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Society of Financial Independence (FI) Magicians
A Little Magical History
First, a little magical history, regarding the Society of the American Magicians. The world knows Harry “Handcuff” Houdini as the greatest escapologist, illusionist, and stunt performer who ever lived. Houdini’s commitment to legitimizing magic tricks leading hm to serve as president of the Society of American Magicians. During his lifetime, many suspected that Houdini’s escapes were fake. However, Houdini proactively sought to uphold professional standards. Exposing magicians using fraudulent methods was a key Houdini tactic. Further, Houdini was known for suing anyone imitating his escape stunts.
HouFIni and the Creation of the Society of Financial Independence (FI) Magicians
Admittedly, we are working to perfect our magical Financial Independence (FI) tricks. In pursuing life as HouFIni the FI escape artist, and as a Family FI team we are channeling Harry Houdini. Accordingly, HouFIni refers the the ability to perform amazing FI escapes from the Retirement Police that are Not an Illusion (ni). Thus, the combination creates HouFIni.
In the spirit of legitimizing the benefits of Financial Independence , HouFIni created the Society of Financial Independence (FI) Magicians. Harry “Handcuff” Houdini may have been the greatest magician who ever lived, but he did not reveal his secrets.
Houdini’s Society of American Magicians protected the greatest escape tricks. However, HouFIni’s Society of Financial Independence (FI) Magicians are willing to share the FI magic.
Key Elements of the Society of Financial Independence (FI) Magicians
Astonishingly, the Society of Financial Independence (FI) Magicians is open to those willing to put in the time and effort. To be an FI Magician you need to do the work. No one else can do the work for you. Anyone studying magic tricks secrets knows they often rely on combining psychology, continual practice, misdirection, sleight of hand, and illusions. But HouFIni, you said performing amazing Financial Independence (FI) escapes from the Retirement Police that are Not an Illusion (ni)? Indeed, we will be explaining in greater detail below.
HouFIni and other FI magicians create illusions by manipulating perceptions. Instead, the Society of Financial Independence (FI) Magicians are focusing their attention away from the secret techniques used to perform the trick. HouFIni, this sounds deceitful, how can this be?
One of the greatest FI Magician’s tricks is the illusion and misdirection of hiding money from yourself. HouFIni, how can I become FI if I hide money from myself? Isn’t that defeating the whole purpose to make my money disappear?
Perfecting the FI Magic Trick of Making Your Money Disappear
In HouFIni’s defense, most people that have debt, may not have any idea where their money went? Even worse, people in debt, likely have no means to get their disappearing money back. If your money is disappearing with you hiding it from yourself first you have to stop the bleeding. It’s a little bit like sawing a woman in half and figuring out how to put her back together.
Assuming you have no debt, you can work on perfecting the FI magic trick of making your money disappear. HouFIni, how are you magically hiding money from yourself?
HouFIni and the Society of Financial (FI) Magician’s use pre-tax and post-tax retirement accounts to make their money magically disappear. Indeed, the trick involves you never even seeing the money in your paycheck. The beautiful thing about working a W-2 job and having access to these special accounts is utilizing the tax advantages.
Hiding Money From Yourself in Pre-tax retirement accounts or tax-deferred accounts
Pre-tax retirement accounts or tax-deferred accounts, are retirement accounts that an individual contributes to before government taxes are taken out. In the U.S., examples of pre-tax retirement accounts generally include traditional accounts such as 401(k)s and 403(b)s. Many W-2 eligible FI Magicians are hiding their money in pre-tax accounts. The term pre-tax means that the individual puts off paying taxes on the money contributed to these types of accounts. Further, you are putting off taxes including any potential earnings generated on contributions.
The secret trick is being able to hide the money from yourself and theoretically letting it grow for your retirement.
However, the government collects taxes on pre-tax retirement accounts or tax-deferred accounts when upon you withdrawing money during your retirement. Additionally, the government not only taxes the money but also imposes a tax-penalty if the withdrawals do need meet certain criteria. Typically, pre-tax retirement accounts do not allow for a taxable withdrawal until the individual reaches age 59 and a half. Thus, motivation for naming our website as fi59andahalf.com.
More Magical Benefits of 401(k) pre-tax retirement accounts
A 401(k) is an employer sponsored pre-tax retirement account or tax-deferred account. Eligible 401(k) or 403(b) employees saving a portion of their salary, subject to annual limitations, may also be eligible for additional magical benefits. Matching a potion of their employees retirement accounts is an invaluable benefit. Matching provides essentially free money to participating employees.
For Tax Year 2025, 401(k)s allow the following, but total contributions cannot exceed your annual compensation at the company that sponsors your plan:
- Maximum contribution limits for employee salary deferral limits are $23,500, and $70,000 for the combined employee and employer contributions.
- However, if you are age 50 to 59 or 64 or older, the maximum 401(k) limitation allows an additional $7,500 in catch-up contributions for a total of $31,000 annually.
- Important, new for 2025, if you between the ages of 60 and 63 you will be eligible to contribute up to $11,250 as a catch-up contribution for a total of $34,750 in 2025.
- Please note, that depending on your employer’s 401(k) plan, you may be able to make post-tax contributions beyond the pretax and Roth contribution limit but less than the combined employee and employer contribution limit to invest even more for retirement.
