With one notable exception, our savings strategy in 2024 was identical to the year prior: max out our pre-tax retirement plans at work, i.e., Stephanie’s 403(b) and my Individual 401(k), and max out our traditional IRAs—if allowable. And allowable it was, because our modified AGI was below the “phase-out threshold for MFJs covered by retirement plans at work” ($123,000 in 2024), and our AGI was below that threshold precisely because we had maxed out our pre-tax retirement plans at work. Put simply, our 401(k) plus 403(b) contributions reduced our taxable income to the point where we could also make traditional IRA contributions, which further reduced our taxable income. All together these retirement contributions saved over $13,000 in state and federal income taxes.
I speculated at the end of 2023 that the initial slowness in my schedule may have had less to do with the inclement weather and more with “my lack of any regular clients. With the latter now in place, it’ll be interesting to see how the early part of 2024 plays out.” Well, the year started out both rainy and slow, but when the clouds parted and people emerged from their post-holiday hibernation, my theory proved prescient. Of the ten clients with whom I worked in January and February, only three were new.
Not the first time a client lent me their truck to take a load to the dump
Though I’m still internalizing the fact that I was self-employed last year, the IRS needs little convincing. With net earnings from self-employment over $400, they consider me very much self-employed, and those earnings need to be reported. To be honest, this is something I’ve been chomping at the bit to do for some time, because it unlocks a brand new savings achievement: the Individual 401(k)! Also known as a Solo 401(k), it will allow me to contribute (read: defer) far more of my self-employment income than I could with just an IRA, plus I’ll gain the potential to make “profit-sharing” contributions as the plan’s employer.
To figure out how much I’d be able to contribute, I needed to do a dry run of our taxes. So back in November, I dusted off the spreadsheet I built to simulate Form 1040 and added the following to account for my self-employment income: Schedule 1 (Additional Income and Adjustments to Income), Schedule 2 (Additional Taxes), Schedule C (Profit or Loss From Business), and Schedule SE (Self-Employment Tax). Though that may sound like a lot, I only needed to input 3 values (highlighted in yellow) across those 4 schedules. The values in gray are simply references to other cells or basic calculations.
Screenshot of my spreadsheet simulating the IRS Form 1040 Schedules 1, 2, C, and SE for 2023
Telling people “I accidentally retired” usually gets a chuckle, but it’s actually pretty spot-on. I fully expected to go back to work once Stephanie started grad school (because what else was I gonna do?), but I never did, and now here I am, five years later. I may need to retire that quip, however, because 2023 sure seemed like the year I accidentally unretired. It all started with a humble Craigslist ad that I posted just over a year ago, offering to help people with their DIY projects—for free…
My offer didn’t exactly receive a groundswell of attention. In fact I only ended up working one gig for free, and just before taking off the guy slipped me $25 “for gas”. Meanwhile I kept an eye open for ads from people looking for help. After responding to one that seemed right up my alley (the title read: Need helper in Pacific Grove yard clean up some digging [sic]), and hearing nothing back for several weeks, I got a text on Christmas asking if I was available the next day. Stephanie was scheduled to work the 26th, so yes, yes I was! He offered to pay me…and I kept mum about my ad. Turns out earning someone’s gratitude by doing work that directly helps them while also earning a little scratch in the process is a pretty intoxicating cocktail. Thus the “I’m not looking to be paid” line in my original ad quietly fell by the wayside.
Here’s a screenshot of its latest incarnation, circa December 2023:
