Afford Anything - Ask Paula: I’m Bored at Work, and I’m 14 Years from Retirement; Should I Tough It Out?

Episode Date: October 19, 2021

#344: Russell’s job offers the option to contribute to a 457 plan. Since he’s in the highest tax bracket, should he take advantage of the tax deferral offered through the 457 or invest within a taxable brokerage account? Anonymous is on track to be financially independent in 14 years, but isn’t living up to her potential working a boring job. How can she live up to her potential and do more without sacrificing her quality of life? C wants to know what tax implications she should consider before working remotely from abroad? Daan is wondering if he should stake or lend his current cryptocurrency portfolio to make additional gains on assets he plans to hold long-term? Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode. For more information, visit the show notes at https://affordanything.com/episode344 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, but not everything. Every choice that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention, anything in your life. That's a scarce or limited resource. Saying yes to something implicitly means you're turning away all other opportunities, and that opens up two questions. First, what matters most?

And second, how do you align your decision-making around? that which matters most. Answering these two questions is a lifetime practice, and that's what this podcast is here to explore and facilitate. My name is Paula Pant. I am the host of the Afford Anything podcast. Every other episode, we answer questions that come from you, the community. And my buddy, former financial planner Joe Salcihai, is here to answer these questions.

What's up, Joe? I like how you say that I'm here to answer these questions. You're not here today to answer these? You know, I was actually thinking, I was like, oh, I should have said is here so that we can answer these questions together. And I was like, should I pause and do a retake or should I just roll with it? And then I was like, no. I think it's out there now.

Yeah. I was like, pretend you're on stage. Pretend it's a live performance. We're just going to run with it. I was thinking Paula was delegating today. I've answered enough. Joe's got it from here. Joe, please have thoughts on my behalf.

Which would be very difficult because you always think differently than me, which I enjoy, which is why when you talk. about the most important thing, the most important thing to me today is to answer these questions with you because we've got, man, we've got some good ones. We've got amazing ones. So here's what we're going to cover. Anonymous is on track to be financially independent in 14 years, but her job is boring A. F. What should she do? C wants to know what tax implications she should consider before working abroad. Dan is wondering if he should stake or lend his current cryptocurrency portfolio so that he can make additional

gains on assets that he plans to hold long term. And Russell is in the highest tax bracket and wonders if he should take advantage of the tax deferral offered through the 457 plan or choose a different alternative. We're going to tackle all of these questions right now. Starting with anonymous, Joe, we give every anonymous caller a nickname. What's the last show or movie that you see? You know what? Actually, let's not do a show or movie. Oh.

Yeah, I know, right? I was ready and you're throwing me a curve. Name someone who inspires you. Name a role model. You know, someone that I just spoke to, Major General Mary Eater, who wrote a great new book called The Girls Who Steps Out of Line. She was one of the first women to reach her rank in the military and the stories of bravery that she tells. in that book are fantastic. Back in August when that book came out,

so many different outlets chose it as their book choice of the month that if you haven't explored the girls who stepped out of line, you owe it to yourself. If you want to listen to me, interviewer, that's on the Stacking Bedgment show. Where does that title come from?

Great question, and I wondered the same thing. And when I asked General Eater that question, she said that many years ago at an award show, one of the big Hollywood award show, accepting an award and told this story about an ancestor of hers that was in line. And this line, Paula, was a line of people that were headed to a big hole. And it was a mass grave. And they knew that they were going to be shot and killed by these Nazis. And as she's in her line headed to this place where she's no, she's going to die, she said to the guard, what would happen if I stepped out of the line?

And the guard said, I don't have the heart to kill you, but somebody will. And so at that moment, she stepped out of the line and she ran. And this woman accepting this award said, had my ancestor not done that, I wouldn't be here today accepting that award. So I owe it all to her that she stepped out of the line. And there are stories like that. The entire book is stories of these women that did such courageous things and saved so many, so many people. obviously they're heartbreaking, they're harrowing, and they are courageous and also inspiring about what we can do if we think beyond ourselves.

And Mary Eder had such a great career in the military, achieving a rank that women during her service did not normally attain. So she's somebody that very much inspires me. And so in honor of her, we give every anonymous caller a nickname. and so this anonymous caller we will refer to as Mary. Hi, Paula and Joe. I am 31 years old living in a medium cost of living area. I make $78,000 a year, which is on the higher end of decent for my city.

