchased in 2017 (refi in 2020 for lower interest rate)

Debts: $0


Item Amount Notes Interest/Type of securities held/Stock ticker Name of bank/brokerage Expense Ratio
Taxable Investments $219,287.94 We didn’t know quite what to do when we started investing, so we started a Vanguard account with all of these different allocations. We haven’t contributed to anything other than the Total Stock Market ETF in awhile because we realized it was redundant. Should we consolidate these into the Total Stock Market ETF or let them ride? Vanguard Total Stock Market ETF: $156,644.69
Vanguard Total Bond Market ETF: $20,494.25
Vanguard Mid-Cap Growth Fund: $12,357.55
Vanguard 500 Index Fund Admiral Shares: $8,114.27
Vanguard Health Care Fund Investor Shares: $8,142.69
Vanguard Growth Index Fund Admiral Shares: $6,923.28
Vanguard Equity Income Fund Investor Shares: $6,611.21
Vanguard Vanguard Equity Income Investor CL: 0.28%
Vanguard 500 Index Admiral CL: 0.04%
Vanguard Healthcare Investor CL: 0.30%
Vanguard Growth Index Admiral CL: 0.05%
Vanguard Mid Cap Growth Investor CL: 0.33%Vanguard Total Bond Market ETF: 0.03%
Vanguard Total Stock Market ETF:  0.03%
Tara’s 401k $97,773.21 This is Tara’s Roth 401k. The fees seem high, but I feel stuck since it’s an employer-sponsored account with a match. Vanguard Target Retirement 2050 Fund Vanguard 0.08%
Rob’s Roth IRA $46,680.34 Vanguard Target Retirement 2050 Fund Vanguard 0.08%
Savings Account $19,746.62 This is our more robust emergency and vacation fund in a high yield savings account. 0.55% interest rate Barclays N/A
Savings Account $552.56 This is our emergency fund. We keep a minimum of $500 in here to avoid a charge. Earns essentially 0% interest Bank of America N/A
Total: $384,040.67


Vehicle make, model, year Valued at Mileage Paid off?
Toyota Corolla 2012 $10,753 63,000 Yes
Toyota Scion XB 2009 $5,500 55,000 Yes
Total: $16,253


Item Amount Notes
Mortgage $1,062.00
Groceries $750.00 Includes household supplies and food
HOA fee $278.96 Required by our condo community
Piano lessons for Tara $220.00
Misc. $200.00 Clothes (thrifted!), personal items, medical / dental / vision, etc.
Average pet vet bills $150.00 Rough average of what we spend over a year for vet care for 3 cats
Travel budget $150.00 Varies by year and depending on the cost of the trips we want to take.
Restaurant money $150.00 Includes date night and outings with friends
Rob’s hobby $100.00
Energy bill $85.00
Gas $75.00
Car insurance for both cars $63.81
Cat food for three cats $60.00 One of the cats has a special diet
Cat inhaler $55.00 Yes, our cat has asthma. Who knew that was a thing!
Alcohol $50.00 Priorities, y’all
Household repairs $50.00 Very rough estimate of household appliance repairs
Car Expenses $50.00 Inspections, oil changes, etc.
Gifts $40.00
Farm Sanctuary donation $35.00
Cell phones $33.55 Mint Mobile for two phones (affiliate link). Yearly total is $201.23 a person ($402.46 for both of us)
Pet Shelter donation $20.00
Charity donation $18.09
Spotify account $17.31
Movie rentals $15.00
Amazon Prime membership $10.00
PBS streaming membership $5.00
Monthly subtotal: $3,743.72 I’m not quite sure how to account for the random things in life (the washing machine breaks, the car needs new brakes, we need a new appliance, a pet or person has a major health issue, etc.) But this is a rough estimate! 
Annual total: $44,924.64

*Note: my employer pays for our internet since I work from home, which is why it’s not listed above.

Credit Card Strategy

Card Name Rewards Type? Bank/card company
Amazon Prime Rewards Visa Signature Card 5% at Amazon and Whole Foods; 2% at Restaurants, Gas Stations, Drugstores;1% all other purchases Chase Bank
Bank of America Visa Signature 3% online shopping; 2% for groceries; 1% all other purchases Bank of America

Tara’s Questions For You:

Our questions fall into two broad themes: discrete investing questions and broader questions about frugality as a lifestyle.

The woods are a happy place for us!

1) Investing?

  • Instead of throwing money into our Vanguard Total Market ETF, should I contribute MORE to my company 401k to reach the annual IRS-allowed max?
    • I contribute 15% to this right now, which exceeds my employer match requirement. I have a choice about what type of contributions to make and I choose to make Roth contributions.
  • Are there any steps we could take to optimize our investment earnings?
  • Should we consolidate all of our individual Vanguard accounts into the Total Market Index Fund?
  • Should we consider shifting our resources over to Vanguard’s Total Stock Market Index Fund Admiral Shares, for instance?

Background Info:

We have investments in a variety of Vanguard mutual funds, although the vast majority of our investments are concentrated in the Vanguard Total Stock Market Index Fund ETF. We want to know if we should shift our investments entirely into this fund, or if it is okay for us to hold investments in a variety of other funds. They seem fairly superfluous, given the diversification provided by the Vanguard Total Stock Market Index Fund ETF, but they also seem harmless. I do wonder if we are missing opportunities by not wholly committing to the Vanguard Total Stock Market Index Fund ETF. Is it best to have more in one big bucket?

Rob’s most recent painting contest entry

Are there other mutual funds that may be better than the Vanguard Total Stock Market Index Fund ETF?  What I like about our current strategy is that we have full control each month over how much money we save. If we have an emergency or need to save for something, we can decrease our investments for that month and use cash flow to pay for whatever we need to. If we turned to a more aggressive strategy with my 401k, we wouldn’t have as much control. However, I think financially we would be fine maxing out my 401k (and Rob’s) and having enough left over to live, save, and invest more in our other account. I also feel strange about going through my employer each time I need to make adjustments. I don’t feel as in control and I don’t like the idea of my employer knowing too much about my financial situation.

We also like the idea that we can access our money better through our current method than if more were stored in our 401k. Though I know that’s the point: not to access it! It’s just peace of mind. What is the best strategy?

I know a core tenet of most financial advice is to steer clear of investing in specific stocks. I know we are supposed to trust index funds when it comes to investing our money. Is there any nuance to that general principle? Should we consider investing in specific stocks with proven track records, in order to potentially boost our earnings? I’ve considered investing in Amazon, Costco, and other stocks. We do not currently hold individual stocks, but I want to know if that is something we might consider doing in the future.

2) Taxes?

Rob painted this for Tara, who really likes birds

We don’t understand taxes at all. We have no idea how taxation is biting into our investments and we would like to plan an intentional strategy for limiting our tax burden when we begin to draw from our accounts. Would maxing out my 401k and investing less in our Vanguard accounts help with taxes? Should we open up another Roth IRA for me? Overall, taxes are something we are pretty much in the dark on.

3) Living a Frugal Lifestyle?

  • How do you balance a commitment to frugality with a very human need to get the most out of life?
  • Should we be open to spending more on things that could enrich our lives before we reach financial independence (eg. travel, eating out, movies, etc.)?

Background Info:

We were heavily influenced by Liz’s book, Meet the Frugalwoods, and began saving aggressively years ago. We have continued to refine our savings strategies and now save more than 50% of our income annually. Our level of commitment to frugality varies, but we are consistently thrifty people who save aggressively. On the whole, this lifestyle has been great for us.

But we have had some conversations lately about the ways frugality can become a source of anxiety.

Sometimes Rob and I forgo purchases and experiences that could improve our lives because of our concerns about the expenses associated with them. This can be demoralizing, and it causes us to miss out on opportunities that could enrich our lives. For instance, we rarely leave our home for meals, and sometimes wish we could go out on more dinner dates. This is especially important for me, since I work from home. It is also important for Rob, since it would be nice to give him an occasional break from cooking. We also thrift nearly all of our clothing, and sometimes we would both like to buy some new things to spruce up our wardrobes.

Overall, we’ve encountered a dark side to frugality, one that can limit our experiences and life satisfaction. This can take a light toll on our mental health. Non-essential purchases can be fraught with guilt. We tend to forgo things we need and live a life without spontaneity and play.

