Milestone 9: Total Financial Independence

Milestone 9: The End of The Road – Total Financial Independence

If you have made it to Milestone 9, then you’ve completed all of the previous milestones on our Next Dollar Roadmap:

Let me begin by congratulating you.

You’ve made it.

This is the finish line, the goal, the destination. That place you’ve been aiming for through each step on your financial journey.

Unfortunately, that doesn’t mean all of your financial worries are behind you.

Sure, it’s a lot easier to deal with monetary headaches when you have money than when you don’t, but now you’re the CFO of your own financial empire.

Now that you have money, you’ve also acquired the responsibility that comes with preserving it and using it well.

To that end, in this post I’ll discuss several concepts that you should truthfully have your eye on beginning with Milestone 1 and gradually move to some topics that are befitting to more affluent readers.

Insurance

I’m not going to spend much time on insurance.

At a minimum, I suspect you already understand that you need coverage for your health (and your family), your car (if you own one), and your home (or renter’s insurance if you rent).

If you don’t have insurance coverage in these areas and for any potential personal liability you could have related to them, then go do that right away.

This is true no matter where you are on The Next Dollar Roadmap.

The relative cost compared to the potential risk is such that it would be foolish to go uncovered.

There are two other types of insurance I would suggest that you strongly consider as well: Life Insurance and Umbrella Insurance.

Let’s start by discussing life insurance.

Life Insurance

If there are people in your life that are dependent upon your income or some other critical role you play in their lives, then you need life insurance.

The primary purpose of life insurance is to replace income in the event of one’s untimely death.

Most commonly, if you have a spouse and/or kids whose basic needs are met thanks to your employment, then you need coverage to provide for them if you die.

However, there are other scenarios you should consider:

Do you provide care for others who depend on you and would need to hire that support if you pass away? (like a stay-at-home spouse or caretaker to elderly or disabled loved ones)
Are you married and your sole source of income is a pension that lacks benefits for your spouse if you predecease them? (could also consider an annuity here)
Do you have debts that would be challenging for your heirs or estate to manage?
Do you own a business that has obligations which would be difficult for your heirs or estate to manage?
Are you the owner of significant assets that will not divide very easily among your heirs (businesses, real estate, land, etc.)?

If any of these scenarios apply to you then you should evaluate the amount of coverage you need and obtain life insurance to cover any potential financial gaps.

Ninety-nine times out of one hundred, term life insurance is the way to go.

It’s affordable, predictable, and doesn’t leave you obligated to maintain a policy if your circumstances change, and you no longer need it.

The alternative is permanent insurance, which I typically don’t like for several reasons, not the least of which is the cost of the insurance versus the benefit it provides.

When I compared term life to whole life a couple of years ago, I calculated millions of dollars in lost opportunity cost by using permanent insurance.

There are some permanent insurance strategies for those of you who are remarkably wealthy and have estates that could potentially fall prey to estate taxes.

You could also sign up for permanent insurance because you love your insurance guy and want him to receive a fat commission at your expense.

For the rest of us, term is probably the way to go.

Umbrella Insurance

As the name implies, Umbrella Insurance covers everything. At least, it covers everything your other policies don’t.

If the value of your assets exceeds the liability limits of your other insurance policies, then you need umbrella coverage to protect your assets in the event that you are found liable for damages.

For example, let’s assume that your homeowner’s insurance policy provides $250,000 of liability coverage but someone is injured on your property and they are awarded $500,000 in damages in a lawsuit.

Your insurance company would cover up to your $250,000 limit, but the rest will be up to you.

If you have other assets like retirement accounts, stocks, personal property, etc. you could be forced to liquidate these things to cover the amount you owe.

An umbrella policy would step into that gap for you and protect those assets as well.

And one of the best things about an umbrella policy is the premiums are cheap compared to the coverage they provide.

I currently have $1,000,000 in coverage for a little less than $12 per month. If I bumped it up to $2,000,000 it would only cost me about $6 more each month.

Keep in mind that your insurance company will generally require certain minimum coverages on your homeowner’s and/or auto policies before they will agree to grant an umbrella policy.

Giving

I briefly touched on giving way back when we covered budgeting.

If you give due to a spiritual or religious belief, then you should always be fulfilling that commitment, even before Milestone 1 on the Roadmap.

If you give as a matter of personal preference, then hopefully that’s something you started doing before Milestone 9.