I currently max my Roth IRA, HSA, and 401K. Plus, I contribute $400 a month to a taxable brokerage account. I have about $81,000 invested across all my accounts and have 41,000 student loans, which are currently in forbearance due to COVID. My primary goal is to have enough money so that in about 14 years, I have the financial flexibility to stop working and spend time with my mom or take care of her if I need to. My secondary goal is to live my life to the fullest. I love change. I love freedom, and I believe FI can help with both of these goals. The issue is I feel stuck in my current job. As I said, it pays $78,000 a year. I'm up for a promotion by the end of the year with a 10% raise. I work from home, I have tons of autonomy over my work, and I have great work-life balance.

I'm on track with my savings rate to RU BFI in about 14 years with an income of 40,000. But it is so boring and I am so unmotivated. I can't imagine doing this for another 14 years. I'm fairly sure I'm compensated appropriately for my role. I could be making more in other roles, but it would be higher stress and longer hours, though I guess I could, with a higher income, retire quicker. I also can't help but feel like I'm not living up to my potential. I just feel like you could be doing more, but not quite sure what that is. Any advice you'd like to give me?

Mary, thank you so much for asking that question. Here are my thoughts right off the bat. Number one, this is not a financial question. This is much more important. this is a question about your life, your career, your potential, the talent and skills that you bring to the world and the way that the world can be better as a result of the talents and skills that you possess. That's what this question is about. It's far more important than finance generally and financial independence or fire specifically. It's far bigger than that.

it would break my heart if for the next 14 years you stayed in a job that was boring, that underutilized your potential, and that did not allow the double win, the win that you would experience personally from having fulfillment, the type of fulfillment that comes from working within your calling, you would miss out on that. And the world, and I don't mean to sound all kumbaya, rainbow and unicorns here, but when I say world, what I mean is your community, maybe three people, maybe five people, maybe 10 people. The people who you would directly impact through whatever type of work you would be doing,

those people will miss out on that impact as a result of you not have, having the confidence to make that switch. I'm with you. And you know what? These jobs, by the way, Paula, are the hardest ones to leave. They're the jobs that aren't horrible because of all the benefits she talks about and great work, life balance and all the stuff. It's very difficult to leave that.

Much harder to leave than the boss who treats you horribly every day and you're not being paid very much. Like those jobs are fairly easy to leave. even if you need money really badly, you will leave that as quickly as you possibly can to get away from that environment. But these environments that are a six and a half on a scale of one to ten are the ones that you're like, and then you end up wasting all this time. So I'm right there with you. It's like the difference between touching a hot stove where there's immediate pain and you yank your hand away versus being a frog in a boiling pot of water where that frog. slowly gets, I don't know why this analogy is so popular.

But that is how people, you know, frogs, frogs won't hop out of a pot of boiling water because the temperature rises so slowly that they don't realize that they're getting boiled alive. And so even when they could hop out of that pot of water, they don't because the pain is gradual. There's a few things. I think instead of looking at the negatives of her current career, I think this also gives her an opportunity.

Because right now she is good work-life balance, she can use some of that balance that she has to begin exploring what her parachute out is without having to jump completely out all at once, cut ties. She may be able to, in her time away from work, be able to begin exploring and starting things on the side and seeing what works. I like that a lot better.

And I know in our community, Paula, where you and I spend a lot of time with a lot of the indie creators out there, that's how they started. Independent, not Indianapolis. Do you think of indie creators? You think of Indianapolis creators? I do. I do. Anytime I hear indie, I think Indianapolis. Really?

Yeah. I come from the music world. So I think indie publishing. I think indie. And every time I say the word indie, you still think Indianapolis. I sure do. Holy cow. yes we'll clarify it's not indianapolis you don't have to move anywhere it can be it can be independent

but these independent voices the way that they started as you know paula many of them did it part way right they slowly got into it they were able to find their voice while having a paycheck come in which was awesome and so they were able to keep their benefits keep their paycheck bring a little revenue coming in and then and then be able to move out now That's if you're going to do your own thing. If you're going to become your own brand, that's a way to go. It's harder to do that if you want to go work in something else. But I think taking some of that time to explore what you want to do and to talk to people in those careers and find out what it's really like.

Because the thing that people always came back to me and said whenever they switched careers, whether they were excited about it or they were laid off and they had to move to a different job, is that the job always sounds better than it is when you start doing it, right? Right. Podcasting is way sexier when you hear about podcasting. Like, I can't believe how much time it takes us to edit this stuff. Yeah. Seriously. It is amazing. And I remember people telling this before I became a podcaster. And I'm like, why would you do that?

Why would you spend that kind of just press record and get it out there? Nope. It is a long, long time to make a quality product. Yeah. And so there's a lot of grind to anything, whether you love it or not. And I love podcasting and Polo. I know you do too. So I like think about that way. I'd also caution you in two areas.