Liz Frugalwoods’ Recommendations

Tara, Rob and all three cats are in fabulous financial shape! They’ve completed the pre-requisites for a healthy financial life and are in the luxurious position of turning their attention to their investing strategy. Very, very well done!

Wondering what those pre-requisites are? Here you go:

  1. Rob is the best bartender

    Eliminate debt! It’s tough to move forward on financial goals if you’re weighed down by debt. I don’t include a low, fixed-rate mortgage in this definition of debt.

  2. Save up an emergency fund! This is 3 to 6 months’ worth of your living expenses held in an easily-accessible savings or checking account.
  3. Track your expenses! In order to know how much you need in your emergency fund, you need to know how much you spend every month. The easiest way to do this is with a free online program, such as the one offered by Personal Capital, which is what I use and recommend (affiliate link).
  4. Contribute to your retirement account and be on track given your age and planned retirement date! If your employer offers a match, be sure to contribute enough to get the match–this is FREE $$$. If your employer doesn’t offer a retirement plan–or you’re self-employer–you need to set-up an individual retirement plan, such as: an IRA, a Roth IRA, or a Solo 401k (that’s what I have).
  5. Create a credit card strategy! This is an optional next step if you’ve completed steps #1 -4. Using a credit card responsibly–which means paying it off in full every month–is a fabulous and easy way to earn rewards. I love my cash back card and earned $712.59 from it last year. Here’s how.
  6. Open a taxable investment account! This is another optional next step if you’ve completed steps #1 -5. Investing in the stock market is one way to have your money make more money. Wondering how to get started? The best primer on investing (in my opinion) is JL Collins’ Simple Path to Wealth (affiliate link).
  7. Explore other tax-advantaged vehicles! Another optional step if #1-6 are done. Such accounts include (but are not limited to): Donor Advised Funds and 529s.

Before delving into Tara’s specific questions, I want to go through all of their assets.

Review of Tara & Rob’s Assets


Tara and Rob have a total of $20,299 between their two savings accounts. This is great, but, I’m not clear on why this is in two different accounts?

  • If it were me, I’d consolidate to one high-yield savings account, such as the American Express Personal Savings account, which–as of this writing–earns 1.75% in interest (affiliate link).
  • Tara & Rob would earn $355 on their money in a year just by having it in this high-interest account.

They are spot on with this dollar amount as their emergency fund. Their monthly spending is $3,743.72, which means three months’ worth of spending = $11,231.16 and six months = $22,462.32. Perfect job, Tara and Rob!


We adore our little outdoor space

Between Tara’s employer-sponsored 401k and Rob’s Roth IRA, they have $144,453.55 in retirement investments. Let’s check this against Fidelity’s retirement metric:

Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.

Since Tara & Rob are 34 and 35, we’ll say 2x their combined income, which would be ($103,824 x 2) = $204,648. This means they’re a bit behind, however…

I have questions about Rob’s employer:

  • Do they offer a retirement plan?
    • If so, I encourage him to explore the details and find out if there’s an employer match.
    • If there’s a match available, he should start contributing to this immediately. Again, an employer match is FREE $$$$.
  • Tara mentioned a pension plan for Rob–they should research the details on that.
    • Does it require full vesting/a specified number of years of service?
    • Is any portion of the pension available if Rob leaves teaching before that service date?

Social Security:

The above retirement total also doesn’t include what they’ll each receive in Social Security. To figure out their anticipated Social Security benefits, Tara and Rob should:

  • Follow these instructions on how to retrieve their earnings tables from (the government’s Social Security website).

This information, combined with the answers to my questions about Rob’s pension, will give them a clearer picture of what they can expect to have in retirement.

Tara’s Question #1: Investing Strategies

Alrighty, let’s turn our attention to the meat of today’s study: investments. As I read it, Tara’s investing questions boil down to:

  1. Should they each max out their retirement accounts? (Tara’s 401k and Rob’s Roth IRA)
  2. Should they consolidate their taxable investments into their Vanguard Total Stock Market ETF?
  3. Should they invest in individual stocks?

1) Maxing Out Retirement Accounts?

WHOOPS edit by Liz on 9/1/22: I totally missed the part where Tara said her 401k contributions are Roth, which means what I say below is false. Tara’s 401k contributions are NOT pre-tax.

Like the rest of the world, Rob learned how to bake sourdough during the pandemic

Some retirement accounts, including Tara’s 401k, are pre-tax. That means you don’t pay taxes on the money you contribute to these accounts. You do pay taxes when you take this money out in retirement; BUT, this generally works in your favor because your tax bracket should be lower in retirement since your income is likely to be lower (assuming you’re no longer working). If Tara and Rob want to decrease their taxable income, maxing out Tara’s 401k–which is $20,500 in 2022–is an easy way to do so. However, Tara is correct that putting money into a 401k locks it up. You can’t withdraw from a 401k until age 59.5; if you do so before then, you’ll pay a penalty. As Tara noted, the whole point of a 401k is that you don’t touch that money!

Rob’s retirement account–a Roth IRA–is taxed in the opposite way from Tara’s 401k. Here’s a quick rundown on Roth vs. traditional IRAs:

Roth IRA (Individual Retirement Account):

  • A Roth IRA is a retirement account that’s post taxes.
  • This means you pay taxes on the money you put into a Roth IRA, but you don’t pay taxes when you withdraw the money in retirement.
  • A Roth IRA grows tax free.
  • You need to be age 59.5 before you can withdraw money penalty-free (although there are exceptions).
  • Your eligibility to contribute to a Roth IRA depends on your income and your particular tax situation.
  • I like this Nerd Wallet article on Roth IRAs if you want to read more.

Traditional IRA (Individual Retirement Arrangement):

  • A traditional IRA is a retirement account that’s pre-tax.
  • This means you don’t pay taxes on money you put into an IRA, but you do pay taxes when you withdraw the money in retirement.
  • There are no income limits. Anyone can contribute to a traditional IRA.
  • You need to be age 59.5 before you can withdraw money penalty-free (although there are exceptions).
  • More about traditional IRAs here.
Our firstborn

The bottom line is that contributing to some sort of tax-advantaged retirement account (such as a 401k, 403b, IRA, SEP IRA, etc) makes sense for most people in most circumstances.

How much you can contribute to a Roth IRA (and whether or not you are allowed to) depends upon how you file your taxes and your MAGI (modified adjusted gross income). The IRS has this handy chart outlining Roth IRA options. Assuming Tara and Rob are “married filing jointly” and their MAGI is under $204k, the maximum allowable contribution for each of them is $6,000/year.

If he wanted, Rob could also open a traditional IRA, which would be a pre-tax account (and thus, would both reduce their taxable income and increase his retirement savings). However, that $6k IRS-mandated limit is still in effect and your COMBINED contributions to both a Roth and a traditional IRA can’t exceed $6k.

Tara could also open a traditional IRA and contribute $6k annually. This is another option for further reducing their taxable income, if that’s a priority for them.

However: before making any decisions about IRAs, I’d first want to know what options Rob has through this employer.

2) Consolidating the Taxable Investments?

Now we’ll turn our attention to Tara and Rob’s other stock market investments–their taxable investments. Retirement accounts (like 401ks and IRAs) are ALSO invested in the stock market, but are taxed differently than plain old taxable investments. With taxable investments, there are no age, income, or contribution limits, and don’t receive any preferential tax treatment. Hence, their name: “taxable investments.”

If everything I just said sounded completely incomprehensible–but you’re curious–I HIGHLY recommend you check out the book The Simple Path to Wealth by JL Collins (affiliate link). If you’re still with me, let’s forge on…

Tara’s question about whether or not to consolidate their various Vanguard accounts into their Total Market Index fund comes down to capital gains taxes. You have to pay capital gains taxes on the profits (not the total amount) your stocks have earned over the years.

What you pay in capital gains taxes depends on several factors:

  • How long you’ve had your investments:
    • Short-term capital gains taxes–when you’ve held stocks for less than one year–are higher than long-term capital gains taxes, which is yet another reason to keep taxable investment accounts open for the long-term.
  • How much money your investments have made since you bought them:
    • In other words, how much these investments have appreciated since you purchased them.
  • Your income.

For more on capital gains taxes, check out this Motley Fool article.