In any event, I believe giving is one of the most enjoyable things you can do with money, especially when you have a personal connection to the person or cause you are making gifts to, and even more so when you can do it efficiently.

I will leave it up to you to identify the beneficiaries of your generosity, but I want to cover several methods for giving that can also generate significant tax benefits for you.

As I run through these, I’m going to cover several at a very high level and provide links to more detailed posts I’ve written about these.

Donating Appreciated Shares

If you have a taxable brokerage account with appreciated shares of stocks or other securities and you have charitable ambitions, then donating shares of these assets is a great tax-saving opportunity that will allow you to make a donation and capture a double tax break without altering your asset allocation at all.

If you simply donate cash to the charity, the tax process would look something like this…

Income -> Income Taxes -> Paycheck -> Check to Charity -> Tax Deduction

By donating shares, we’re changing the process to this…

Income -> Income Taxes -> Paycheck -> Deposit to Brokerage ->Purchase New Shares -> Donate Appreciated Shares to Charity -> Tax Deduction & Free Stepped Up Basis

Here’s how it works:

Select shares from your taxable brokerage account that have the highest level of appreciation (the difference between the price you paid for the shares and their current value) that you’ve also owned for more than one year.

Notify your investment brokerage that you want to donate a number of shares equal to the amount of money you’d like to donate. (You’ll need account information from the charity you’ve selected to make the transfer.)

The average value of the shares on the day they are donated will now be eligible for a tax deduction as it would if you had simply written a check to the charity.

On the same day (preferably) direct the cash you would have given directly to the charity into your brokerage account instead and buy back a value of shares equal to that which you donated.

In so doing, you’ll capture a free step up in the cost basis of the investment you donated reducing your future exposure to capital gains taxes, all while keeping the exact same asset allocation.

Let’s walk through an example.

Suppose Phil Philanthroper donates $2,000 a year to the local art museum.

By writing a check, Phil would receive a nice little deduction for his gift by reducing his adjusted gross income by $2,000.

But if Phil donates $2,000 of stock instead, the art museum still gets the full value of the donation, Phil still gets the tax deduction, and Phil receives the benefit of a stepped-up cost basis.

To carry this example further let’s assume the stock Phil donated was worth $80/share when Phil bought it but had appreciated to $100/share when he donated it.

Since Phil donated 20 shares ($2,000 at $100/share) he will avoid future capital gains tax on $400 of appreciation (20 shares at $20 of gains/share).

If Phil is in the 15% capital gains bracket, this means Phil just saved $60 simply by making his gift a little differently.

Now Phil’s situation is a simple example with small dollars. The more you donate and the more regularly you give, the more valuable this technique becomes.

There are some things to bear in mind using this strategy:

It only works for long-term holdings, which means you need to own the donated security for at least one year to claim a deduction.
If you donate shares that have been owned less than one year, only the basis is deductible.
You wouldn’t want to do this with shares that have lost value (depreciated) because you would be surrendering an opportunity to tax loss harvest instead.
Donate shares with the largest unrealized gains to maximize the value of the step-up.
Stock donations are limited annually to 30% of the donor’s AGI.
Get a receipt from the charity for your records.

Qualified Charitable Distributions

Another popular gifting technique is to use Qualified Charitable Distributions (QCDs) to make gifts while also satisfying your annual Required Minimum Distributions (RMDs) from IRAs or other tax-deferred accounts.

Once you reach age 73 (or 75 if you were born in 1960 or later) the IRS will begin to require that you liquidate a portion of tax-deferred assets so they can be taxed. This is known as a Required Minimum Distribution or RMD.

If you need this money to cover your living expenses then an RMD isn’t really a problem.

But, if you have sufficient sources of income from elsewhere, an RMD is a taxable event you’d probably rather avoid.

And that’s where Qualified Charitable Distributions can provide great value.

A QCD is a method of redirecting money to charity that you would otherwise withdraw from your retirement accounts as an RMD.

The donation is credited to you as an RMD, but it isn’t taxable since it was given to charity.

Of course, you won’t receive a tax deduction for this donation since it’s coming from an account that hasn’t ever been taxed, but it does mean that RMDs won’t increase your adjusted gross income which could potentially push you into higher tax brackets.

This could not only save you money on your taxes, but also leave room for Roth conversions, keep the amount of your social security that is exposed to taxes lower, and decrease your Medicare surtax.

