As I’m reentering a society after the pandemic, I had the pleasure to chat with a family friend about early retirement strategies. One of the many topics that popped up was about accessing age-locked retirement funds - namely 401(k)s and IRAs. Conventional wisdom is that these account stay locked until you hit a certain age, but funds from these accounts are accessible as long as you’re ready to jump through some hoops.

I put together this post to test my understanding of the subject, so please let me know if there’s something I misunderstand. I used the IRS and the United States Code websites as the sources of truth, and I link to each throughout this piece. The links are likely to get out of date within a few months to a year though, so don’t hold your breath for those.

This article is for retirement accounts in the United States only.

Tax-advantaged accounts

There are 5 tax-advantaged retirement vessels that I’m somewhat familiar with:

• Traditional 401(k)
• Roth 401(k)
• Traditional IRA
• Roth IRA
• HSA

These are not the only tax-advantaged accounts out there for different employment situations, but I think these are fairly common. Here’s a quick reference for each with some stats as of June 2021:

	401(k)	Roth 401(k)	IRA	Roth IRA	HSA
Employer-sponsored?	Yes	Yes	No	No	Sometimes
Allows for employer match?	Yes	Yes	No	No	Yes
Tax-advantaged contrib. limit	$19,500 + match	$19,500 + match	$6,000	$6,000	$3,600
Total contrib. limit	$58,000	$58,000	$6,000	$6,000	$3,600
Contrib. increase at age 50+	$6,500	$6,500	$1,000	$1,000	$1,000 (55+)
Taxation	Deferred	Exempt	Deferred	Exempt	Exempt/free
Withdrawal timeline	59 1/2	59 1/2	59 1/2	59 1/2 or 5 years	Qualified/65
Mandatory withdrawal	70	70	72	N/A	N/A
Early withdrawal penalty	10%	10%	10%	10%	20%

I dig into each a little bit more below.

Traditional and Roth 401(k)

401(k) is an employer sponsored plan: it allows you to invest in a choice of funds selected by your employer. 401(k) often comes with an employer match, which allows the employer to contribute additional amount on top of the tax-advantaged contribution limit. At age 50, you can contribute additional amount in “catch-up contributions”.

There are two limits for 401(k) plans: the tax-advantaged contribution limit (at $19,500/year in 2021, not including employer match), and the total contribution limit (at $58,000) (IRS website). You don’t get any tax benefits from contributing to your total contribution limit, but it’s primarily used for “401(k) megabackdoor” - to funnel money into a tax-advantaged Roth IRA. The limits are shared across Traditional and Roth 401(k).

From what I understand, Roth 401(k) also requires the employer match to be contributed to a Traditional 401(k) account.

Traditional 401(k) is tax-deferred, meaning you don’t pay taxes on the amount contributed, but you pay taxes on withdrawal – this includes paying taxes on the principal (the investment income). In contrast, Roth 401(k) is tax-exempt. You pay your taxes in advance, and investment income or withdrawals are not taxed.

Early withdrawal penalty of 10% applies if you attempt the funds before age 59 1/2, but keep on reading to learn how to get around that. You must begin withdrawing from your 401(k) by age 70.

Traditional and Roth IRA

IRA is an individual plan which allows for tax-advantaged investments. Direct contribution limit is at $6,000, however rollovers are not capped. Meaning the above mentioned 401 megabackdoor funds don’t follow the limit. At age 50, you can contribute additional $1,000 a year. The limits are shared across Traditional and Roth IRAs.

There’s technically an income limit on Roth IRA contributions (MAGI of $140,000 single or $208,000 married), but Traditional IRA contributions can be rolled over into Roth IRA (IRS.gov), effectively nullifying the limit. This is referred to as “IRA backdoor”.

Just like with 401(k), Traditional IRA is tax-deferred: you get a tax refund for contributing to it, but you’ll have to pay back those taxes on withdrawal. Roth IRA front loads the taxes, making earnings and withdrawals tax free.

Traditional IRA can be accessed at age 59 1/2. Roth IRA can be accessed either immediately upon reaching age 59 1/2, or after holding IRA account for 5 years. There’s a 10% withdrawal penalty otherwise, and you must begin withdrawing Traditional IRA contributions by age 72 (Roth IRA doesn’t have the mandatory withdrawal period).

HSA

Health Savings Account is another tax-advantaged investment, but it’s not tied to the employer (however employers might choose to offer an HSA plan). HSA contribution limit is at $3,600 for 2021, which includes employer match if employer offers any. This can be increased by $1,000 if you’re over the age of 55.