Rob’s favorite pasttime

To figure out their capital gains exposure, Tara and Rob should look at their Vanguard portfolio for their “cost basis,” which is what they bought the shares for. From this, they can calculate their potential capital gains.

If Tara and Rob find that they’d pay nominal capital gains to sell their shares and move them into the Total Market Index Fund, then I personally would consolidate. If it were me, I would put everything into one total market, low-fee index fund that matched my asset allocation needs and risk tolerance. The reason is that, in general, investing in a total market index fund gives you the broadest possible exposure to the stock market (as well as the lowest fees).

In a total market index fund, you’re essentially invested in a teensy bit of every single company in the stock market, which gives you a ton of diversity. If one company–or even one sector–tanks, your entire portfolio isn’t toast. It’s the “not putting all of your eggs in one basket” version of investing. It’s what I do, it’s what the vast majority of FIRE folks do and, best of all, it’s very, very easy to implement and maintain.

Going forward, if it were me, I would focus on funneling all my extra money into the Total Market Index Fund. Tara and Rob also have Vanguard’s Total Bond ETF, which is something a lot of folks like to invest in because bonds are a lower-risk (although also lower-reward) investment vehicle.

Is it Wise to Invest in Individual Stocks?

In my opinion, absolutely not. Why? because if that one company goes down, your investment plummets. If Apple or Amazon or Netflix or whoever has a bad quarter, you have a bad quarter. If you are instead invested across the entire stock market, companies can go bankrupt and your portfolio will still bob along with the broader stock market. Investing in an individual stock is “putting all of your eggs in one basket.”

I consider investing in individual stocks to be a hobby, not a financial strategy. If you really enjoy day trading and want to do it for fun, go right ahead! But I wouldn’t do it with money I need. In my opinion, it’s not much safer than going to a casino.

Expense Ratios

Focaccia bread baked by Rob

I also want to note the expense ratios on Tara and Rob’s investments. Expense ratios are what you pay your brokerage (in this case, Vanguard) for the ability to invest in the market. Tara and Rob did a fantastic job selecting a brokerage with excellent low-fee funds.

Tara is correct that the expense ratios are a tad higher on some of their accounts, but none of them are outrageous. In general, you want to aim for the lowest possible fees because there’s no reason not to.

For reference, the following three brokerages offer DIY low-fee investment options:

  • Fidelity’s Total Market Index Fund (FSKAX) has an expense ratio of 0.015%
  • Charles Schwab’s Total Market Index Fund (SWTSX) has an expense ratio of 0.03%
  • Vanguard’s Total Market Index Fund (VTSAX) has an expense ratio of 0.04%

Wondering how to find a fund’s expense ratio? Check out the tutorial in this Case Study.

Tara’s Question #2: Taxes

Any tax decision will depend on Tara and Rob’s gross annual income. In general, if you work in the US, have a W2 income, and aren’t a billionaire, there aren’t really all that many tax-advantaged options available to you. You can–and should–take advantage of what’s available. But, for the vast majority of people–and especially if you’re taking the standard deduction–there’s no “one weird trick” to saving money on taxes. It gets more sophisticated if you are FIRE’d (or in the tax year prior to FIRE), which I’ve addressed in previous Case Studies.

Here are the standard tax-advantaged vehicles Tara and Rob can look into:

  • Retirement accounts, such as 401ks and IRAs: I outlined these tax advantages above.
  • HSAs (Health Savings Accounts): “A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses” (source:
  • FSAs (Flexible Savings Accounts): “…a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside” (source:

Here are a few others that don’t apply to Tara and Rob, but could be helpful to other readers:

Tara’s Question #3: Living a Frugal Lifestyle?

Date night out!

I don’t want anyone to think I espouse depriving oneself in favor of saving money! I know it’s a tough needle to thread, but my hope is that folks can find their sweet spot of “luxurious frugality” where all their needs are met, they’re able to afford some “wants,” and they’re financially on track for their future. At the end of the day, life’s too short to spend it doing stuff you hate and that’s where I think frugality comes in: it gives you the option to live a life you love.

The whole point of frugality is to save on things that don’t matter to you so that you can spend on the things that matter the most.

This is values-based spending and it’s how I structure my spending decisions. Am I spending on things that support my highest and best priorities? If yes, great! If not, then it’s time for a re-adjustment.

I’ve written about this topic quite a bit over the years, so I’ll refer Tara and Rob to some of these oldies-but-goodies from the Frugalwoods archives:

From 2017:

Geez louise, evidently I was on a tear in 2017…

From 2016:

From 2015:

I hope these offer some insight into how I maintain frugality without feeling the undertow of deprivation.

Goal Clarity

A Middle Eastern spread prepared by Rob

I also wonder if some of their financial stress stems from the uncertainty around Rob’s career? I sense that this weighs on both of them since it seems clear Rob wants to transition to a new job. I wonder if they might feel more comfortable with their discretionary spending once they’re clear on Rob’s next step and new salary?

To that end, I encourage Rob to begin actively job searching. We’re currently in a fantastic job market for employees and Rob should capitalize on that! I imagine there are plenty of non-classroom-teacher careers accessible to someone with his experience, such as: curriculum development, textbook creation, consulting, etc? Former teachers, please share your advice in the comment section!

Frugality Should Not = Anxiety

I was sad to read Tara’s comment that, “…we have had some conversations lately about the ways frugality can become a source of anxiety.”

Tara, you and Rob have no reason to feel anxiety around your finances. You’re in great shape and you’ve put yourself in the position of NOT needing to feel anxious about money. Through your wise choices, you and Rob have given yourselves that gift. Time to start enjoying it! This doesn’t mean blowing money on stuff you don’t need, but it does mean building conscious treats into your lifestyle on the regular.

Tara mentioned a desire to eat out and that’s something they should absolutely do! Do it tonight! I’ll make the reservation for you if you want.

Perhaps establish a schedule for dining out–weekly, bi-weekly, monthly–then go to the restaurant and have a wonderful time knowing that you’ve planned, prioritized and saved to make it possible. Understand that this is very different from defaulting to take-out every night because you failed to meal plan. This is strategic luxury and it’s how frugality remains tenable for a lifetime. My husband and I eat out regularly and every single time, it’s a delightful experience. We don’t stress about the cost because it’s a planned expense. You can build restaurant meals into your budget in exactly the same way you include groceries, HOA fees, etc.

Hiking in Arkansas

Here’s how to be strategically luxurious:

  1. Identify your priorities
  2. Spend on those
  3. Eliminate spending on non-priorities

There’s honestly little point in being uber frugal if you’re not using some of your savings for the things you enjoy most in life. Optimizing every last expense, but being miserable, defeats the longterm goal of financial stability. Why have money saved up if you can’t ever enjoy it?


  1. Make a reservation at a restaurant, enjoy your date night, feel zero guilt, and commit to doing it regularly! Let me know if you need me to make the reservation for you.
  2. Find ways to incorporate fun and spontaneity into your ultra-frugal budget. Create a plan, set aside funds, and feel confident that you’ve worked hard to make this fun possible.
  3. Consider consolidating your cash accounts into one high-interest savings account.
  4. Research the retirement options and pension offered by Rob’s employer.
  5. Rob should begin an active job search, especially in light of the current red hot job market.
  6. Determine your capital gains tax burden and decide if it’s worth consolidating all taxable investments into the Vanguard Total Market ETF. Going forward, plan to focus contributions towards this account.
  7. Determine your combined gross income and then consider if you want to explore additional tax-advantaged strategies, such as:
    1. Maxing out Tara’s 401k
    2. Opening an IRA (for Tara, for Rob or both, being cognizant of the $6k limit)
    3. Researching HSAs and FSAs. I’d start with seeing what your employers offer.
  8. Cuddle up with the cats and pat yourselves on the backs–you’re doing great!

Ok Frugalwoods nation, what advice do you have for Tara? We’ll both reply to comments, so please feel free to ask questions!

Would you like your own case study to appear here on Frugalwoods? Email me ( your brief story and we’ll talk.

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  1. Wow, this one really made me envious about where you live. It must be enchanting to live in such beautiful natural surroundings. Great advice on frugality as always, thank you 🙂

  2. If Rob is a teacher in the public school system in Texas he is putting money into TRS…however, because of that he will NOT be putting money into Social Security. It’s something called the Windfall provision that doesn’t allow government employees to collect Social Security. Hoping Congress can do something to fix that.