Other important points about QCDs:

The QCD must go directly from your account custodian to the charity. If it comes through you, the distribution is considered taxable.
In 2025, you are limited to $108,000 in QCDs per person.
You can begin QCDs at age 70.5 even though your RMDs won’t start until age 73 or later (unless you were born before 1950. In that case, you should have already started when you turned 72).
Your RMD amount is calculated using your IRA balance from the end of the previous year. The IRS has tables corresponding to your age so you know what percentage to withdraw.
To count toward your RMD, the QCD funds must leave your account by December 31 of the same year as the RMD.
You can’t make a QCD from a 401k, but odds are you’ll have long since rolled yours over to an IRA.

Donor Advised Funds

Donor advised funds (DAFs) are managed by a custodian (usually an investment brokerage) who invests the money in the fund on behalf of the fund’s benefactor and makes distributions according to the instructions of the benefactor.

As a giver, a DAF allows you to set aside donations far in advance of when those donations will actually be distributed to charity, but you still get a tax deduction in the year you move the money into the DAF.

So, if you have a big income year in which your income taxes are expected to be relatively high, you might use a DAF to preload charitable contributions and keep your tax liability low.

Or, if you like to make charitable gifts, but they aren’t large enough to justify itemizing your taxes instead of claiming the standard deduction, a DAF could allow you to combine several years’ of donations into one year allowing you to receive a tax deduction for the full value of the donation.

Let’s look at an example to see how this might be beneficial.

Terry Tither has been giving 10% of her income to her church for as long as she can remember and intends to continue doing so until her last breath.

Over the years, Terry has accumulated quite a sum of assets in a taxable brokerage account and would like to begin donating appreciated shares to her church.

Terry’s annual AGI is $60,000 which puts her $12,525 deep into the 22% tax bracket for a single filer in 2025.

Her annual tithe of $5,500 is technically deductible, but since it doesn’t get her down into the 12% bracket Terry still prefers to take the standard deduction of $15,000, leaving her with an AGI of $45,000.

Then, one day Terry finds martinmoney.com and learns about DAFs.

After doing some math, Terry realizes she can donate $16,500 of mutual funds from her taxable brokerage this year to reduce her AGI and claim a larger deduction. This is 3 years of tithing claimed all in one tax year reducing her AGI to $43,500.

In the following two years, Terry doesn’t get a deduction for her tithe since it has already been claimed. Instead, she uses the standard deduction of $15,000 each year to reduce her taxable income. So, for this three-year period, here is what Terry’s two options are:

In this case, by using the DAF, Terry saves $1,500 in taxable income for one year. This amounts to $180.00 in the 12% bracket. It may not seem like much, but it’s scalable.

Clearly, DAFs can provide great tax planning flexibility depending on your individual circumstances. Keep these in mind as you think about your charitable giving.

Other important points:

In addition to cash and securities, most DAFs can accept less common assets like insurance policies, bitcoin, restricted stock, or even S & C Corp stocks.
Some companies will charge a fee for managing your DAF.
The fund manager also technically has control over the distribution of money. You might want to do your homework to see how satisfied previous customers are with the service or start with a small donation and work up from there.
Did I mention the contributions are irrevocable? Seems important.
You’re probably getting tired of acronyms, but they’re incredibly helpful when writing a long post. Here comes some more.

Charitable Remainder Trusts

Finally, if you plan to leave a significant portion of your estate to charity then you could potentially use a Charitable Remainder Trust (CRT) to take advantage of a significant tax deduction for such a donation while you are still living and still receive income from the trust.

As the name suggests, a CRT is a trust. It is created by a donation made by the “trustor” who receives a partial tax deduction for the donation.

The trust then distributes income to the grantor or other non-charitable individuals for a pre-determined period, after which the remaining assets are given to the designated charitable beneficiary.

The primary purpose of a CRT is to reduce taxes.

Like a DAF, contributions to a CRT are irrevocable. As a result, the assets are removed from the estate of the grantor, excluding them from the probate process, estate taxes, capital gains taxes, and gift taxes.

There are two types of CRTs: Charitable Remainder Unitrust (CRUTs) and Charitable Remainder Annuity Trusts (CRATs).

CRATs distribute a fixed amount of the trust assets and do not permit additional contributions.