HSA is effectively tax-free, meaning that you don’t pay when you contribute, nor do you pay when you withdraw (but there are caveats). HSA can be withdrawn to pay for qualified medical expenses without a penalty. Reimbursing for expenses does not have an expiration date, as long as the expense was incurred after your HSA was established. You can also withdraw HSA without qualified reasons once you hit the age 65 (which is higher than 59 1/2 used for 401(k) and IRA).

Early withdrawals

Now that the basics are out of the way, let’s discuss early withdrawals from each of these accounts.

Traditional and Roth IRA

Let’s look into IRAs first, since the most common way to access 401(k) funds early leverages IRA peculiarities.

5-year rule

I’ve also heard the 5-year rule referred to as a “Roth conversion ladder”.

The most obvious candidate for early access is Roth IRA. Roth IRA contributions (money you put in), can be accessed at any time without a penalty or paying additional taxes. Roth IRA distributions (aka the principle, or the money you’ve earned) can be accessed using what’s referred to as a “5-year rule”.

There are confusingly three 5-year rules when it comes to IRAs, and even more confusingly we care about two of them (the third rule deals with beneficiaries).

The first 5-year rule lets us access Roth IRA distributions within 5 years of owning the Roth IRA account. Simply enough, if you’ve had Roth IRA account for more than 5 years, you can access both the money you put in, and the money you’ve earned.

The second 5-year rule covers rollovers. Rollovers from Traditional IRA or Roth 401(k) need to marinate for 5 years (per transaction) before being accessible. So if you converted between your Traditional IRA and Roth IRA twice – in 2021 and 2022 – you’ll be able to access the money in 2026 and 2027 respectively.

This means that Roth IRA can be accessed if you hold the account for at least 5 years, and Traditional IRA can be converted to Roth IRA (a taxable event) and accessed penalty-free after 5 years.

For example, if you opened a Roth IRA account in 2015, and it’s now 2021 – you can access all the funds at any time without paying taxes.

In a more complex example, you’d convert the Traditional IRA to Roth IRA, and access the resulting money after 5 years:

1. Convert a certain amount from Traditional IRA to Roth IRA
2. Pay taxes on the transaction
3. Wait 5 years (for each transaction)
4. Withdraw transaction amount + earnings

This works out similarly for Roth 401(k) to Roth IRA conversion (but with less steps and without taxes):

1. Convert any amount from Roth 401(k)
2. Wait 5 years
3. Withdraw transaction amount + earnings

72(t) SEPP

72(t) SEPP (Substantially Equal Periodic Payments) can be used to sign up for a payment plan from your Traditional IRA (technically you’re able to use SEPP for your Roth IRA as well, but this will incur double taxes). This is quite a commitment, and you’ll be receiving periodic payments from your IRA until you hit the age 59 1/2 (or for 5 years, whichever is longest).

For a Traditional IRA example, you can sign up for SEPP to receive $5,000 annually. This means that each year (until you turn 59 1/2 or 5 years passes – whichever is longest) you will pay taxes on those $5,000, and withdraw the difference.

Additionally, IRA can be used to pay for large medical expenses (within the same year), high education expenses, home-related expenses ($10,000 lifetime limit), and a few more niche cases.

10% penalty

10% penalty sounds large, but it’s really not a terrible choice if the other options don’t work (although I don’t see why they wouldn’t). Given the tax-advantage growth that these assets have been enjoying, 10% penalty is not a steep price to pay. Although understandably loss aversion kicks in, and either a 5-year rule or the 72(t) SEPP sound preferable to paying the penalty.

In case with the Traditional IRA, the penalty would have to be paid in addition to paying taxes on withdrawn amount. Roth IRA only imposes a penalty if you didn’t wait for 5 years since the account creation or the rollover transaction.

Traditional and Roth 401(k)

401(k) can be accessed early (before the required 59 1/2 age) in multiple ways. Both the 5-year rule (aka the Roth conversion ladder) and the 72(t) SEPP can be used to access 401(k) funds.

Roth conversion ladder leverages the ability to rollover Traditional 401(k) to Traditional IRA, and subsequently convert Traditional IRA to Roth IRA (a taxable event). Within the 5 years of that second conversion, you should be able to access the money.