    I would look into TIAA CREEF…both my husband and I work for the state of Texas and we feel they have done a good job of managing our money.

    1. Actually 14 districts in Texas also participate in Social Security. I’ve worked in one of them.

      Rob’s take-home pay is way (WAY!) more than I ever expect to see, even after 22 years in teaching! But if the job reduces his quality of life, then there are definitely other options out there. There are a few textbook publishers in Texas, as well as the Texas Education Agency.

      1. If a teacher works or worked a job outside of the school system (which is super common), they put money into Social Security. There can also be other situations where they are eligible to SS benefits, such as a spouse’s death. However, they often can’t access that money or, if they can, they see the amount they receive reduced drastically simply because of their profession. I understand why the law was created. Eliminating double dipping is a good thing, but there are also many instances where people pay into systems (either TRS or SS) and then never get to see the benefits, which in my opinion is kinda messed up.

      2. The problem is when you did work at another job before going into education. I paid in to Social Security for over 20 years and have spent that last 15 in education..I am eligible for a set amount but because I have worked in education they with take back over half of it…if I had never worked anywhere else I would still be eligible for the full amount. If my husband dies first they will take out over 1/3 of his Social Security. We have worked hard to have good retirement but for a lot a people it can be devastating. It also happens to people in Police and Fire Department. It’s called the Windfall Provision.

        1. I have this issue, too. I found out that if you work in a place that pays into the teacher retirement AND social security for 5 years (in my area), then you can eliminate that Windfall act and collect the full amount (that you are entitled to) from both sources. So, after 18 years teaching, I now work for my county government which is one of those employers that contributes to both.

    2. I am a retired government employee and collect both my pension and Social Security. As others have said, it all depends on where you worked.

    3. In addition to TRS (the Texas Teacher Retirement System), Rob probably has access to a 403b, which is like a 401k but for educators. And he probably has no company match because that all goes to his pension. But this vehicle adds to the amount you can save in retirement plans, and they probably have an low-cost option like Fidelity index funds or at worst TIAA-CREF.

      For TRS, it’s possible that staying in teaching a full 10 years will dramatically improve what you can get from your pension over contributing for less than ten years–he should definitely research that before choosing a quitting date if he’s still flexible at all in continuing to work there.

  3. They can both contribute $6000/yr into a individual Roth IRA and should after they max out any match their employers offer in retirement accounts.

    1. I don’t know the pension system in TX, but it is possible there is some portability with other public sector jobs. If that’s true, his pension benefits would grow if he worked at a public library or took another job more suited to his personality.

  4. Congrats Tara and Rob on building such an awesome life. I love your outdoor space, too! Seems like you’re doing great financially. To add to Liz’s advice– I do think you should max out your retirement contributions. You have a big savings margin and a LOT in taxable investment account, so you have a lot of room. and as Liz noted could stand to up the retirement side a bit. since it’s pre-tax you won’t feel the hurt to your bottom line that much. You can start to roll over a little bit every year into your Roth (you will get a tax bill for this so just do it a little at a time) to get back that flexibility you’re fearing losing.

    thank you Rob for your teaching service, agree with Mrs FW it’s time to set yourself free as it doesn’t seem like it’s making you happy. You can weigh the pension implications as Mrs FW notes — if it’s a ten year vesting, maybe worth it to stick it out? But I bet Rob could make up for losses with a higher salary in consulting as Liz suggested, so don’t feel beholden to the pension either if you’re miserable.

    Enjoy your date nights, and also, get those new clothes you want!!

  5. If Rob is an introvert (so am i) and a teacher he needs to look at teaching for one of the online schools. It is a great way to still stay connected to teaching, but it is much more fun for an introvert. I teach at the university level and online so I get the experience of connecting with others but can still be the homebody I am.

  6. Go out to eat! Have those date nights!

    That bread looks delicious.

    This wasn’t addressed in the post, but Texas has made abortion a felony. If you haven’t looked into permanent birth control, now might be the time (although you may have difficulties doing so because of your ages).

  7. Congratulations, Tara and Rob, on what you’ve achieved so far! Well done. As a Canadian, I can’t offer anything useful by way of your investments. However, I wonder if Texas offers opportunities for Rob to do tutoring in a work from home format? This would let him take immediate advantage of his teaching degree, while permitting him to do one-on-one work instead of being in the hectic classroom environment (my mother was a teacher, so I know how challenging it can be). Alternatively, perhaps there are career paths at local community colleges, maybe with some additional education. Teaching adults would be far easier on the nerves, I expect, and would not require as much of his time each day. Best of luck to you both! Life is short – enjoy yourselves.

  8. Quick note around a career change option for the creative introvert … I just finished a 14-week software development bootcamp to get out of a career that required a LOT of interaction with the general public. I wanted a field where I could work closely with a team (but not Anyone In The World With An Opinion), that offers more reliable work-from-home options, and that requires attention to detail and provides opportunities for you to flex your creative & problem-solving brain muscles regularly. There’s a ton of demand and seems to be a field with clear opportunities for growth. The cohort starting in a few weeks includes a LOT of teachers. This might be a career field that would interest Rob.

  9. Retired math teacher here, and extreme introvert. Great job so far, Tara and Rob! I note that Tara’s 401k is described as “Tara’s Roth 401k” so if that’s correct, then her contributions are posttax. The employer match, however, is pretax and goes into a pretax 401k.

    For Tara and Rob’s taxable account, to simplify I’d recommend focusing first on looking up the cost basis and turnover rate of their highest-cost nonindex specialty investments (Midcap Growth, Healthcare, Equity Income). From them sell whatever they’ve owned for 1+ years that generates the lowest long-term capital gains. This will improve tax efficiency. Also sell anything that generates a loss to offset the gains by up to $3000 (losses greater than $3000 can carry over to the next year, but I aim for simplicity). Then park the proceeds in the Total Stock Market ETF *or* pay extra on the mortgage *or* fund a Roth IRA for Tara *or* help with cash flow while increasing contributions to the employer retirement plan. If they want to simplify further, either right away or in a later tax year, then repeat the process with Growth Index and 500 Index, since Total Stock Market overlaps them completely. I did all my own financial planning, but for help Tara and Rob could pay a financial advisor (I’d recommend an advice-only fiduciary advisor).

    I didn’t see Rob’s subject mentioned, so I’m not sure what consulting or other work might be suitable. I lowered my teaching load by taking on the school’s academic scheduling; it was a lot of solo work ideal for an introvert. If Rob needs to stay at the school for a while longer to qualify for a pension, perhaps some such nonteaching work would be available.

    1. Glad someone else went into the weeds on sorting out the investments! Since the market is down about 15% now is a great time to move some of your money out of your highest cost funds (.3%). You can split the cost basis by contribution and sell specific shares that have been held long-term but have have risen by a modest amount or fallen. I wouldn’t worry about moving money out of your other funds that are low-fee. And you don’t necessarily need to move any specific purchases if they have risen a lot and are going to get a big tax bill.

      Moving forward, I don’t see any reason not to max out your retirement accounts, especially since you have access to a Roth401k. You aren’t planning to purchase a new property, so you seem overinvested in taxable accounts compared to retirement accounts. And since you are investing in a Roth401k, if you decide to retire early you can roll it over to a RothIRA and have the option of withdrawing contributions penalty- and tax-free before age 59 (there are hoops but it is doable).

      Since you mention the pension, it is definitely worth looking at what is offered and what is given up if you leave at this time. Maybe there are other jobs within the public education system or local government that would still fall in the pension system but be a better fit? I have seen teachers move to administration roles, librarian roles, IT roles etc even within the same school. Those might be a better fit for someone who would rather be working with small groups of people rather than performing for a class.

    2. 1PF, you are right! Her 401k contributions are indeed Roth (and thus, not pre-tax). I somehow missed that when I was reading her Study… HAH. This is why it’s so good to have all of you eagle-eyed readers offering advice. Thank you!!!

  10. Finally, someone from a large city in Texas, in a condo, with cats (I have a dog, too), and no kids. And, also, your HOA fees are $4 more than our condo fees. I have a feeling judging by the photos where you are, but it doesn’t matter.

    I agree with some other commenters. My friend teaches Jr. High School level online and has for years prior to pandemic. She loves it and gets to travel more. My other friend just got an online teaching role at University of Tennessee at Knoxville. I feel like online teaching would be best for an introvert; you just may have a dip in salary.

