We qualified for it this year. Yay?
I guess I haven’t told you I had a weird goal this year: to make $5000 of earned income. Why? So we could qualify for my wife’s FSA. As usual, it was less about the money, and more about the psychology, emotions, and all that crap. Hold on while we wade in to that mess!
FSA-what it be
A dependent care flexible spending account (FSA) is a way to not pay taxes on up to $5K for childcare or care for others you are supporting. You have your employer deduct whatever you choose (up to $5K a year in 2023), it’s taken out before taxes, and then you use it to reimburse yourself for what you paid for childcare or whatever. Take it away Investopedia:
We’ve been using this shit since we started our first kid in daycare, and stacked on top of 401ks, 457Bs, and HSAs, it’s been a nice way to lower our taxable income, reduce our expenses, and invest more. But as I learned whilst doing VITA last tax season, we were at risk of not being able to use it this year.
Because I like…retired or whatever.
Earned Income
In order to qualify for a dependent care FSA, both parents have to have earned income, or be disabled so they can’t work, or be actively looking for a job. And that earned income (for each person) has to be equal to or greater than the amount you’re chucking in the FSA. So we each had to make five grand this year to qualify. And it had to be earned income, not investment income.
I imagine if the US government were a person, his (because lobsters) justification would be like:
“so you mean only one of you works and the other just sits at home all day? Well you can damn well take care of the kids! I’m not going to subsidize your childcare so you can play videogames and eat doritos!!”
This was a problem for us (not a real problem; more like a first world FIRE problem, but more on that later), because as I had found out last year, me taking care of the kids full time was not good for anyone, and daycare was a crucial part of me clawing out some sanity. Which meant if we were going to use this sweet tax benefit, I was going to have to earn some money.
A Stupid Game
Ok, let’s get real for a minute. At best, this FSA thing was saving us about $1K a year. We could totally afford the childcare without the FSA, and worse case we’d just have to settle up come tax time. We even made sure to budget a bit extra in YNAB on the off chance I didn’t make enough. We weren’t going to take our youngest out of daycare because we didn’t qualify for the tax benefit. But learning about this earned income rule sparked a little desire of mine to see what kind of different ways I could make money this year. Plus, I thought the challenge would be even more interesting in that I had the following constraints:
- Part time only: If shit went sideways, sure, I’ll work my ass off to support me and mine. But I just got done doing wazoo crazy shit for the past 20 years, and for the past 10ish I worked like a rabbit on crack to save over 70% of my salary to scrape out some sweet Financial Independence.
- Family is priority: Since my wife continues to work part-time, I do the majority of the household stuff, including most of the kid transportation, cooking, grocery shopping, kids laundry, etc. You know, the homemaker life. As I found out, this is not an insignificant amount of tasks. My wife can pitch in occasionally as she has a pretty flexible job, but one of my primary goals in leaving my full time job was giving her the ability to focus more on her job which she surprisingly likes. This means I’m limited to working while the kids are at school between about 9 and 3ish, and the occasional night or weekend.
- Not working that much: I have no desire to rush around working as much as possible between 9-3 just to take advantage of some tax benefit, especially when I don’t need to. I still want to enjoy my FIRE life; a relaxed lunch in the middle of the day, naps, daily 1-2 hour workout, and weekly mountain bike excursions. I’m willing to give up such luxury a few times a week, but any more than that seems like I’m squandering my hard earned break. On average, this means that I’ve got 3-4 hours to work 2-3 days a week.
Within those constraints, I set off to earn my five grand this year. Math wise, should be pretty easy right? Even if I only work 3 hours at a time, twice a week, and take 2 weeks off, I’d just need to find something that paid about 17 bucks an hour.
Here’s what actually happened:
So that worked out.
The Gigs
I had 4 main gigs this year:
- Substitute Teacher: Yeah, this sucked. I only did this 6 times this year, and that was plenty. On the plus side, I got a good feel for our school district and even more appreciation for teachers. I moderately enjoyed being a lunch room monitor, but the actual subbing in classrooms was crazy. I subbed at a few elementary schools, and one intermediate school. I had hoped to do the High School too, but couldn’t find a job that fit within my childcare responsibilities. Though this was the most stressful of my jobs this year, I’m not completely against trying it again when we move to a different school system. This was also the second worst paying job at an average of $12.95 an hour.