Number one is I love this business meets artistry author, Austin Cleon. You talk about him a lot. I totally do. And Austin cautioned me that you shouldn't make your hobby your next thing, your next job, your full-time career. And we live in a time. And we live, you and I, Paul, also live with the group of people, right? The afford anything audience who will see somebody who's excellent in making cupcakes and what's the first thing you say. Oh, these are so great.

You know what you should do. You should sell these. And the second that you sell it, you're no longer making cupcakes. You're running a business. Right. And those are two completely different things. And it will also destroy your love of cupcakes. The book, The E-My Myth by Michael Gerber is about exactly that.

concept. Yeah. And the book by Austin Cleon that goes over this is called Keep Going. So I think there's magic in finding something that you like, but I would keep your hobby as your hobby. The book, so speaking of books, and we'll, by the way, we'll list all of these books in the show notes. You can subscribe to the show notes for free at afford anything.com slash show notes. But another book that talks about the same concept is Big Magic by Elizabeth Gilbert. Oh, yeah. She also talks about not burdening your art by making it create your paycheck. But that being said, to go back to Mary's question, we're not suggesting any particular type of new career for Mary.

What we're stating is, if this is underutilizing your potential, then don't spend 14 years of your youth, your health, Your intellect, don't waste that for the next decade and a half. No matter what you do, and I know we're going into, should you be an artist, should you not? Like, I know we're getting into that field here, but the main message for Mary, whatever you're doing right now, this ain't it. So, sorry, Joe, I cut you off, but keep going. No, I think that's... Keep going, title of Austin Cleon's book. But I think that's a great point because the older you get, the more you realize that time

is your enemy and I have never, I've never met someone that I've spoken with who expressed what Mary just expressed to us where later on they said, I'm glad I waited another five years before I started exploring. Right. Never has anybody said that. Now, jumping all at once, yeah, you don't want to do that, but starting to explore now, absolutely. So I give that piece of vice. The second warning that I'd have is this, is that no matter what you do, realize that your first inclination might not be right and be okay with pivoting. And as an example, I sold my business when I turned 40, my financial planning business, and I immediately thought I wanted to be a school teacher. I went to school to become that within a year. I realized I was very bored in school and

I was learning that I was going to fight administration. I mean, teachers are wonderful and I get really excited about thinking about teaching, but the stuff about working for administrators and fighting the system was not what I wanted to do. And at the same time, as a hobby, I was writing financial segments for friends of mine who are financial planners and having a blast. And I realized, man, that would be way more fun. And so I started doing that. And on the side, I began writing some fiction because I thought that would maybe be it. Neither of those were it. I started a financial blog so I could be more expressive and not write what somebody else told me to do and also realized I really still like the financial advice area. That blog then,

a couple years later turned into the podcast, and I stopped blogging. So I had to pivot four times, Paula, to find my thing. And I think that you can't be stubborn. I think you have to be willing to listen and realize you're not going to get it right at once. So what's interesting to me about that story is that we've just talked about not making your hobby your job, but you sort of did, or at least you let your hobby inspire the direction of your job. It was directionally accurate, but it wasn't the specific job that you had. Yeah, I don't think so. What was my hobby?

Well, your hobby was writing these financial segments for friends of yours. Yeah, it actually wasn't my hobby. What was your hobby? No, no. My hobby's been board games. Oh, I got you. I got you. I love playing board games.

I love traveling. Like for a while, I thought about, you know what? There's this guy, Tom Vassel, who became huge at the same time I was thinking about this. He does videos and podcast and. and writes a ton about board game reviews. And I thought, you know what, I'll go into board game reviews. That would have been the worst thing for me to become a board game reviewer and trying out new game after new game after.

And I've actually talked to Tom about this. And Thomas had a great career doing what he's doing. But he's like, I did not know that this was going to be the business it is and the churn that it is. And he doesn't think about games anymore the same. He thinks about it is now this business. And he's part of the machine of new games. coming out every year. It's not the exciting thing it is for Joe who gets to go hang out with a few

beers or a glass of wine with his friends and try the hottest new thing. A few. One or six. But what it did, what I actually did was because I was bored, these people asked me to do it and I thought, I'll make some money because at the time I'm in school and I'm not making any money. Luckily, I had this bag of money from selling my business. A bag of money. That sounds I had a big bag of money. And I had this spouse that loves doing what she does. And so she's also bringing an income. So I had the stability that a lot of people don't have. But I do enjoy, and I don't think it's a hobby, but I do enjoy making money. And these people reached out to me because of what I had done in PR and in finance. They're like, hey, I know you like writing. I know