CRUTs distribute a fixed percentage of the balance of the trust, revalued each year, and permit additional contributions.

In both cases, the distribution must be no less than 5% and no more than 50% of the trust assets.

CRTs have a maximum allowable lifespan of up to 20 years after which the assets go to the designated charity.

CRTs are complex and can be expensive to set up, but they can be effective for avoiding large tax liabilities in a given year by offsetting a large portion of income or at least spreading it out over a longer period.

If you have a significant estate and plan to leave a large portion of it to charity, you should at least look into whether or not a CRT is for you.

Estate Planning

Last but certainly not least, at Milestone 9 you need to be sure your estate plans are in order. We’ll start with a basic will.

The Will

A will is a document that records your wishes regarding the distribution of property to heirs and the care of your minor children.

If you die without a written will (also known as dying intestate) your default becomes some order of succession provided by the state in which you live.

This can also make your estate the subject of great frustration, anger, and even fighting among your decedents. It’s not uncommon for heirs to spend away the estate on legal fees while they fight over it.

You might think you don’t need a will until you have a high net worth or a family, but there are several reasons everyone with any assets should have a simple will:

It makes life easier for your heirs.
If you have kids, you can nominate someone to care for your children instead of leaving a judge to decide.
You can specifically decide who gets what and how much.
Perhaps most important, you can specifically decide who doesn’t get anything (and name them so it’s really clear).

If you have significant assets and want to spare your heirs the headaches of probating a will, you should visit a good estate planning attorney to set up…

A Trust

A trust is a legal entity in which a third party (the trustee) agrees to hold assets on behalf of a trustor, beneficiary, or beneficiaries.

The trust is managed by a trustee upon the trustor’s death who then sees that the instructions of the trust are carried out.

One of the biggest advantages of a trust is that trusts avoid the probate process upon the trustor’s death. This saves your beneficiaries quite a bit of trouble in receiving the assets of the estate and keeps details of the estate out of the public record.

Trusts can be very simple or extravagantly complex. It all depends on how they’re set up.

Trusts certainly require more time and effort to establish as compared to a will but can provide a lot of worthwhile benefits for your heirs. As of 2025, a typical trust costs between $3,000 and $5,000 to set up.

Here are some types of trusts and an explanation of each one listed. This is not an exhaustive list by any means. Bear in mind that all trusts will include characteristics of more than one type of trust from this list.

A Living Trust is a trust set up by a person for their own use and benefit as long as they are alive. Once they die, the assets in the trust are transferred to the trustor’s heirs by a successor trustee.

A Testamentary Trust is a trust established according to instructions provided in a will. The trust is created after the trustor has passed away so the trustee can distribute the trustor’s assets to his or her beneficiaries.

A Revocable Trust is a trust that can be changed or closed by the trustor during their lifetime.

An Irrevocable Trust is a trust that cannot be changed or closed by the trustor during their lifetime. Trusts created for tax planning purposes are usually irrevocable.

A Funded Trust is a trust that has assets in it.

An Unfunded Trust is a trust that has no assets but is normally funded upon the trustor’s death.

One of my favorite all-time books is “Beyond the Grave” by Jeffrey Condon. In addition to being quite entertaining, the book covers a litany of real-life scenarios in which the author (an estate attorney by trade) was serving clients who had a variety of estate needs.

It opened my eyes to some of the legal risks associated with dying and challenged me to think more carefully about estate planning, especially the use of trusts. I highly recommend it.

That’s a Wrap

There you have it. Ten Milestones to financial independence.

If I’m being honest, there is so much more complexity and depth I could add to these, but this broad review should give you a pretty clear picture of how you should manage your own finances to meet your goals.

For more information about the topics I’ve discussed in The Next Dollar Roadmap, please continue checking out the website as I post new content each week or subscribe to our YouTube channel if you prefer to digest topics through video.

Thank you so much for your interest in The Next Dollar Roadmap. God bless and take care.

Next Dollar Roadmap

Curt

Curt is a financial advisor (Series 65), expert, and coach. He created MartinMoney.com with his wife, Lisa in 2022. By day, he works in supply chain management for a utility in the southeastern United States. By night, he's a busy parent. By late night, he works on this website but wishes he was Batman.

About Me

Hello. I’m Curt Martin and I started MartinMoney.com to educate you about personal finance so you can reach your own financial goals. Read more about me here.

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