- Door Dash/Uber Eats: This was kind of fun, especially since I did this on my bike downtown, thanks to the recommendation of Kevin Ha. It was enjoyable to zip around on my bike, and it was strangely gratifying to bring people their lunches. Despite that, it was a logistical mess since I had to drive downtown and load/unload my bike with all my delivery accoutrement, which added an hour to each time I did this. If I lived within close biking distance, I probably would have done this more often. Also I did not enjoy almost getting hit by cars (most of our bike lanes are unprotected), nor did I like breathing exhaughts fumes. Having complete control over my schedule was nice, but this made it really easy for me to say “fuck it”, and instead head to my local trails. Especially since I was only losing out on 20 or 30 bucks. I did this half a dozen times, and it had a slightly better average hourly rate of $13.93. I should note that as I got better at this gig, so did my hourly rate. Also I was limited to the peak earning period during lunch; I’m not going to sacrifice dinner with my family for 30 or 40 bucks. I was amazed at the amount of fellow food delivery people working, most of whom used their cars. No way in hell I’d do that; factor in gas and depreciation and I don’t see how it would be worthwhile unless you can’t find anything else.
- Tactical Instructor: During one week in the summer I taught shooting, leadership, and some other obscure yet related skills to soldiers. This was super fulfilling, physically and mentally draining, and I would do this more if I could. Reading what I just wrote, I should probably devote more of my abundant free time to making that happen. As I worked nearly 100 hours in a week (26 hours straight on the last day), I don’t think I’d want to do this type of work more than once every other month, less I become a sleep deprived drooling idiot. Been there; I’m good. This was my favorite gig, but also the worst paying, coming in at an average hourly rate of $4.69. Frankly, if I could get them to not pay me I’d just call it volunteering.
- Executive Protection: Keeping people with lots of money safe. This has been fun and fulfilling as well. It’s been nice working with some old friends, and it’s been good to have a justification to keep my skills sharp. I wrote a whole post about this gig, and I’ll continue to work this for at least the next few years. This is also the highest payed gig I worked this year, though since I’ll probably eventually get Dox’d, I won’t be sharing that rate. Without this gig, I would not have made my FSA eligibility goal.
The Guilt (again)
As I’ve ruminated about many times before, much of my reason for doing at least some work has been to alleviate some guilt. I feel guilty that I’m not an awesome stay at home dad, and that we’re sending our youngest to daycare because I couldn’t hack it. Having Uncle Sam essentially say through the tax code that I need to either take kids myself or work enough to justify the FSA both adds to the guilt, and helps me justify working. Even though we could swing the daycare with our current FI(ish?) status, I feel like I should make enough to pay for it.
Luckily, the VA pays me enough to cover said childcare. My diagnosed issues are absolutely a major contributing factor to why I suck at being a full time caregiver. And while I suppose I earned those VA benefits in the past, I still feel guilty about not working in the present to pay for childcare. So while I know I still have issues to work through(still in therapy, yayyyy), in the meantime it’s been good to earn some income to help alleviate some guilt.
Though this year I didn’t earn enough to pay for childcare, I did qualify for the FSA. Also, I didn’t start the EP gig until the end of the third quarter of this year. Now that I’m back in the rotation, it’s probable that my income will triple next year.
Mission: Accomplished.
I accomplished my stupid goal of qualifying for the FSA this year, and learned some stuff along the way. And it was fun! When I first retired, I’m real glad I took nearly a year break from paid work. It has helped me hold myself back from committing to some new shiny income producing opportunity, which after some further consideration I realize I don’t want or need to do.
Case in point, I was super tempted to push through my dislike for subbing and sign up for more shifts because…guaranteed money and a lifetime habit of chasing that dollar. But after giving all of my energy to third graders all day, I barely had any left over for my own kids. Did I really want to keep pushing just to save $1K on taxes? Turns out the answer was: fuck no. The same has happened with the EP gig. While it’s enjoyable, there’s been several lucrative opportunities that have popped up, but would have involved me either doing stuff at 2AM, or missing some important family thing. Not worth it, even though the money was tempting. Which is interesting to me.
Will extra money always be tempting? Especially when we don’t need it? There’s always something else I want: I could work some extra, and we could take a cool vacation. Or just go out to Chipotle more. Or I would work even more, and finally buy a tesla like every other FIRE person. But we don’t need any of that crap. And right now, my bigger want is to not to fall back into a crazy rushed life where I miss the best parts of it. I’m open to more work, if it’s balanced, is challenging, and serves some purpose. But until I stumble upon that, I hope I won’t fall back into the trap of chasing money while ignoring living life.
I also learned more about what kind of work I enjoy. When I first left the police department, I didn’t think I’d ever carry a gun for money again. And I thought I’d probably like teaching. Yet here we are. I’m not sure where this will go, but I guess I’ll find out.