you used to write your own segments when you were on TV. Would you write segments for me? Yes. And I'll pay you X. Absolutely, I'll do that. Okay. So you basically iterated with side hustles. Yeah. And then tried a few different side hustles and one of them developed out and iterated from there. Exactly. And really what I did as I think about it, which I hadn't until we brought this up with Mary, is I took the pieces of that financial planning job that I loved and I dumped the pieces that I didn't. The piece that I like is talking about what colors your parachute. How should you manage? manage money. What's the way to think about money? The piece I didn't like was carrying the incredible burden of responsibility of making sure that one client actually did what they were supposed to do. And that often I cared more about implementing the plan than they did. And I felt

this burden when the market went bad, like this horrible burden that, oh my goodness, this is, this is so rough. I needed to jettison all that. I needed to have a career where I could give financial advice and not care if you took it or not. Jettison is a great word, by the way. But beyond that, that is a very useful insight to go back to Mary's question because I'm sure she doesn't, from the way she asked her question, it doesn't sound like she has a sense of what she wants to do. But based on what you just said, those are good starting questions for Mary. Mary, What are the aspects of your job that you enjoy? And conversely, what are the aspects of your job that you don't enjoy?

If you start there, if you start with listing both of those out, and then figuring out how you can side hustle and iterate and test and take small bets on different types of income-producing activities that reflect the elements of your job that you enjoy, the elements of your job that tap your talents and skills and allow you to do something valuable in this world. That's how you begin and that's how you iterate and that's how you find your next thing. And I agree with you, Joe. It is an iterative process. Iterive also a good word.

Oh, I thank you. I would never jettison that word. Oh, wow. Whoa. Drop the mic. ladies and gentlemen, he just brought that together. Ninja. Ninja, two words. Wow. All right. Speaking of the number two, so your two points to summarize are Number one, beware making your hobby, your next career move, because you can suck all the fun out of it.

And then number two is don't be afraid to pivot. And because your first instinct, might be directionally correct, but probably isn't where you're going to land. Fantastic. And Mary, my core message is that you have the opportunity to do something important. You're young enough to work. You're healthy. And I don't know your health history, but you're healthy enough to work. You have access to technology, to self-eastern, you have access to technology, to cell phones and computers in the internet, which the majority of the world's population still does not, you most likely have some form of an education

that puts you in the top minority of most educated people in the world, assuming that you have a higher education degree. And you certainly have talents, skills, philosophies, altruistic motivations. there is so much potential there, and there are at least 14 years. That's a long time. 14 years that you could take all of that potential and do something that makes a positive impact in the lives of others.

So don't let that go to waste. And don't worry about the money. I am the quote-unquote fire or financial independence person. who is sitting here telling you, don't worry about financial independence. Don't worry about it. Just that's not what this question is about. And that's why I love the idea, Paula, what you're saying. It's why I love the idea of exploring versus jumping. I think doing the research, exploring, becoming knowledgeable about on two fronts, looking internally and then looking externally are both valuable things to have happened. And the blessing that she has,

has, the gift that she has is she works at that place that is right now feeding her wallet in a way that she can do that and giving her the balanced life that also, it sounds like, provides the time that she can do it. That's a great place to be. And a lot of people looking to get out of their job don't have that gift that she has. Exactly. So thank you, Mary, for asking that question. And best of luck with wherever your path takes you next. We'll come back this episode in just a minute. But first, the holidays are right around the corner and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need serveware and cookware. And of course, holiday decor, all the stuff to make your home a great place to

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That's what being a fifth-third better is all about. It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle. That's your commercial payments of fifth-third better. Our next question comes from Dan. Hi, Paula. My name is Dan. And I have a portfolio of index funds, about 90%.

But about 4 to 5% currently is in some of the biggest cryptocurrency, because I believe that this will change our world or industry the way that we're going to pay and that it is good to hold those for the long-term future. I'm holding those currently just in the broker that I bought them. However, I've also heard that it's possible to either stake them or lend them out or put them in a platform where you get interest. What are your thoughts on some of those things? Since I'm not looking to gamble away any money, but if it's possible to earn 8 to 16% plus on my cryptocurrencies that I'll already be holding, why not do that? So that's my thought. I hope you and Joe will be able to answer that. Your show is amazing.

I cannot wait to listen to your answer and hear more from you. Thanks. Dan, thank you so much for the question and thank you for being part of this community. First, I think that your allocation sounds fantastic. You've got about 90% of your portfolio in index funds. I assume split between a variety of asset classes like equities and bonds. And then you've got another four or five percent of your portfolio. in cryptocurrency.

That sounds like a fantastic allocation. Really like what I'm hearing. As to your question about either staking or keeping your crypto in the type of account that would pay you interest, there are two very different suggestions. So let's quickly walk through the pros and cons of each. If you were to stake your cryptocurrency, you would have two options, either. You need to have 32 eth in order to become a full validator. That's the minimum requirement to be a full validator.