For example, when getting ready for retirement, you may convert all your Traditional 401(k) balance to Traditional IRA. Then each year, you could do the following (this may look familiar from the above):

1. Convert $5,000 from Traditional IRA to Roth IRA
2. Pay taxes on the transaction ($5,000)
3. Wait 5 years (for each transaction)
4. Withdraw transaction amount ($5,000)

This works with Roth 401(k) to Roth IRA as well. It’s simpler too, as Roth 401(k) to Roth IRA conversion is non-taxable. Convert Roth 401(k) to Roth IRA, wait 5 years, and withdraw at your own leisure.

HSA

As you may have guessed, HSA balance can also be accessed before the age 65. But it does come with a caveat.

You see, HSA allows you to pay for qualified medical expenses tax-free. No taxes on withdrawal, tax-free growth, and no taxes when paying out. However, these qualified medical expenses don’t expire. As long as you had an HSA account at a time of medical expense occurring, you can get a refund on that medical payment.

This is something that we’re doing – banking medical receipts (which isn’t hard, given the overpriced American healthcare system) to cash in at a later date.

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There’s a number of ways to access retirement accounts in the United States. Be it through Roth conversion ladder, 72(t) SEPP, or even by using old medical receipts. And now I have somewhere to look back to once I inevitably forget how any of this works.

I don’t blog consistently, and I’m still struggling to find my voice. I find writing difficult for many reasons, especially when it comes to identifying topics worth writing about. I want to bring a combination of passion, expertise, and a fresh perspective into a topic – which makes finding a theme to cover challenging. To top it all off, English is my third language. Getting the content to flow well is difficult, and I don’t always have the ear for it.

In contrast, I find it straightforward to write once I know what to write about. In part due to the volume of writing I have to do for work: as a technical lead at Google I routinely use extensive design documents to communicate my ideas. I also wrote a book once.

I found a set of techniques that work well for me. I don’t know if these techniques help me write higher quality material – you’ll be the judge of that. But these techniques help me express ideas from my head and onto paper. Hopefully in a digestible and entertaining format.

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I never took journalism 101. Like with many things in live, I found my own way of doing things: why take an easy path, when a difficult one could work just as well?

I break down writing process into a set of distinct steps. I start with some preliminary research, write an outline, do my in-depth research, write a wine draft, turn that into a coffee draft, and finally proofread the result. I try to take breaks and get some distance from whatever I’m working on in between these steps.

Preliminary research

This is a step zero, although it might not apply to everything I write about. This is a breadth-first, “open as many tabs as computer can handle” type of research. There’s no in-depth reading at this point, and only high level information is consumed.

I picked up this approach from my wife, who is an indisputable queen of online research. I find it tempting to dig into the first source I find. Stopping myself from digging too deep helps me understand the information landscape.

For instance, when writing about financial independence in Cote d’Ivoire (a topic I know nothing about) my preliminary research consisted of: a brief review of country’s history, a list of major geopolitical events, investment landscape, and identifying trustworthy sources which could tell me more about currency stability or tax situation.

I’ve also looked for existing sources on the subject, but there wasn’t any.

Outline

This post started with an outline. An outline is crucial to pacing and identifying areas of focus. Chapter summaries in a book, outlining headings in technical documents, or putting together a bulleted list for a blog post – you name it.

Outline only needs to make sense to you, and you don’t have to use complete sentences. I started with the following outline for this post:

• I write a lot
  • Quantity doesn’t mean quality
  • I don’t publish most things I write
  • A lot of practice with technical docs
• Outline
• Wine draft
• Coffee draft

An outline is not final, and it evolves as I write. For instance, by the time I wrote the bulk of this post, an outline evolved – something was removed, and a whole lot of things were added:

• I write a lot
  • Double down on how bad I am at writing
    • Quantity doesn’t mean quality
  • I don’t publish most things I write
  • A lot of practice with technical docs
• Preliminary research
• Write an outline (you’re here now!)
• In-depth research
• Write wine draft
• Write coffee draft
• Proofread the result

I like to keep an outline on the screen as I write, as it reminds me to write in context. I often jot down a brief outline when I have ideas about writing something: this way I don’t have to start from scratch when I sit down to write.

In-depth research

This is where I actually read through dozens of tabs I opened during the preliminary research. This is where I spend the most of my time for topics I don’t feel particularly comfortable with.

I make a point to time box research tasks. It’s easy to go down a rabbit hole when researching a topic, and there’s always more to learn the more you understand the subject. Putting a time limit on each research topic helps me stay on track.

Wine draft

Step 4 out of 6: this is when I start writing.