That’s pretty much it. Oh yeah, almost forgot:
Secret Gig #5
This Blog.
You know what kind of “work” I enjoyed most this year? Writing this blog. It also actually cost me a few hundred bucks, so the hourly rate is abysmal. But whenever I ruminate over what I’d like to end up doing with the next phase of my life, it has something to do with writing. I like the EP gig fine, but I can tell eventually it will lose its luster, and my body won’t like me doing it.
I’m not sure where to go with the writing thing. Maybe back to the PhD idea, with lots of formal writing? Maybe gig work writing? Book? Put ads up here? Substack? I don’t know. As much as I’d like it to be otherwise, getting compensated in some way to do a thing makes it easier for me to accept that thing as both legitimate and a part of my identity. When people ask me what I’ve been up to, I’d like to say writing. But what I usually say is writing, followed by “I had a few pages published in some book for free“. In a perfect world, I wouldn’t care what I tell other people I do. But alas, I’m human.
Ok, now that’s all of it. A giant meandering mess that started with attempting to qualify for an FSA and ended up with egoic questions of identity. About par for the course around here. Hope you had fun along the way 😉
Great read! I’m always interested in how others make a bit of side cash no matter what the motivation to do so. I’m far beyond the need for daycare but always looking for ideas to fund my IRA as well as banking ideas for a little extra cash after retirement. I’ve considered the substitute teaching but with hesitation. Now that I’ve read your take on this endeavor I don’t believe it’s worth the stress or headache.
Thanks!
While the substitute teacher thing was a major headache, it had a very low barrier of entry to try it out. Had to fill out some forms online, do a few hours of paid orientation, and then I could select when I wanted to work on a quality app. If you ever feel like you don’t have enough stress and want to give it a go, at least it’s easy to try out. The lower barrier of entry also makes it easy to quit😉
I’ve been reading awhile without commenting–all really great stuff. Here’s my totally armchair diagnosis: I suppose the tempting lucrative opportunities in the EP line are not really tempting because of the money but because they’re an opportunity to do something you know you’re good at. Same with the financial optimization with the FSA. You can exercise some prowess in these things and that is the true reward. That is perfectly rational, even if not absolutely what’s best for all involved in terms of how you spend your time.
If you don’t want to compromise on family time, the challenge is (1) to find something new that you can find fulfilling within those constraints, or (2) find a way to be fulfilled without necessarily being an expert in anything that’s apparent to others outside your inner circle. I won’t pretend to know what is right for you, but I’m working on #2.
As for the Ph.D, ugh. I am sure you CAN do it. And I hate to discourage you because I bet you’d be great. But I’m just finishing up an academic career and believe me, it is not all it’s cracked up to be. There are far too many people looking for far too jobs, the management pretends to be enlightened but acts like Walmart, all your coworkers mistakenly think they’re geniuses because they are knowledgeable in one very specific area… there’s more, but now you’ve got me monologuing. Keep up the good work.
Thanks Brian, glad you’ve been liking it. My writing here is more than a little bit self-serving; I use it to clarify my thoughts and get closer to making decisions. An unintended benefit (to me) of this blog is comments like yours. You boiled down some of what I’ve been trying to think about, and put it into two concise points which ended up being much clearer than how I had thought about this issue. Which is a long way of saying thanks. 🙂
For (1) I’ve come around to thinking that it may be impossible to find something fulfilling without loosening my constraints a little. Further experimentation is required there.
Your definition of (2) was enlightening, especially the part about being fulfilled without it being apparent to outsiders. I still feel the draw of external validation, which is a larger pull of the Ph.D route than I’d care to admit. But whenever I sit down and think about that path, I end up concurring with your line of thinking. I’ve yet to meet anyone from academia that recommends it.
Aside from the external validation aspect of having more letters in my email signature, that path is also alluring because it’s so well defined. There is a specific process, and my life so far has been filled with checking off requirements to meet one standard or another. Inventing something unique will probably be more fulfilling, but the lack of clear guidance is scary.
Anyways, I appreciate the monologuing, and feel free to write even more if you’d like. I’d be interested to hear more of your thoughts, and how you’ve gone about trying to figure out #2.
I’m glad the comment was meaningful. As for figuring out #2, I haven’t solved it, except to know that the solution may require an altered state of mind. My wife sometimes reminds me (half jokingly) that the Buddha says the key to peace is to stop wanting what you don’t have. Can you stop wanting external validation? It’s much easier said than done. Or can you stop wanting it enough to not feel the need to actively seek it out, and thereby (perhaps) appreciate it all the more when it comes more organically?
But then again, I’m definitely not saying it’s wrong to want that– I can’t imagine where the world would be without people who are driven to achieve excellence in public undertakings. And it may well be that a wholly fulfilled you is the best you for all those for whom you are responsible, even if it means some compromises.
With your average hourly rate being $33 and all the gigs other than EP being in the teens, I want to congratulate you on the excellent EP gig salary. I’m curious, would Roth conversions count towards FSA earned income?
I appreciate your writing and the perspective you bring to the FI community. You do a lot of great writing about stresses in life. Have you thought about focusing on writing on how to effectively deal with predictable and unpredictable stresses in FIRE? Stress brings a whole host of negative consequences such as poorer decisions and a plethora of physical issues.
Thanks for the congrats! The EP salary is still weird to me, especially after having done essentially the same thing in higher risk environments for a couple decades for much less pay. Coming from the public sector, I had no idea that money could become such a source of external validation.
Best I can tell, Roth conversions do not count towards FSA earned income-I had the same thought when we went down this rabbit hole. Thanks to my wife and Bard (google AI) who both confirmed this:
“Publication 503, Child and Dependent Care Expenses:
Page 8 states: “Earned income generally means wages, salaries, tips, and other taxable compensation for personal services performed.”
Page 8 explicitly excludes distributions from retirement plans like IRAs from the definition of earned income for the FSA.
Publication 919, Social Security and Medicare Planning:
Page 8-5 mentions that Roth conversions are considered distributions, not income, for purposes of figuring your modified adjusted gross income (MAGI) for Social Security taxes.
Revenue Ruling 2007-71:
This ruling specifically addresses whether income from rollovers, including Roth conversions, counts as earned income for determining the availability of health insurance tax credits. It concludes that such income does not qualify as earned income for this purpose.
IRS website (Frequently Asked Questions on IRAs):
The FAQ titled “How is a Roth IRA distribution taxed?” clarifies that conversions are treated as taxable distributions, not earned income.”
So basically Roth conversions are taxed at like income, but not considered earned income.
Thanks for the excellent explanation on Roth Conversions counting as income, but not earned income. Learning the tax considerations associated with early retirement and all the possible corollary topics has become a fun interest of mine over the last year. Thanks again!
As per how to effectively deal with stresses in FIRE, I’m still trying to figure that one out!!😂 I’ve tried most of the popular methods out there, and they all seem to work to varying degrees.
But since I mostly write to help myself, that’s a good idea for a post. Have you found any particular methods that have worked well for you?
My Stress-Slaying Arsenal:
1. Nature’s Therapy: I’ll take a brisk walk or bike ride multiple times per day. Add carrying a few dumbells and throwing on a backpack to my walks for occasional spice.
2. Lifting Weights: pumping iron and bodyweight exercises are awesome stress busters.
3. Broadening My Horizons: learning a new language (hola!), diving into a captivating book, and exploring a fascinating topic – these are my gateways to mental escape.
4. Finding Peace in Words: there’s something incredibly soothing about curling up with a good book in a quiet corner of the library. Whether it’s thought-provoking non-fiction like Dan Ariely’s “Misbelief” or lighthearted fiction like Tom Clancy’s novels, getting lost in words is a surefire way to melt away my stress.
5. Words of Wisdom: JL Collins’ blog posts are my secret stress-relief weapon. His down-to-earth wisdom and practical advice on financial independence and living a meaningful life never fail to bring me comfort and perspective. I didn’t know what F-U money was before this year, but I’m sure glad I spent the last 27 years building some up! 🙂
Thanks so much!
I really like that you listed Nature’s Therapy and Broadening my Horizons-those are things I occasionally do unintentionally and I recall them working great for stress. I’ve never done them deliberately, and they were therefore never in my toolbox of stress relief. I mostly default to reading, working out (pumping iron and/or cardio), and meditation. I’m going to start prioritizing my cardio outside when I’m stressed, and will broaden my horizons by…broadening my horizons and figure out what I want to learn next. 😉
As for words of wisdom, I too find JL Collins’ work to be soothing, especially when it comes to $ stuff. Sort of related-have you ever tried listening to the Nothing Much Happens podcast? A friend of mine recommended it a few months ago, and it has an equally soothing quality for general life stuff. Like a warm blanket of words. 🙂
Thanks for recommending the Nothing Much Happens podcast. I listened to an episode and it was very calming. Amazing service they have!
I live in South Texas where there is a significant Hispanic population, so choosing to start learning Spanish was a good fit. I like doing a lesson or two first thing in the morning while drinking my coffee. The habit has been sticking so far and is fun.