As of the time of this recording, 32 ether is about $121,000 U.S. dollars. So I don't know the size of your portfolio. Maybe you have that. If so, awesome. Put the ether in a smart contract, become a full validator. I think that's great. But if you don't have the 32th to put up, your other alternative is to stake through and exchange. And that has its own set of drawbacks. I mean, if you zoom out conceptually,

if you think about what it means to stake, you're stating that you believe in the validation processes that are being performed. You're stating that you stand behind the work that is being done in order to make blockchain safer and more efficient. If you can't do that, if you don't have your own node, your own computer with reliable internet access that can run proof of stake operations, proof of stake protocols. If you're staking through an exchange, if you're staking through Coinbase or something, I mean, you're essentially vouching for something that you don't really have control or oversight around. You're putting your money into a pool and trusting that the exchange is going to do a good job with it. I kind of think of it. I kind of think of it.

is the difference between owning your own rental property versus being part of a syndication deal. You know, when you own your own rental, you've got control over the outcome and the decisions that are made and you know if things are or are not running smoothly. Everything is inside of your locus of control. Whereas if you put your money into a syndication deal, you're ideally doing the proper due diligence to make sure that you've chosen a good management team and that they're making sound decisions. But even that in and of itself is inherently a skill set, and it comes with risk, and it puts a lot that's outside of your locus of control. So I don't mean to get too philosophical about what it is to stake your cryptocurrency or to stake your

ether, but the conceptual notion that you are when you stake, you're vouching for the operations that are being run. You know, you are a full, if you put up the 32 ether, you're a full validator. That not only creates profits, but it also contributes to the growth, development, safety, of blockchain as a whole. So I think that becoming a full validator, assuming that you have adequate upfront capital to be able to do it, I think becoming a full validator is not only a profitable or potentially profitable enterprise, it also is a benefit to society, in my view. Contrast that with staking through an exchange. Certainly, we still need that. As a society,

that work still matters, but I don't think in the same way that you wouldn't draw an apples to apples comparison between syndication deals versus owning your own rental property, I don't think I would draw an apples to apples comparison between the two forms of staking, becoming a full validator versus joining a staking pool. And given the choice between those two options, if it's at all possible, I think becoming a validator yourself rather than joining a staking pool would be the preferred way to do it. Again, I know that's not within reach for everyone, but the risk that you suffer if you join a staking pool is that, number one, there are the overhead costs that the exchange is going to charge you. Number two, there's the risk that you might get a bad node. And granted, that risk is also distributed, right? If there are decentralized staking pools, then one bad node is not going to pull you down in the way that it would be if you were yourself a few. full validator running your own node. So that's kind of both a pro and a con. But there's the overhead fees. If you join a staking pool, there's also kind of a debate as to whether or not you're contributing, or the existence of staking pools generally is contributing to centralization

of Ethereum. And that's a whole different rabbit hole for a different day. But the threat of Ethereum centralization is something that you'd want to consider. before going that route. So zooming out again, there are not just profit related, but also social consequences associated with joining a staking pool, you know, versus becoming an individual validator. And there are also different types of risks associated with either option. And, of course, the elephant in the room that we haven't even talked about yet is, do you have an exit strategy in the event of a coin price drop? And maybe the answer is no. Maybe you plan on buying and holding for the long term, in which case amazing. But if you would like to sell once

prices hit a certain low, how would your decision to stake your ether impact your ability to retain liquidity, flexibility, nimbleness? That would be the other thing that I would encourage you to consider before deciding to stake. Now, there are a couple of resources that I'll refer you to in order to learn more about what's required. First of all, and I say this for everyone listening, we here on the Afford Anything podcast created a very detailed deep dive episode about cryptocurrency. It's called Bitcoin for Beginners. We will link to that episode in our show notes. You can get the show notes at Affordanything.com slash show notes. Or if you are in your podcast player right now and you want to listen to it immediately, just search for episode 325. That's episode

325. So start there for a primer about cryptocurrencies. And then, Dan, the next person that I would recommend specifically to learn about what's required if you want to stake your eth would be a YouTuber by the name of Crypto Casey. And I will link to her in the show notes. So that covers the conversation about staking. Now, as for the other option that you suggested, which relates to keeping your crypto in the type of platform that would pay you interest on what you hold there, the risk that you're going to have to balance is hot storage versus cold storage. If you want to keep your crypto on a platform that pays you interest, that means that there is, that there is, at least the theoretical possibility that hackers could break in and steal your crypto. And certainly when you keep your crypto in cold storage on a digital wallet, there are risks there too.