    You are doing great! Love the figurines and the bread. My husband is also the cook of the house.

  11. Thanks everyone! A few things to address:
    -I actually have a choice to make Employee Pretax or Roth Contributions to my 401k. I have chosen Roth contributions, so my 401k is actually not pre-tax. I do pay taxes on the money as I contribute. I’m open to suggestions if I should change my strategy and make my contributions pre-tax.
    -I’m not sure if I should max out my 401k in light of the fees or if I should open a separate Roth IRA (like Rob) and max that out to $6,000 a year. We do max out Rob’s Roth IRA each year.
    -Rob’s pension is through TRS (Texas Retirement System). He is eligible to receive it once he meets the age of retirement (65) and has had at least five years of teaching (he does). Here is the annuity calculation:
    Average Salary = Average of Five Highest Annual Salaries
    Total Percent = Total Years of Service Credit x 2.3%
    Annual Annuity = Total Percent x Average Salary
    Monthly Annuity = Annual Annuity ÷ 12
    -Another thing to note is that we do look at our taxable investments as part of our overall retirement fund. We do not plan to touch this. Is it too risky to think of this money as retirement money? We do plan to adjust our bond allocations as we age and get closer to retirement. I prefer investing this way vs. maxing out my 401k because it gives me freedom to have more cash flow each month should an emergency crop up. We just put whatever we have “left over” each month into our investments. For example, we recently had a month with more expenses and were able to stock away about a quarter of our normal savings. If I had maxed out my 401k, we wouldn’t have had the cash flow that month and would have dipped into savings. Are the tax advantages in maxing out my 401k worth it as a reason to adjust my strategy and (perhaps) feel a little more insecure each month due to lower cash flow?

    1. -I somehow missed that your 401k contributions are Roth when I was reading the Study… HAH.Thank you for the correction!!!
      -In terms of your concern about fees–as I read it, the fees on your 401k and Rob’s IRA are exactly the same, right? Given that, there’s no “fee-related” reason to switch.
      -The tax question comes down to your combined annual gross income and whether you think your salary will be higher now or when you’ll be taking $$ out of your 401k/Roth IRA.You either pay the taxes now or later. There’s not really a “right” answer, but you would reduce your current tax burden by going with pre-tax now. On the other hand, your income is likely such that your tax burden isn’t all that great–but this is something you can look into.
      -To answer this question: “we do look at our taxable investments as part of our overall retirement fund. We do not plan to touch this. Is it too risky to think of this money as retirement money?” That’s perfectly fine and that’s typically the assumption with taxable investment accounts.
      -In terms of cash flow, I think you need to do whatever you feel most comfortable with. Since your 401k isn’t pre-tax anyway, I don’t think it really matters. Again, if it’s a priority for you to reduce your taxable income, you can switch over to pre-tax and/or open Traditional IRAs.

      1. As far as my 401k fees, I think I know what happened! I see the breakdown of my fees for my 401k on Personal Capital, and it seems like a lot. I don’t see Rob’s Roth IRA fees in real time, so I never reflected on them. You are right, our fees are the same, I was just confronted with mine and assumed they were high. Thanks!

        1. Hi Tara! since you mention using Personal Capital – I have my savings/emergency fund in their cash account which is currently paying 2.02% interest! If it were me, I would max out my employer 401K Roth account to the 2022 limit of $20,500 while you are young and it has many years to grow tax free.

      2. The fee related part stood out to me as well — they’re both the same AND 0.08% is – at least in my opinion and experience – a great expense ratio! The decision about where to invest I think should mainly be about taxes as Mrs. FW mentioned. One thing I think is worth consideration here is whether you plan to continue living in Texas post-retirement, since TX has no state income tax you won’t be paying income tax on the money whether you choose to put it in pre-tax or post but this could change if you live somewhere that has state income tax – if thats the case I would continue contributing Roth now as ANY state income tax you pay in retirement – even if based on a lower future income – will be more tax than you would pay on it now.

        In regards to the career side — I worked a year in teaching and it wasn’t for me. I also know several people who transitioned out of traditional teaching in the past few years. Some of their “post teaching” jobs have included — workplace training/development; teaching in a less traditional setting – online teaching, working with small cohorts of home schoolers, tutoring, before/after school programs, teaching adjunct at local colleges etc; I have also seen non-profits advertise for people with an education background – i.e. before/after school programs, curriculum coordinator for an academic based out of school time program, program or education coordinator at a YMCA, Boys & Girls, JCC or similar. Some of these roles may be more introvert-friendly than others.

    2. Yes the tax advantages are worth it. The expense ratio of 0.08% is really reasonable, so definitely not a reason to invest less in your tax advantages funds.

      Your emergency fund is for emergencies, so go ahead and use it for things that come up! I know you mentioned you didn’t want your employer to have so much information about your finances, but you may be able to make changes online instead of in person. And I can pretty much guarantee that no one in HR is judging or even noticing that much how all the employees are contributing – no one cares about your life and your financiers as much as you do.

      1. Strongly agree with this! The tax savings on retirement accounts are huge. Prioritize maxing out a Roth IRA for each of you, followed by the 401K. As others have mentioned, you are able to access money you contributed to a Roth IRA 5 years after you open it.
        If you’re worried about cash flow and depleting your savings, maybe just add an extra month of savings to your checking account. Also that wouldn’t even be an issue with the Roth IRA since you can contribute to it whenever you want until you hit the limit.

  12. Rob, you may want to check out the Millionaire Educator website as well as listen to a few of the podcasts he has been a guest on. He has some great insights into teaching and finance.
    There are also some good resources to investigate the Windfall Elimination Penalty and Government Pension Offset which may impact social security benefits (including spousal and survivor benefits. See Devin Carroll’s blog and YouTube channel.

  13. Maybe I misunderstood, but it looks like Tara is contributing to her 401K as a ROTH 401K (so her contributions are post tax, employer is pre-). I know that at my house we waver on if our retirement $ should be pre- or post- tax (so right now we have a mix that is about 80/20%), but that would be a way to reduce now taxes (but would need to be considered distributions later). Depending on how the 401K is setup, they should be able to do a mix as well (reduce now taxable income some).

    I personally would consolidate the brokerage (as long as there isn’t too much that will be subject to short term capital gains, or maybe just some of it), and maybe dial back contributions to that, in order to fully max the more tax advantaged accounts (401k for Tara, continue Roth IRA for Rob, and maybe a ROTH IRA for TARA).

    We started putting a portion of our e-fund into I-bonds, and keep adding yearly – to leave it there to act as our “stable $” as we get closer to retirement (and keep our 401Ks/IRAs in more stock) – unless there is some better option in the future.

    1. Katie, you are right! Her 401k contributions are indeed Roth (and thus, not pre-tax). I somehow missed that when I was reading her Study… HAH. This is why it’s so good to have all of you eagle-eyed readers offering advice. Thank you!!!

  14. My husband and I are both former teachers. It can be really difficult when you’re a teacher and under contract to take the leap and find another job. The timing is weird because you don’t want to leave in the middle of a school year. I can tell you that there are SO many educational software companies looking for people to join their team as as software trainers- look for titles like user ed, software consultant, professional services etc. I work for an educational software company and my husband now works for a university as an academic advisor with FABULOUS benefits.

    Think of all of the software he encounters while he’s at school and check out their careers pages. Companies like Power School, Blackbaud, Clever, School Admin to name a few are always looking to hire teachers and most roles are fully remote.

    It can be a big scary jump, but I can tell you it’s totally worth it.

    1. Thank you! This is reassuring. Yes, the contract issue is something we ran into over the summer as we thought about a career change for him. You can’t break a contract, but it’s scary to not renew and just hope for the best with a job search. As you say, the timing is tricky. We are thinking spring is the best time to start job searching.

  15. Tara and Rob are doing very well. I wonder if he has looked at going into administration instead of actively teaching? Was that mentioned and I missed it? Is that even a possibility? Online teaching is another one. Getting a pension is so rare these days – I’d try to find a way to stay in the system if he still has a few more years to be vested, until he is at 100%. On the other hand, if Rob can find another job with a much higher salary, he can put away that much more money for his retirement, and may get a percentage matched by his new employer.

    Good luck!