I found it near impossible to write without separating creative stream of conciousness from the editing process. The “wine draft” is the first attempt at filling in the blanks. The grammar can be all wrong, and the sentences don’t always have to make sense. It’s not necessary for the content to flow or read nicely.

This is where the outline really helps, because writing top to bottom is generally very difficult. Filling in the blanks under the outline however is much easier. I often find myself jumping between different headings and writing a little bit here and there under each heading.

Prioritizing cadence during this step helps, as a stable writing rhythm helps me enter the state of flow. To stay in the flow, I have a wine draft authoring rule: no sentence-level editing. Moving paragraphs or headings around is fine, but changing sentences is generally not.

That’s the goal - get as much content out as possible, no matter how much the language rules get abused. I find it easier to edit down a boatload of content, rather than struggle to come up with the missing pieces when editing.

This is the stage when I decide if the content is not worth publishing – many of my wine drafts never see the light of day.

I find accompanying wine mandatory, but whiskey or tea works in a pinch.

Coffee draft

After the wine draft is complete, I take a break. Often couple of hours is enough to create a distance between me and the text. A coffee draft requires more focus and attention. This is when the messy draft takes shape and becomes (hopefully) readable. You tell me.

I make my way down, sentence by sentence, turning ramblings of a madman into a coherent narrative. I rearrange sentences, correct syntactic and grammatical errors, and liberally remove what doesn’t contribute to the narrative. If the wine draft is particularly incoherent, I simply rewrite each paragraph one by one.

This is when I add illustrations if need be. A coffee draft is nearly the final result, barring typos and minor mistakes.

Coffee helps here, but, unlike with a wine draft, is not required.

Proofreading

The final step involves good old proofreading (unless you have a proofreader: it was great having one when working with a publisher).

I try to proofread in a different software suite, or with different fonts and colors: it helps create further distance between the content and I. For instance, I write this post in Vim using Markdown, but I proofread by reading the final preview using my blog’s visual theme.

It often helps to read things out loud too: anything you can do to change up the way you perceive the text.

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And finally it’s ready to be published: ta-da! This method hasn’t failed me yet, be it for writing Mastering Vim, technical design docs at Google, or blog posts like this one. Fingers crossed it’ll continue working well for me.

Roguelikes are once niche, but an increasing mainstream video game genre. The genre is named after 1980 “Rogue” - a procedurally generated dungeon crawler. Rogue and games inspired by it often include simple ASCII graphics, feature procedural generation of the world, and include “permadeath”: the game is over once you die.

Many games were heavily inspired by it - like Ancient Domains of Mystery and Nethack, or more recent Cataclysm: DDA and Caves of Qud. Modern games bring a lot of fantastic fusion into the genre too with like The Binding of Isaac or Hades. But I digress.

A few months ago I was struck by a bout of inspiration. I’ve tried countless times before, but never produced a complete video game – this was meant to be the time! I’ve significantly reduced the scope, came up with a plan of action, and started coding!

I codenamed the game “Hikaya”, which means “a fairy tale” in Tatar - my native language (although I think the word itself has been borrowed from Arabic). I planned to make a fairly straightforward roguelike, without too many bells and whistles.

I’ve found a wonderful tutorial on rogueliketutorials.com, which introduces libtcod – a library to simplify the mundane: drawing on screen, handling input, field of view and lighting, pathfinding. I’ve struggled through all of the above before, and knew that getting deep into the mechanical details would slow me down.

Alas, I didn’t finish the game. I’ve gotten maybe half way there, before my focus slipped away from the project. But not before getting some screenshots and documenting some interesting ideas I had!

The only contains a dozen dungeon levels, with a short story being told through item descriptions. The player is an adventurer who’s sent by their village to a nearby cave to retrieve the last flame - a placeholder MacGuffin.

Every item and monster posses a fantasy-sounding name, contrasted with a short, but colorful description hinting at a science fiction nature of the objects. Think magic scrolls with touch screens, or injectable health potions.

Each monster type has a unique behavior - with goblins running away and regrouping, ogres snacking on goblins to restore health, and so on.

As the player descends down the dungeon, they encounter multiple bosses guarding the staircases. The bosses drop unique armor pieces, which tell a story of a group of adventurers descending into the dungeon, but succumbing to traps, greed, and treachery.

Finally, a dragon guards the last light on the final floor. The game ends with the player becoming a dragon, and a cycle becomes anew.

I know, I know: edgy, uninspired – but I enjoyed the premise.

The combat is focused on tactical movement and avoiding damage, and the player unlocks new moves – like kicks, jumps, or faints – as they progress through the dungeon.

I wanted to experiment with the health system. Inspired by FATE tabletop roleplaying system, I attempted to use health pools. The system was meant to keep combat dangerous and entertaining throughout the game by making even the goblins dangerous throughout the game.

My biggest experiment came from a health system. Inspired by FATE tabletop roleplaying ruleset, the health consists of multiple pools (as opposed to a single bar). The goal of the system is to make combat deadly, and create a sense of danger even for trivial encounters, while still leaving room for error.

Let me try to explain. For example, a player might have three health pools - for 1, 2, and 3 hit points each. Each time a player takes damage, the smallest pool is used to absorb that damage. For instance, a 2 damage hit voids the 2 hit point pool. A second 2 damage hit clears out the 3 hit point pool. A third 2 damage hit is fatal.

You can see the voided health pools marked as red on the screenshot below, and the full health pools in green:

To complicate thing further, I give players some leeway by slowly draining partially damaged pools over time. For instance, if the player uses their 5 hit point pool to absorb 2 points of damage, I’ll slowly drain that pool over the next three turns. This would let the player take another 2 damage hit (or a few 1 damage hits) “for free” immediately after being hit. You can see those hearts marked as yellow on the screenshot above.

Needless to say, the system turned out to be very convoluted to explain in game (and on paper too – I don’t think the above is clear enough). I still think it’s a great idea, but it desperately needs better user experience design to make it accessible. In fact, FATE itself got rid of confusing health pools in it’s latest “FATE Condensed” release, simplifying health down to binary hit markers.

Despite not finishing it, putting together Hikaya was a fun experience. I’ve had a great time working on the prototype: I’ve learned a lot, and maybe I’ll lead my next video game project to completion given everything I’ve learned!

My wife’s cousin recently moved to Cote d’Ivoire, and our latest conversation centered around financial independence and early retirement. The topic is also known under the trendy term “FIRE”. You may have heard about it as “those darn milenials retiring in their 30s”.

A lot of the advice I’m familiar with is US-centric (or covering Canada, Australia, EU countries, and so on). I couldn’t find adequate resources for pursuing financial independence in emergent economies. I tried to research this subject, and here’s what I came up with.

This one’s mostly for you, Myriam – as a follow-up to our conversation.

A pre-disclaimer

I refer to “developing” economies in this article. I’m using this term interchangeably with low and middle-income countries, countries with emerging markets, or pre-industrialized countries. None of those classifiers are strictly defined either. This can be a controversial term, but I hope the reader will bear with me and focus on the primary goal of this article - financial independence outside of countries like the United States, Canada, Australia, UK, and others.

“The” disclaimer

Before I dig in, I want to shine light on my credentials for this article: I don’t have any. I immigrated to the US at age 18. Before that I lived in Russia (which is often considered a developing economy). However I’ve never gotten a chance to become financially savvy in the country. Never held a full-time job outside of the USA.

My wife an I diversify into developing markets (and it’s less than 20% of our portfolio). We don’t have any inherent knowledge or in-depth understanding of emerging markets.

And I sure as hell don’t know what it’s like to live in a pre-industrialized country.

I’m bringing a perspective of a person who’s familiar with financial independence and early retirement in the United States (and vaguely Canada). This piece is a compilation of about 10 hours of research (give or take), with my own context applied to it.

This is not a professional financial advice, and I’ll be making culturally or economically ignorant statements about many countries. Read while having a tub filled with salt nearby.

Working to death

There’s a strong reason why the United States is a birthplace of FIRE movement as a media phenomenon. Limited worker protections, no government mandated vacation days or holidays, no maternity leave, low social security pension – you name it.

In fact, according to 2018 ITUC worker rights index, the United States is placed in “Systematic violations of rights” category. But this is where the first caveat comes in. A major chunk of emerging economies hold a “No guarantee of rights” or a “No guarantee of rights due to breakdown of the law” rating. Make of that what you will.

There’s the cultural aspect to an overwhelming desire to escape workforce: it’s common to live for the weekend in the States. Culturally life is often put on pause Monday through Friday. Enjoying life two days out of seven can be draining.

In the EU, one might take two months off (okay, not quite: 28 legally mandated days off + 7 weekends in between = 42 days). In the States (Canada, Australia, etc) you work to death, and getting out of the rat race is a priority.