I mean, we've heard all of these horror stories of people who've lost access to their digital wallets. They've lost their password or they threw their wallet away. But the potential for hacking is real. many people have lost their digital currency to scams and to hackers, and if you've got your digital currency outside of a cold storage digital wallet, you are exposing it to some degree of risk. Now, is that risk worthwhile? Maybe.

I mean, that's a choice that you're going to have to make. I can't determine your risk tolerance for you. I'll simply outline what the pros and cons are, what are the risks, what are the benefits, and it's up to you to decide. does the benefit adequately compensate for the risk? And so the benefit is the interest that you would make. The risk is the risk of losing your crypto. So does the benefit pay out enough that you're willing to take that risk?

That's the question that you need to ask yourself. An interesting side note, Paula, not for Dan, but for other people listening, is that while these hot wallets are not, I can't say hot wallets without thinking, hot pockets. These hot wallets are not FDIC or SPIC insured, but you can have an SPIC insured account with the major brokerage firm, and they may come to you when you reach enough money, and this is a great thing about accumulating assets. At a certain point, these brokerage accounts may come to you and say, hey, if you're a long-term holder of these assets, can we borrow them from you and pay interest on these to borrow them from you? They're still yours. They're still

protected by SPIC insurance, which means from them stealing them from you and you have proof of ownership. But you can earn interest on your assets. And if you think that you have a significant enough amount of money to do that, you may want to ask your broker and say, whichever platform you use and say, hey, do you borrow assets in exchange for an interest rate on these investments? I used to have clients and I have friends who have done this very thing and it is safe. It's big companies like Fidelity as an example that will do this. So you're not dealing with small names. You're not dealing with hackers breaking in and stealing your stuff.

But with assets, when you get close to that big buy number, you may want to look into doing that if you're going to hold for a long time. Easier to do, by the way, if you're holding on to individual. securities than if you're holding on to a Vanguard index fund. They won't, obviously, Fidelity's not going to do that with a Vanguard index fund. But you know what I mean. Right. Thank you for asking that question, Dan. Good luck. If you decide to stake your crypto or earn interest on your crypto, best of luck with either of those decisions. And if you decide that you're just going to keep it in cold storage, that's awesome too. Best of luck with whichever route you take. We'll come back to this episode after this word from our sponsors.

Our next question comes from C. Hi, Paula and Joe. My question is related to working remotely, specifically working remotely abroad. Over the past year with COVID, I think a lot of people have really tried to build the ability to not return to the office. My question is related to those who want to have the flexibility and design their life to be able to work anywhere in the world. what kind of tax implications should we be considering specifically if we are working in a traditional employment relationship and not working for ourselves? Thank you so much. See, first of all, congratulations on your plans to live and work overseas. It's going to be an

amazing eye-opening experience. You're going to learn a lot. It will be life-changing in many ways. So I'm very excited for everything that's in your future. I think that living overseas is going to be a grand adventure, and I'm so excited that you are thinking about doing this. Now, to your question about the tax implications, assuming that you are a citizen or permanent resident of the United States, in general, the money that you make will be subject to U.S. federal income tax. There are exceptions to that, but in general, the money you make, even while you're overseas, will be subject to U.S. federal income tax, and no matter what, you will have to file a U.S. tax return. However, there are a bunch of caveats to attach to that statement.

First, the IRS has a long list of exceptions for types of compensation that the IRS does not tax, even if it's paid to a U.S. citizen or resident for services that are performed outside of the United States. So, for example, certain types of agricultural labor or domestic service in a private home or combat zone compensation for members of the armed forces. Those are examples of a long, long list on the IRS website of exceptions to the general statement that wages paid to a U.S. citizen, even if that U.S. citizen is working overseas will be taxed. There's a long list of exceptions in the show notes, which you can subscribe to at afford anything.com slash show notes. We will drop a link to this page on IRS.gov that has a long, long, long list of bullet points with these exceptions.

So that's the first thing to know. Second, the other thing that you should know is that there is something called the foreign earned income exclusion. And what it means is that if you meet certain requirements, you might be able to qualify for this particular exclusion, which means that some of your earned income may be excluded from tax liability. In the year 2021, if you're a U.S. citizen and you live overseas, you will be taxed on your worldwide income. but if you qualify for the FEIE, then you might be able to exclude up to $108,700. That's the 2021 limit. And that limit adjusts for inflation every year.