  16. Liz, please reconsider advising people to contribute to retirement plans (IRAs, 401(k)s, etc.) pre-tax. I seriously challenge you (and most financial advisors) who predict that a retiree’s tax rate will be lower than their tax rate is during their earning years. I know that’s the received wisdom. In my never-humble opinion it’s bunk.

    No one has a crystal ball. But it seems unlikely to me that tax rates will fall.

    Let’s say that Rob & Tara will have a total of $2m in retirement arrangements the first year they both must take a Required Minimum Distribution. That means they’ll need to pay taxes on around $75k of retirement income — beyond any other income they may have like social security, wages, and taxable investment income. That’s a substantial T amount of taxable income — let’s say (conservatively) they’re in the 22% federal tax rate and they’re still in Texas with no income tax. The federal income tax on the RMD would be around $16.5k.

    For the last couple decades I’ve advised young friends and relatives — if there is ANY way they can swing it financially — to pay the income taxes up front and take the Roth path. Then taxes never have to be part of the equation — ever again.

    1. I agree. RMDs from a pretax account can be a huge eventual tax burden. I started a Roth IRA at Vanguard many years ago, using stock index funds for higher (and tax-free) returns. As soon as my school’s retirement plan began offering the Roth 403(b), I chose that. I’d rather pay taxes at a known rate now than postpone them to an unknown rate later.

      At retirement I rolled my Roth 403(b) balance from TIAA to the Vanguard Roth IRA, and I rolled my pretax 403(b) balance to a Vanguard traditional IRA. My traditional IRA is mostly in safer and lower-returning bond funds (Short-Term Treasury Inflation-Protected Index), which keeps the RMD from skyrocketing as years go by.

      If I need to withdraw more from my portfolio than the annual RMD in a year, having a mix of Roth IRA, traditional IRA, and taxable accounts gives me flexibility. For example, if exceeding a tax bracket by taking more from the traditional or from selling shares in the taxable account would incur excess Medicare fees, I can take from the tax-free Roth.

    2. Agree. I did a terrible (super back of the envelope) math exercise a few years ago to see what my RMD would look like if the market performed at 5-7% /year over the next 30 years (to get me to 72)….it is more than my household current income (thanks to high income/ fantastic corporate contributions / diligent personal contributions in my 20s).

      So we switched my husband to Roth 401K contributions, and I pay the taxes to convert my SEP IRA every year. These are definitely higher income problems (which I never thought we would have…and am thankful for), but also things no one talks about. We hope to RE, and roll if we can, but it’s hard to know what the future holds (jobs, tax laws, health………)

    3. Totally agree. There are taxes in retirement that you probably don’t realize ! Social Security for a couple is most of the time taxed federally because the income threshold is so low. RMDs, taxed…Pensions sometimes taxed, depends on the state. A mix of pre-taxed retirement vehicles and Roth IRAs is the best strategy. You can choose to take income from these different buckets to minimize the taxes you pay when you retire. The government changes rules all of the time, so the perks of the Roth IRA May not even apply by the time you retire.

    4. I disagree and would recommend maxing out pre-tax. Even if they are forced to withdraw $75k, you forget the deductions. Right now, I believe a married couple’s first $25,000 are tax-free, so only $50k is taxed. One of the good things about living frugally is that in retirement, you are only living on what you withdraw, and since you only withdraw what you need to live, that amount is probably much less than your income while working. Say we earn $160k now, but need $60k to live on. I much prefer shifting dollars out of the $160k bracket and into a future $60k bracket.

      Not to mention, investing pre-tax also gives you an extra 10 or 20 or whatever % to invest today and start growing, instead of paying the tax and investing what’s left.

      1. Thanks for your input Norm. Just want to confirm–for it to be invested pre-tax that would mean investing in a traditional IRA, correct?

    5. I completely agree, and when I am eligible I am going fully in on Roth401k. My current tax rate (after child credits etc) will be around 10% or less on a relatively high income. When I ran the numbers for retirement, SS and pension will conservatively be 70-80% of my income next year, without any of the dependent tax breaks and likely higher tax rates. So the name of *my* game (you run your own numbers) is to spend down anything I have in traditional retirement accounts before RMDs kick in. My strategy mg change if my income changes drastically.

      Plus don’t you want to be taxed on the money when it is $10,000 rather than when it has grown to $80,000 3 decades later?

  17. Re: your investments and taxes.

    Considering that the majority of the money is in the index you want, I’d be tempted to just leave it as is. None of the expense ratios are particularly high, and as you contribute more money to the single fund you want to primarily own, the expense ratio will only get less expensive over time as your exposure to the others slowly diminishes. In a sense, treat it as if you had bought an individual stock and when you’re eventually ready to sell part of your portfolio, pick these off first.

    As for your taxes, index funds are tax efficient by design. The bond fund is the most inefficient, but it’s only currently about 10% of your overall taxable account and, as mentioned before, will decrease in exposure with time. If you really want a more detailed tax picture, you should hire a CPA and do a consultation to go over things more thoroughly, but at a glance you don’t appear to be bleeding from your tax burden, so I wouldn’t lose sleep over it. I also recall you saying that you have a choice between traditional and Roth contributions to your retirement account and you’ve chosen the latter – that’s also a decision I would want you to run by a CPA to run numbers and make sure that’s the best strategy for your family’s situation.

  18. Perhaps this is helpful. I created a savings “sub-account” on Quicken which I call the Travel Fund. This is money earmarked from our savings specifically to be used for travel. This way we don’t agonize about whether we can afford to take trips. If there is money in the account, we can afford it. Every month I sweep left over money from checking into savings. $600 of that sweep is credited to the travel fund, so it is always replenished. Maybe you can start a Fun Fund, and the money in that “account” can only spent for dinners out, travel, etc.

    1. This is a great idea! I think it would be helpful to have it physically set aside for fun. Right now, I just think of that sort of money as “well it could be invested. . . . ” Thanks for giving us permission to have fun 🙂

      1. I was going to suggest something similar – a budget for the fun stuff.

        You also mentioned that you find it difficult to budget for unforeseen things, like home fixes. For this, we have also created a sub-account into which we put a certain amount each month and then take the money out as needed. That way the emergency savings don’t get touched unless there is a larger emergency.

  19. I am taking this school year off (teacher of 22 years). The last few years especially were especially draining and I wanted to explore what other career options might be available. I suggest Rob check out the Teacher Career Coach website. This is a blog, jobs board, podcast, forum, etc created by a former teacher. She has so many resources for teachers looking to transition to other careers, as well as strategies to support teachers who want to stay in the classroom.

  20. I would like to reassure you that it is possible to retire early. We did it by 50 (I was 45) although it took some years of radically reducing our spending and also taking side gigs (like your husband doing commissioned art work now). By the time we quit working we did have eveery single obligatioin paid, including our home. Both of us are introverts, too, and I cannot express enough how wonderful it was to be able to be social when we wanted without having to be social all day long at a job. You already have a good head start so more power to you! The freedom is worth every effort you put into achieving it now, while you are young and still have the energy to do things like side gigs.

    1. Thank you, Lindsey! Yes, a big question we had going into this was if retiring early was even possible for us on our salaries and at our savings rate.

  21. Hello, fellow introverts. If I’m not mistaken, at your income level, I would be looking to maximize any tax-deferred investments. I know I did a comparison once of different investment account types with different expense ratios at different income levels, and I found that saving pre-tax dollars becomes more important the higher you move up in the income tax brackets. So if that’s possible in either of your retirement accounts, that’s where I would invest first. And at a low 0.08% fee, you can be comfortable really just maxing out on the pre-tax before investing post-tax dollars in a Roth IMO.

    Also, forget about investing in individual companies. We have a few just for fun, but it’s totally not necessary. Instead, I would concentrate on making an asset allocation (sounds like you don’t have one) of a certain % in stocks, a certain % in bonds, plus healthcare or REITS or whatever you like, and make sure that in total, you stay close to that percentage. I re-balance twice a year, that’s all.

    And honestly, these are just some minor details. It sounds like you’re already doing really well.

  22. I was a teacher previously and also found it anxiety-inducing. I am now a learning designer (also known as an instructional designer). I work for various organisations as a contractor/consultant helping to create learning materials and assessments. My work includes helping online distance learning institutions create their online courses, helping vocational education providers create pape-based learning guides and assessments, and helping a professional training institute for board directors transfer their face-to-face learning workshops to an online workshop format. If Rob likes using a computer and has an affinity for learning new software quickly, this could be a great job. Note – I don’t write the learning material – I work with a subject-matter expert (SME) to create it – so I can work in any subject area.