This is where I need another disclaimer: I quite like living in the United States. I just think it’s worker protections are shit and should be improved.

Of course the United States and the likes don’t have a patent on working long hours or having workers protection. But there’s a reason why FIRE is prevalent in the industrialized world (in contrast to developing nations). One word: “stability”.

Stability

Despite the popularity of FIRE in the United States, similar formula applies for achieving financial independence in the rest of the industrialized nations. And there’s a constant across those countries: stability.

It’s as simple as that. To ensure your financial future you need to plot and plan ahead. You can’t plan effectively in an unstable landscape. Currency hyperinflation or hyperdeflation, risk of regime and major law changes, corruption and nepotism.

When considering financial independence within developing nations, it’s important to acknowledge and asses the stability of the economy, currency, and political regime. These constants are treated as somewhat of a given in many FIRE conversations, but most recommendations and arguments quickly fall apart when faced with a lack of stability.

There’s no recipe for dealing with a lack of stability, but hedging against it would likely have to be a key part of one’s financial independence strategy. I found a few things that are worth considering – and I’m sure there are many more aspects that escaped my surface-level investigation.

The FIRE recipe

In it’s core FIRE comes down to three principles: increase income, decrease expenses, and invest the difference.

Decreasing expenses is simple, but not easy. Increasing income is hard work that pays off if successful: drastic income increase helps speed FIRE along. Investing the difference carries significant risks due to aforementioned lack of stability.

I’m going to dive into all three principles, but regardless of plans for retirement, building up an emergency fund is always the first priority in nearly every financial conversation. Let’s talk about that first.

Parking cash

The first question you might get asked when talking about FIRE is “do you have an emergency fund?”. There’s always a straightforward recommendation of having N months worth of living expenses in a savings account. Of course this blanket advice breaks down the moment we discuss developing economies.

Lack of faith in the currency or the government puts savings accounts under question. Granted, banks in the developing nations are quick to offer high interest accounts. You might get a 20% return on investment, only to realize that the currency lost 25% of its value in a year.

If the country allows for holding foreign currency, foreign currency could be used to hedge against that. The United States dollar is the most widely held reserve currency. Euro is pegged by 19 countries, making it a relatively stable bet as well. Japanese Yen (JPY) is the third most commonly used reserve currency.

Real estate

I titled this section “Parking cash” and not “Emergency fund” because I wanted to mention an alternative to savings accounts often used in developing economies. Real estate.

While not a place for storing emergency funds, longer term reserves are often held in what’s perceived as the most stable asset – real estate. Due to a significantly lower cost of labor it’s common (and is often sensible) to purchase land, and then build on that land.

Although lower risk than other asset classes, it’s worth examining potential for asset seizure. 1980’s land redistribution in Zimbabwe is the prime example of this. Less stable political systems are at a higher risk for similar events.

Non-primary residence (that is: a house you don’t live in) can be used as an investment – either through having tenants, or through an act of reselling. Investment through real estate is work, and it’s the type of work I don’t think I would enjoy. I haven’t researched anything on the subject and will zoom past real estate and onto another topic.

Earn more

Increased income is an important pillar of reaching financial independence. This is where you say:

I work in a highly specialized (and therefore well paid) field. I can talk all I want about saving and investment, but without the high earner salary, stock grants, and financial benefits my job provides - it would take me decades to get where it takes me years.

It’s possible to ensure your financial future with a lower income. It’s much, much harder.

There’s a significant luck element involved, and I’m not interested in peddling the “work hard and you’ll be rich” narrative. Load of bullshit if you ask me. There are however concrete steps one can take. These steps could open up the right opportunities.

Increasing earning potential is a massive boon in the FIRE world. Directing energy towards this goal might be a higher priority step compared to everything else I wrote about.

The most straightforward way to increase earning potential is through education (either formal or informal). College, university, books, online courses. If formal education is problematic, some industries (e.g. software engineering) are more open to self-taught professionals than others. Yours truly is a good example of that.

Networking is another avenue to pursue. It might be more difficult in certain nations due to inherent nepotism and lack of opportunities.

In fact, many developing countries make vertical mobility problematic due to corruption. In an increasingly connected world, earning internationally could be a feasible way forward to increasing income. That is if you have skills that are worth paying for.

Spend less

Another “duh” topic, reducing your spending in proportion to income is crucial in achieving any type of financial freedom.