Now, whether or not you could qualify for the FEIE depends on whether or not you meet a long list of criteria. You need to be a U.S. citizen who's a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. or a U.S. citizen or U.S. permanent resident who's physically present in a foreign country for at least 330 full days during a period of 12 consecutive months, or a U.S. permanent resident who is a citizen of a country with which the U.S. has an income tax treaty in effect. Now, that doesn't necessarily mean that if you spend 330 full days overseas in a 12-month period, you will necessarily qualify for the FEIE. There are more rungs of qualifications that you would need to go through. And the IRS has a tool.

It's called the Interactive Tax Assistant tool that you can use to help determine whether or not your income earned in a foreign country is eligible for the FEI. i.e. exclusion. So in the show notes, we're going to link to number one, the page on the IRS website that talks about the foreign earned income exclusion, and number two, that interactive tax assistant tool, you're going to want to go through that tool, input your data in it, and see whether or not you qualify. Again, because the IRS guidelines have a long, long list of specifics. And so you'll need to go through that interactive tool. and input all of your specific data in there to see whether or not you would be able to benefit

from the FEIE. One form you want to look at is IRS Form 1116, which is a foreign tax credit that you can use to detail the name of the foreign country that you're living in, the gross income that you're earning, and to hopefully qualify for a tax credit, which will allow you to avoid double taxation on some or all of that income. I think this is an area, Paula, just based on your reply and the forms that we're talking about, where you really want to know a lot more than I think you can get from us in a, even if we had a 20-minute answer. I think this is a great time to have someone who is a specialist in this area and to work with them to make sure that you

are completely legal and you don't get blindsided, blindsided the last minute by restrictions that you didn't know existed. That said, I love this idea and I wouldn't let all of the mumbo jumbo we just went through get in your way of achieving your goal. I have this, I'm not an expert in this area, fairly certain that you're not either, Paula. But I do know enough about taxes and tax planning to know that, and I know people who expats working in foreign countries, and I think getting into those groups could also be hella helpful. But I think it's also, you know, what's the old phrase? It's like riding a bike.

You figure out what the forms are, what you have to do, what the hoops are that you jump through, and then you go through them. And I know too many people that will let what you and I just detail get in their way and they never achieve this dream. I think it's great. Go do it. Right. Like people who get intimidated from the start. Yeah. Like, wow, I got to follow those things. Well, I guess I'm not doing it. Don't do that. So what I would recommend you do is go to our show notes, read the IRS forms.

And by the way, IRS.gov is the best source of information. They write clearly. They write completely. You know that what's on their website is going to be accurate. it. So we've linked this to the particular pages on IRS.gov that talk about the taxation of U.S. persons who are employed overseas, employed by U.S. companies overseas. We've linked to that page. We've linked to a page about the foreign earned income exclusion. We've linked to a page about Form 1116. All of that is in our show notes. My recommendation for you is that you review all of that and then talk to a CPA or another tax professional. But this way you can go into that conversation already informed.

This way you will have done your homework in advance of having that conversation. So you'll be able to have a much more constructive conversation with your CPA as a result of having taken the time to read what's on the IRS website. But I think this is a great question and also a great plan. I'm very excited for you. So enjoy living overseas and working remotely. And thank you, C, for asking that question. Our final question today comes from Russell. Hi, Paula. This is Russell from Connecticut.

Thank you so much for the opportunity to ask questions here. I wanted to ask a question about 457 plans. My job provides a different competition plan, i.e. 457. It's a non-governmental plan. I've been thus far hesitant to invest through it, given that it ends up not being my money until withdrawal. However, my employer is a large healthcare organization and seems to be fairly stable financially and offers pretty great investment options within the account. But I think what would help me decide whether to invest through the account is having an idea of how much I might actually be losing out by not taking advantage of the tax.

deferral, I do fall in the highest tax bracket and I have all double-to-income. So I was wondering if you could just give me some numbers. So like, for example, if I invested, let's say, $20,000 annually for the next 15 years in a taxable account versus putting that money in to the 457 account, what would be the difference, say, after 15 years in the money accumulated, you know, after tax that I would have to pay at that time. So I think just some ideas, even some ballpark numbers would be kind of helpful for me to decide.