  23. I work in FWISD in the DFW area, one thing that came to mind would be for Rob to look over his employee handbook to see if either taking a sabbatical or what is called a regular leave of absence is an option. My district offers both and while you are guaranteed a job upon returning, I believe you aren’t guaranteed your current job. That would give him more time to try to get something else going in between school years. Also when you sign your school contract you do have up until 45 days until the first day of school to get out of it. I believe this usually falls around July 10th. That would allow him to sign a contract and then back out if he is able to secure other employment. Nice to see a fellow Texas teacher featured.

  24. You guys seem to have built a life that you love! Since it seems like maybe the major concern is Rob’s job, and the potential of needing to retire early due to that, I wanted to address the financial aspect of that.
    Your spending matches your take-home pay without Rob’s income, which is after a 15% retirement contribution. 15% is sufficient to be on track for traditional retirement (though 20 is even better). So in theory, Rob could quit his job whenever he wants, and you guys could make it work for your current cost of living to cover living expenses and save enough for traditional retirement. That said, it is obviously much less risky and helps improve your savings/investment to have an additional source of income – but you do not need to worry about needing Rob’s salary to match his current salary. I think that if Rob wants to leave his job, he should do so, and should look to find a job that he will find more sustainable that will increase your total income and reduce your financial risk. But don’t worry so much about a potential pay cut – because of your low spending, you are very much in a position to take a pay cut if needed to make you happy! No need to wait for financial independence to do that.

  25. Nothing sadder than a teacher who doesn’t want to be there. fly free Rob! What advice would you give your students?

  26. I wonder if he’d be happier working as a math or literacy interventionist. Small groups or 1:1 with kids is awesome.

  27. These comments are all so helpful! I appreciate everyone’s support, especially the teaching and career advice. My main question is this:

    Does it matter too much in the long run if I invest in my Vanguard Total Market ETF instead of maxing out my 401k? If the max contribution for a 401k is $20,500, what if I invested that same amount into my Total Market ETF account instead of choosing to max out my 401k? It’s all the same amount of money, but with a method that gives me more freedom and peace of mind because I’m managing it. I like this approach because it feels more conservative and I have cash flow on hand if I need it. I can choose how much is left over at the end of every month.

    1. This is really a question of taxes and how much you want to automate things. Personally – I am going for a strong Roth strategy so I will only begin doing outside investments when I am able to invest MORE than $20,500 (roth IRA) every year I really want my money to grow tax free, not be bound by any RMD requirements, and be free from the worry of taxes in retirement. But I also have a target retirement age of 58-59 and my partner will be able to collect from his pension by that time so even if I had 6-18 months not being able to touch the 401K penalty free that would be okay. I also LIKE that my 401K is automatically deducted and that I am not bound by “what is left at the end of the month,” I was trying to balance Roth contributions and savings but found that I wasn’t ending up w/ as much to save at months end as I anticipated on paper… so I majorly bumped up the 401K deferral and then I don’t have any choice but to save it! But if you have better control of your spending and investing habits than me that might not be necessary.

    2. You can calculate the taxes to figure out roughly how much money you are losing by using this method. It won’t be exact since your 401K is Roth rather than traditional, but they have similar tax benefits in the end. I’m guessing your top tax rate is 24%, so you’re paying around $5000 extra in taxes each year (0.24*20500) if you don’t utilize the account for the tax benefits. And then you’re also giving up the potential to be investing that additional money. It’s less clear-cut to calculate with Roth accounts since the tax benefits are on withdrawal rather than contribution, but it’s generally fair to assume that the benefits will be roughly the same.

      So basically it comes down to whether you are willing to pay $5000 a year (or whatever it is, if you are contributing some of the $20500 to your 401K) in order to get the sense of flexibility that you want.

      Additionally, you ultimately can have much of the same flexibility with a Roth IRA that you do with a taxable investment account, so you should definitely max out both of your Roth IRAs before investing in your taxable account.

  28. I just cannot tell you how important pensions are to your retirement picture. We have pensions although mine is considerably smaller but increases 2.5 percent a year whereas my husband’s does not change yearly. We both have full social security, I worked longer and drew my own social security at 70. For the 4 years before that I drew on my husbands earnings, an amount that was 50 percent of what my husband drew and still worked as I was at full retirement age. I think that loophole has closed though. So many nurses that I know have no pension and neither do their husbands. Numerous of them stopped working as soon as or even before they turned 62 and drew the lowest amt of social security. I know everyone nowadays wants to retire early, coastal retire, etc. Everyone thinks about it but the reality is that very few are able to do this without very high incomes. We saved in the markets, 401k and iras and taxable accounts for well over 40 years and it is a blessing not to have to worry now at our age. Nothing is more stressful than to be 70 with little income other than social security and a paid off home. We have neighbors in this situation at age 70. She works at a restaurant waitressing. He has back pain and cannot work. They spent their 401k to pay for their house, now have no cash and per their statement never had enough money to put any into the stock market. Their house needs painting, has not been painted since we moved here 22 years ago, both of their cars are very old. They seem to wear the same clothes, have not been on any kind of vacation since they moved here 9 years ago, etc, etc. You absolutely do not want to be like that when you are in your 70’s. You already are far above their financial situation and I commend you for that. Just remember inflation pops it’s ugly head up frequently and you suddenly realize your money doesn’t go as far as it did the year before. Also health problems arise. My husband is on an expensive blood thinner and inhaler. Insurance helps a great deal but once you get into the donut hole which for us is the third quarter of the year, you pay much more for those expensive brand name drugs. And there is still a donut hole. Also, Medicare does not pay 100 percent at age 65. You need a medigap policy to make up the difference and a drug policy for drug help and dental policy and vision policy. We are insuranced to death but that is the reality in older age. This is why the CPI-W is a poor way of determining social security cola each year. I am not a clerical worker or an urban worker. I am a retired nurse and we do not have the same expenses that a clerical worker or urban worker has at least not until they are retired. I encourage both of you to work at a job with a pension and your husband to hang onto his job. I cannot even count the number of times I left the hospital saying to myself that I just can’t do this any longer. I went home shell shocked many a day. Just sat in a chair for an hour at home trying to get a grip on the days horrendous events, lack of staff, etc. Nursing is very stressful. I hung in there and kept going to work for 43 years and am so glad now that persevered. I am also a bit introverted so I understand. I think it is good to be somewhat forced to interact with people. I don’t think sitting at a desk at home is healthy but that is just my opinion. I wish you the best and without children you stand a much greater chance of becoming FI, perhaps not as early as you hope though. Also not wishing to move into a dream house with added cost is definitely in your favor. Good luck to you both.

  29. If your real goal for date nights is to get out of the house for special times, you can be a lot more creative with less money. You can have picnics. Or do activities like movies, miniature golf, or bowling. Or check out informal classes or activities hosted by your library, church, city, or various interest groups.

  30. Hello, my husband and I are retired educators, child free by choice and have 5 shelter cats!😀 No regrets! My career was in women’s health and I agree with the previous comment about getting vasectomy/ tubal ligation done soon if that has not already happened. Your lives sound on track. Pensions are great, but not dropping dead from stress is even greater. Best wishes to you both and sending your cats virtual catnip ❤

  31. Your case study resonated with me! Not only am I a ‘Tara’ too but my husband and I are child free by choice and have 2 cats.

    Thank you for sharing your feelings of anxiety when it comes to being frugal! I struggle with this from time to time- trying to keep more of what we make and enacting a budget/frugal spending. We have done well in spending money on what matters to us and saving for the long-term. But I sometimes wonder if I’m placing too much pressure on us and not living in the moment. I also am quick to share that I overthink most things in life. 🙂

    I have this ‘life is short’ reflection and get anxiety that we are not donating more to charities that we love, traveling more regularly, or buying the fancy champagne. Just examples of course. But if I consider either splurging to the extreme or saving to the extreme, I find I personally seek a balance for personal content. By having a budget or “bucket” for categories helps us predetermine what matters most but allowing some margin for spontaneity.

    So I share some of the anxiety you mention. You both are doing so fabulously, and there are some excellent observations and tips above. You cats are beautiful!

  32. I think they may be served well with hiring a financial advisor on a fee basis for some education on their tax situation and assistance is setting up a structure they understand for both pre and post tax accounts. Knowing why they are investing and how the taxes work with each type of account and investment will give them some peace of mind. Find someone who isn’t working for a life insurance company or investment company who is incentivized to sell products. I believe you can Google certified financial advisors in your area and interview them to determine that they can assist with answering your questions and help without a heavy sales push. It’s ok to pay someone to help you set a structure up and understand how it works.

  33. Hi, Tara!
    The way I look at it is that you have enough in your brokerage account if you needed to access that money. There are two, actually three, advantages to the 401K. One is that you defer taxes if you choose pretax savings. If someone does enough (not you and your husband could give 20,500 each on 2022, that can bring your income down 41,000! If that pushes you from 22% to 12%, that is a huge savings. This can just be fine while you are over a six figure income. Growth can rarely make up for that 10%.
    Second, you can sometimes put in Roth money and roll it over to your Roth IRA (individual) account. It had a 6,000 limit. As long as you account for taxes, you can roll it over and exceed that 6,000 limit. Many wealthy people who cannot have a Roth IRA do this. See if your plan has an after tax contribution. This can be rolled over while you’re still working if your company allows it. Look up back-door Roth.
    Third, and you’re taking advantage of this, you get the Company match.

    What you have to do to make up for when you may need more money from your paycheck, if you max out 20,500, is have your emergency fund accessible so that you can draw our 5-10,000 if needed. Then, replenish your emergency fund.

    You’re doing great!

  34. I wanted to address the idea of anxiety about frugality. I totally get this! I can fall into what I call “frugalrexia” where frugality becomes a perfectionistic weight over my head. Where I second-guess all purchases and feel guilty when I spend money that I can totally afford to spend. I have trouble admitting that some things are actually NEEDS (for example, new underwear when the old stuff gets ratty). Or that it’s really ok to throw out that old gross sponge that’s been through the dishwasher 25 times and replace it with a new one. Or that it’s ok to want nice things and to purchase them if I have the money. A few months ago I wanted to buy a brand-new purse I saw at a resale shop. It cost $20 and still had $90 tags on it from a nice store. But then I told myself “it’s too much to spend when you could go to Goodwill and get a used one for $5.” I can totally afford $20 for a new purse and my old purse is so beat-up that it’s falling apart. For me this type of anxiety and decision paralysis is related to my anxiety disorder and OCD. It also feels a lot like an eating disorder I suffered from when I was younger. I’m learning to make better choices through therapy and medication has helped me too. I bought the $20 purse and I LOVE it! If this resonates with anybody, I hope you will seek therapy. Frugality is supposed to be a loving and kind choice, not a burden and a perfectionistic straight-jacket.

    1. My husband had a 2005 Scion xB. He drove it until he was hit in 2011 and it was totaled. Thankfully, he was perfectly fine but we were so sad to lose that car. I was excited to see one listed here. He replaced it with a Kia Soul (which he’s still driving) but it’s not as fun!

  35. Retired teacher here. Also punished by working before teaching and then moving to California. It takes 30 years I think to be 100% invested. However, there are other cut-off points, maybe 15. Probably not worth the stress if only half way there. While I am getting a better payout on the amount invested in California retirement program than my TSA (401K for teachers, sort of ), I am really glad I made a point of setting aside money in a separate fund. I have a financial advisor that specializes in educators and used to be a banker, very good at forecasting. I recommend getting an advisor, make sure they are not vague about numbers and all the usual precautions. Also, while my fund earned from 2-10% and there were years that were low, I was always in a fund that never lost money,(set up that way). That was a comfort to me.
    Thought on frugal: if uber saving for a goal within reach of attention span then not so hard, but if 20 years out, would require a slightly more relaxed approach.
    Thought on what to spend money on: stuff is not as satisfying as events, experiences, and people. Don’t forget being in nature, healing and so so spendy as other things. And don’t forget charity/generosity. That improves money attitudes in my experience.
    Alot of people are worried about the fast fashion of the clothing industry and the waste and harm to the planet. Frugality is of benefit to the future of everyone. This is where quality clothing wins, and thrift stores often have better old quality than available/affordable if new. Consider that the more stuff you collect, the more storage you need. George Carlin was pretty funny on that. The more stuff, the more time on upkeep, putting away, organizing. (I know about this!) well, I hope something was helpful.
    My personal attitude is that I can do anything I want, just not everything. How do I want to use my time?

  36. Tara and Rob, I feel like you’ve already created a fantastic position for yourselves.

    If you two would only earn enough to cover your current expenses, so that you could leave your savings and investments to grow over time, a rough estimate is that in 15 years or so you would have enough money to be FI. (By that time you’d have roughly $1 million from your current $380k in investments).

    So to me that means (indeed) that Rob should start looking for a new job right now. Maybe he can go parttime in his teaching career as a first step. Maybe he should just move on and find a different job that brings him more joy. Rob should create an income of at least $1k posttax per month. That’s an incredibly low amount and very easy to get to for someone with his talents, diplomas and experiences; so he has a lot of freedom to find any type of job that brings in at least that much and that brings him joy or at least much less stress/anxiety.

    It is very likely that Rob will bring in more than $1k/month over the next couple of years. That means that you two will probably reach FI status even sooner than 15 years from now. (And it can also mean that you two can start spending a bit more on fun/sastisfying/interesting stuff and activities).

    So there is an abundance of options in your life. Please make new decisions from the comfortable position that you’ve reached by working hard so far.

  37. I had to noodle on this great case study – and the adorable cats – for quite some time! Tara and Rob are obviously doing great, but there is a big exception… taxes. Getting the tax situation right is so critical to personal finance. I admire Tara for saying she doesn’t understand them and coming here for some feedback!

    Work on educating yourself about how the taxes for each type of account work. It’s super boring (pre-bedtime reading?) but super important. You’re doing such a great job saving that I hate to see your hard-earned money eaten away by taxes. For example, you actually pay taxes twice on money that’s in a taxable brokerage account: first when you earn the money, and second when you take it out (although those are at lower capital gains rates, but that 15% could change over time). Even though you’re thinking of the brokerage account as being flexible and accessible, it’s not, really – imagine that the market is down 40%. Do you really want to withdraw from that account at that time? You could, sure, but it wouldn’t be a strategic move.

    If the tax issue is just so boring you can’t stand it, another good way to think about which accounts to use and why comes down to two words: diversification and flexibility. By having money in diverse pots, all with different tax treatments, you give yourself flexibility to manage your cash flow and tax bill at various points in your life.

    I found a technical but very helpful document from T. Rowe Price called “How to Make Your Retirement Account Withdrawals Work Best for You” that helps visualize the above notion: Scroll to pages 3 and 4 and read the “before and after” example of “Retirees with Relatively Modest Income.” That’s probably pretty close to your situation. It helps to visualize why it’ll be good to have a variety of differently-taxed accounts – so that you can draw on them at different times during retirement.

    Ultimately, I think you should redo which accounts you’re contributing to. It is likely that your best order of priority is the two Roth IRAs (open one for Tara), then your pre-tax 401k, and finally, the taxable brokerage account.

    (Note: Before redoing all your monthly contributions, I would get really clear on what Rob’s estimated pension is and what your estimates are for Social Security. Those are important to have so that you feel secure in your strategy!).

    I don’t have a taxable investment account so I have no experience with buying/selling funds within one, but the folks who have already commented with specific directions on how to better optimize that account seem spot-on. I don’t see why you’d keep funds with .33 expense ratios if you don’t have to.

    Tara mentions being nervous about cash flow a few times. I totally hear this, and the way I’ve dealt with it is to have 1-2 months of expenses sitting in my checking account. I hate budgeting/tracking every dollar (sorry, Mrs. FW!), so it helps me to be okay with having automatic withdrawals into my retirement accounts.

    Finally, does Tara really want to FIRE, or is it more about having flexibility to do something like freelancing? I ask because I work in communications, and there are several wonderful editors on my team. I love my field, and Tara said she does, too. So, why FIRE? Is it possible to shape your plans such that Tara still earns some income later on? I feel like having a job that you love is a gift and can help in so many ways.

    Best of luck to both of you!

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