Expense reduction is very much a country-specific topic. In fact, it’s highly specific to individuals. Analyzing expenses and putting together a budget is a strong first step. Thankfully, reducing expenses is something commonly covered in media, with plenty of literature available around the globe. That, and this is something financial professionals frequently focus on.

A blanket advice I heard for expatriates living in another country is to avoid expat-friendly stores. Those often come with a premium, and shopping locally might reduce expenses significantly. That’s an extent of my knowledge on the subject.

Invest

“Earn more, spend less, invest the difference”. Generally “invest the difference” portion of the advice implies investing in mutual funds – a mix of stocks and bonds for a set of companies. But as you’ve come to expect in this piece, this advice comes with caveats when living in a developing nation.

General advice for investment into mutual funds is holding a 60/40 split of US/international assets. This represents the weight of the US-based stock and bond market in respect to the rest of the world.

But some countries might not allow for international investments. Some countries might introduce additional taxes on foreign investments. Or investments into certain markets could be made difficult due to local regulations. US in particular makes it more difficult for non-Americans to invest, introducing a number of hoops to jump through for identity verification.

To dig deeper, let’s investigate Cote d’Ivoire as an example - a country Myriam is living in.

Quick history recap of Cote d’Ivoire, a former French colony in West Africa. After gaining independence in 1960, the country enjoyed relative stability until 1999. A military coup led to an economic downturn, and two civil wars followed in 2002 and 2011. 2020 presidential election has resulted in unrest.

From those dates alone, political stability in the region at the moment seems problematic.

On the flip side of the coin, Cote d’Ivoire has the benefit of being a member of ECOWAS: Economic Community of West African States. This increases economic stability of the country, by pegging it’s economy (and currency) against it’s neighbors.

This is a nice bonus to economical stability of the region.

We’ve established that blanket investment advice might not exactly work with developing economies. A few questions come to mind:

• What are the restrictions on holding foreign currency or investments?
• How stable is the currency?
• What is the tax situation like?

Let’s dig into each one.

Foreign assets

For financial independence, we’ll want to reduce risks where possible. This means hedging against a single country’s economy.Supporting local economy by investing in a regional stock market is responsible (please do!), but diversification is the name of the game. For a complete portfolio you’ll likely want to hold international stocks and bonds.

Certain countries either might not allow, or make it extremely difficult to hold foreign investments.

In Cote d’Ivoire, there doesn’t seem to be any restrictions on holding foreign assets. That’s a plus. Quick online search didn’t bring up a history of restrictions on ownership of foreign assets either.

Finding a broker that operates in the country of choice (or allows for investment from said country) would be a next step here.

Local currency

Cote d’Ivoire uses West African CFA franc – a French treasury backed currency with a fixed CFA/Euro exchange rate. Political controversy aside, Euro pegged currency offers stability that many developing countries might lack.

To look at currency stability, we can look at an inflation rate or an exchange rate against other currencies. For instance here’s how many CFA a single USD would buy (from 2003 to 2021):

In contrast to that, some quick research surfaces official discussions for introducing “Eco” – a non-French backed currency for the West African region. While this could result in higher economical growth potential for the region, it comes with more risk.

Taxation

Tax laws change how you invest. Our FIRE strategy is carefully crafted to leverage every tax-advantaged account possible: a good third of our assets is held in tax-advantaged accounts. And of course tax laws vary by country.

This is definitely the place where you want to bring in a professional. A quick search (and that’s the keyword: “quick”) indicates that Cote d’Ivoire has 1.5% salary tax, and 1.5% - 10% “national contribution”. Cote d’Ivoire taxes capital gains, dividends and securities. There’s pension both your employer and you pay into, which is nice.

There are likely country-specific tax law peculiarities one can take advantage of to optimize asset growth. This would require much more in-depth research.

Conclusion

Financial independence becomes a completely different beast in developing nations. Whatever little financial knowledge I have is challenged if not outright rendered useless when applied to emerging markets.

Yet there are a lot of directions for future research, and this piece only presents a view through a very much United-States-tinted lens. It could be that FIRE in developing countries might leverage creating a business and using more active forms of income generation.

Many of my findings are superficial, and I touched on a lot of different topics without going in-depth into any one of them. I can dedicate more time to this topic if there’s interest - let me know in the comments.

I just found my financial records going back to 2013!

I know that doesn’t sound exciting, but for someone who loves putting together spreadsheets this is a treasure trove of information! Well, maybe not a trove, but a sizable chunk of data. I only have two numbers for each month – income and expenses. But that’s just enough to calculate my savings rate!