The Magic of 403(b) pre-tax retirement accounts
According to the IRS, a 403(b) pre-tax retirement account is a type of pre-tax retirement plan or tax-deferred retirement plan. Specifically, 403(b) plans are available for employees in public schools, charitable 501 (c)(3) tax-exempt organizations, and certain faith-based organizations. The non-profit sector 403(b) pre-tax retirement account is similar to a 401(k) is an employer sponsored pre-tax retirement account or tax-deferred account. Again, as a pre-tax account, 403(b)s allow individuals to make contributions before government taxes are taken out.
Again, employees eligible for a 403(b)s can save a portion of their salary, subject to annual limitations. Eligible employees contributing to a 403(b) have the same monetary limitations noted above. Similarly, your employer may provide matching “free money” contributions to you under certain conditions and limits.
Again, pre-tax accounts means that the individual puts off paying taxes on the money contributed to a 403 (b) pre-tax retirement account, including any potential earnings they may generate. However, the government collects taxes on pre-tax retirement accounts or tax-deferred accounts when the funds are withdrawn for retirement. However, under certain circumstances the government is assessing penalties if the withdrawals do need meet certain criteria. Typically, pre-tax retirement accounts do not allow for a taxable withdrawal until the individual reaches age 59 and a half.
Utilizing the Magic of FI Tax Bracketology
The Society of Financial Independence (FI) Magicians are waving their wands in the deceptive but legal arts of tax bracketology. Progressing to the tax bracketology next level magic requires an understanding of tax brackets and knowing how to minimize your taxable income. For further information on learning more about this practice please check out March Madness Bracketology It’s Big Money.
FI Magicians and Roth 401(k) and Roth 403(b) post-tax contribution limits
According to the IRS, Roth 403(b) and Roth 401(k) contribution limits for 2023, 2024, and 2025 are the same as those for traditional 401(k) plans. If you have access to a Roth 401(k) and a traditional 401(k), you can contribute up to the annual maximum across both. Again we recommend checking out March Madness Bracketology It’s Big Money. Please also make sure your are seeing our disclaimer below that all of this is for entertainment purposely only. Back to the magic, in other words, if you’re under 50, you cannot be putting more than $23,500 total as employee contributions in your 401(k) accounts in 2025, no matter how many accounts you have.
Utilizing Roth 401(k) or Roth 403(b) post-tax account means you are contributing to your retirement accounts and are being taxed now. The FI magic of making contributions now and paying the taxes now means that assuming your accounts grow, you are not taxed on your distributions if certain criteria are met. Typically, the government is requiring you to have the money in the Roth 401(k) or Roth 403(b) for five years and you also need to be age 59 and a half to withdrawing funding in retirement. Let HouFIni be clear, personal finance is personal so check with your financial professionals, employee benefits person, etc. HouFIni believes its a best practice to consult your professional advisors before investing in these types of accounts and when considering withdrawing funds.
HouFIni and The Society of Financial Independence (FI) Magicians believe under certain circumstances utilizing the Roth 401(k) and Roth 403(b) is like pulling a rabbit out of hat later.
Even The Mad Fientist Loves the Magical Health Savings Accounts (HSA)
Admittedly, HouFIni and family in more recent years are practicing the art of using the magic of Health Savings Accounts (HSAs). The United States federal government created HSAs, which is a pre-tax type of savings account that lets you set aside money to pay for qualified medical expenses. Under current law, contributing to an HSA is possible only if you have an HSA-eligible medical plan (sometimes called a High Deductible Health Plan (HDHP)). Generally a HDHP, including a Marketplace plan, only covers preventive services before the deductible.
However, maximizing magic, an HSA may earn interest or other earnings, which are not taxable. By using pre-tax dollars to fund an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your out-of-pocket health care costs. Unfortunately, HSA funds generally may not be used to pay premiums.
Investing an HSA in stocks and/or other financial interest products depending on the plan administrator and these earnings are tax free is magical. Admittedly, the FIRE Movement’s Mad Fientist refers to HSAs as “the ultimate retirement account”. Employers with High Deductible Health Plans (HDHP)s, banks, credit unions, and other financial institutions offer HSAs. FI Magicians know contributing money to your HSA lowers your taxable income. More next level March Madness Tax Bracketology. Further, under current law, an HSA is always yours, even if you leave the plan.
Paying Yourself First
HouFIni’s magical education includes paying yourself first. HouFIni’s parents perfected the art of “paying themselves first” each month Unsuspecting Retirement Police were fooled by HouFIni’s parent’s status as Prodigious Accumulators of Wealth (PAW)s as described by Thomas J. Stanley and William D. Danko.
Every month, my parents were hiding money in a pre-tax retirement account. This strategy also limited the psychology of money because my parents never even saw the money they were putting into a pre-tax retirement account. Further, for my parents, paying yourself first extended to the mortgage, car payments, and any regular monthly expenses. Admittedly, my parents “entertainment” expenses were occurring only if there was enough money. My parents did have built in entertainment dollars budgeted, such as college basketball season tickets or passes for the local symphony orchestra. Spending on my parents passions at a reasonable discounted price allowed them to live a rich life.
Joining the Society for Financial Independence (FI) Magicians
HouFIni is extending an open invitation to you to join the Society for Financial Independence (FI) Magicians. Membership does not require paying dues. We do recommend subscribing to both fi59andahalf.com and our YouTube channel @retirementpolicemostwanted.
*Disclaimer: The content in this blog posts is not intended to be investment or life advice. Readers should consult with their legal, financial, and accounting specialists and spiritual and/or life coaches to provide insight on their personal and specific circumstances as each situation is unique. This website and any blog posts are written for entertainment purposes only.
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