Thank you again so much for taking this question and everything else that you do. Russell, thank you for that question. And definitely a good one because your 457 plan in a lot of ways doesn't offer the same provisions that a 401k or a 403B do. And let me explain that to people who aren't familiar with the type of plan that you have, just pull us so we can bring everybody up to speed on why Russell's hesitating. And the reason for that is, is that while a 457 plan, like a 401k or a 403B that other people might have is also this tax advantage deferred compensation plan to use IRS speak, it is a plan

that is still eligible to be claimed by creditors if the company that you work for, the entity you work for goes bankrupt or in litigation. And that is the reason why a 457 plan is a little more risky than investing in a 401k or a 403B. The cases of a creditor going after a 457 plan or companies with 457 plans struggling are few and far between. For most people, investing in a 457 plan is going to feel a lot like investing in a 401k or a 403B. However, there is that one downside. So the first thing to ask is your particular plan, is it open to creditors if something goes wrong with your employer? And I would ask that right away because maybe yours isn't. Maybe they have it set up in a way that you'll

be fine and there's no way for me to know that. With regard to your larger question, what are you missing out on and running the numbers? Even in the top, even with me knowing the tax bracket, even if I know the capital gains tax, I have no idea how you're going to move money around, how often you're going to move money, what types of investments you're in, and whether you're going to be subject to the capital gains tax or to the dividend income stream that's going to be tax because of the fact that you're not inside of a qualified plan. So it all depends on how tax efficient you are without using that plan. If you have a very tax efficient strategy and you don't touch anything and it doesn't pay any dividends for a long time, you may have no problem at all

growing your assets outside of that plan. If you're moving the money around a lot and you're paying these small capital gains taxes, then you have this friction, or if you're using a dividend income strategy, you're going to have a different type of friction. So there's no way for, I think either Paula or I, to give you this number. I will tell you this, for the average person, the consequences of not having a tax shelter on your long-term money is significant. And I know that if at all possible, saving inside a tax shelter is far superior. And I can't define far because I don't know what you're going to do with the money outside, even knowing your tax bracket.

I have no idea how you're managing your money. And it's going to be different for somebody who's listening that has a strategy that is more conservative and throws off a lot of taxes or one that's more aggressive, meaning, let's say you have a tech stock that doesn't pay any dividends and you never sell it. It's going to be fantastic. And you're only going to pay a capital gains tax when you sell it versus when you take money out of your 457 plan, that's going to be income. So in your case, that could be a much higher tax that you'd have upon exit. So I wish I knew. I wish I could do that. And it's not that easy.

I will tell you, though, that for the average person, you want to avoid that topic altogether and keep it inside of a retirement plan. The only caveat for you is the fact that it's a 457, and that's the only thing that gives me pause. So I would just think through bank What's the chance of that for your particular company? And then second, what are the provisions for you to still get at your money if your company goes through bankruptcy? And for that, you want to go to your HR department. Joe, the only thing that I would add to piggyback off of what you just said, Russell mentioned

that he works for a large organization, a large company. In his particular case, it's a health care organization. But to broaden this out and make this answer apply to more people who are listening to this show, if you work for a large organization, a large company, and you are not best buddies with your HR department, there's a good chance that you might be underutilizing them. Because oftentimes, HR departments not only can answer questions related to your compensation and your benefits, but also there might be things that you're eligible for that you don't even know about theme park tickets, Costco memberships, triple A discounts, whatever it is.

Now, it's certainly true that HR departments exist to protect the company and to serve the interests of the company, absolutely. So when I say be best buddies with them, I don't mean let your guard down and think of them as your best friend. I mean, make sure that you have a great professional working relationship with them so that you can be aware of all of the opportunities that your company provides and all of the guidance and service that your company provides that you might not be utilizing. And that's especially the case if you work for a large company or a large organization where a lot can get lost in the shuffle. So thank you, Russell, for asking that question. Joe, we did it. Man, already. The time just absolutely.

flies. Taxes, working overseas, chasing your dream. And cryptocurrency. earning interest on your hot pocket cryptocurrency. I think it's called hot storage, Joe. Hot storage versus cold storage. Still makes me hungry. Joe, where can people find you if they would like to hear more of your ideas? You can find me and sometimes my good friend Paula Pant over at the Stacky Benjamin show every Monday, Wednesday, Friday, a very intelligent show presented in a very light way. So stacking Benjamin's wherever finer podcast are listened to. Well, thank you, Joe. That's our show for today. Thank you so much for tuning in. If you want to discuss today's episode, head to Afford Anything.com slash community, where you can hang out with

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All right, there's your disclaimer. Have a great day. You know what, actually, let's not do a show or movie. Oh. Yeah, I know, right? I was ready and you threw, you're throwing me a curve. Name someone who inspires you. Name a role model.

Paula. Steve, can we play like a sound effect that indicates, uh, what's the emotion it's supposed to indicate? I don't have a word for it. Like, if rolling your eyes were an emotion, the sound effect that indicates that. But don't do this one. That would be bad. By the way, Steve, everything that we just said, that whole thing, I think that's the blooper.

That's the blooper. But also don't do this one. That's also the blooper. As a result of you, not. I want to say having the courage to take the switch, but I don't want to be judgy. Having the gumption. How old are you, 87? So should I say courage or gumption or something else?

Fortitude.