(income - expenses) / income = savings rate

With this number I can trace a broad outline through the past 8 years of my financial life! I present my savings rate charted over the past 8 years:

It’s smoothed out using a 6 period rolling window, as it’s near impossible to see trends when plotting raw numbers.

This chart tells a life story: starting with a near 0% savings rate in early 2014, a dip in 2017, and a steady 75% from 2018 onward. Let’s trace my major life events!

By the end of 2013 I lived in downtown Philly and was working as a freelance software developer. Per-project pay was decent, but the gaps between contracts reduced the overall income. That, and being a sole breadwinner for a family of two – the funds were running dry and we were living paycheck-to-paycheck.

My then-SO and I had different financial upbringing. My ex-wife and I were both young when we got married, and we’ve never sat down and talked about finance – so I could only guess as to what her relationship with money was. I came from a household of a frugal single mother – we were never short on cash, but the expenses were low. In a rural community food was grown in a large garden, milk bartered from a neighbor, sweaters knitted.

I distinctly remember my partner not having more than a couple of hundred dollars in a bank account when we moved in together. On the other hand, by the time we got married I amassed a nest egg - nearly $20,000. Granted, it’s small in the grand scheme of things – but these were the savings I put together from working low wage jobs – before I learned software development.

You can see us deplete that fund by the end of 2013 and into early 2014. And paycheck-to-paycheck we lived.

In January 2014 I was offered a position with a software company in the Silicon Valley. Things were looking up for our financial life! My then-wife and I moved to a Bay Area suburb.

It took some adjusting after living in downtown Philly. Both our income and expenses increased. Thankfully with the new job we found it harder to keep up with the increasing income: that’s where we settled for the 25% savings rate. A balance between frugality and spending habits.

A marital disaster struck at the end of 2015: my now ex-wife and I split up. What was a downturn in life turned out to be a financial upturn for me. My ex moved back with her parents, and I stayed in the apartment we were renting.

In a bout of coincidental timing, the apartment complex I lived in was scheduled for demolition. I had to move out and look for a new place. Instead, I decided to move into my car. I wrote about that in detail before, if you’d like to read about that.

This is when I became interested in the FIRE movement. If you’re not familiar, “FIRE” stands for “Financial Independence, Retire Early” (I like to think everyone is aware that this is a terrible acronym). The idea is to increase income, drastically decrease expenses, and invest the difference into index funds to live off of indefinitely.

Now that I had an idea where my money can work best, I had an easier time justifying increasing my savings rate. FIRE also turned increasing savings rate into somewhat of a game.

Finally, I negotiated a chunky raise at work. I was underpaid by the Silicon Valley standards, and “I like working here, but I need to be paid X or I quit” tactics worked. Having a reputation for being a high performer no doubt helped.

It’s not surprising that as a culmination of those events, this is where you can see my savings rate beginning it’s climb to a respectable 75%. Occasional spousal support would bump up the expenses, but not having rent to pay and a higher salary made it easy to absorb those expenses.

By the end of 2016 I got my dream job at Google, and moved into a new studio apartment. No, the big dip isn’t just a new place, but it’s strongly connected. I decided to make up for a year of living out of a single suitcase. There’s furnishing the new place from scratch, top of the line gaming PC, a VR headset, and so many things I didn’t need! I definitely went on a bender.

It took me a year to slow down. This is also where my then-girlfriend and now-forever-housemate became more open with me financially: I happened to meet another FIRE enthusiast out in the wild, completely by chance. She reignited my desire to live frugally. End of 2017 was marked by me donating and selling an ungodly amount of things I accumulated over this year, and returning to comfortable living within (or below, depending on how you look at it) my needs.

We moved in together by the end of 2018 and married in 2020. We still keep separate accounts for ease of accounting, and this chart only displays my data for the sake of my partner’s privacy (it’s less work to chart too). Overlaying my SO’s data after combining our finances doesn’t meaningfully change the numbers you see above.

It’s not realistic for us to push the savings rate higher without sacrificing the luxuries we enjoy - like travel or occasional high end dining. So here we are, at a comfortable 75% to 80% savings rate.

My wife and I earn 7 times more than I did when I was a sole breadwinner. Our joint expenses are 60% higher than what my ex wife and I spent 8 years ago. Both my wife and I are in a priviliged position to be high earners in a high paying industry. We’ve gotten extremely lucky where many wouldn’t have.

There’s no real purpose to this post other than sharing my journey. Hope you found something of interest!