I’m basically trying to figure out how to fund the gap between early retirement to age 62 while minimizing taxes, retirement account early withdrawal penalties, and still allowing for estate planning. I’m really not as knowledgeable as I need be regarding taxes/penalties/estate planning and am hoping to get ideas on where I should start researching/actions I should be taken.
I’m planning to retire in the next 2 to 7 years which will make me 50 to 55 years old. My wife is about 2 years younger than me and a stay at home mom. We have two children. The oldest starts college this fall and the youngest will start college in 4 years. So a good retirement transition time will likely be in 4 years when the kids are out of the house.
We currently have three main pots of money we could spend from which are summarized below in today’s dollars.
Pot 1 – Private Company stock = 4X current income
Pot 2 – Roth IRA/401Ks = 3X current income
Pot 3 – IRA/401Ks = 10X current income
I will be required to sell Pot 1 stocks upon retire. After paying capital gains, I plan to put the balance into a savings account/money market and spend it till it’s gone. I assume this will take care of our first 5 years or so. I assume we then should start spending from Pot 2 – Roth IRA/401Ks until their gone which would hopefully get us to 62. We would then start taking social security and the remainder from Pot 3 – IRA/401K.
I think this approach is the conventional wisdom and would minimize my taxes/penalties. However, I originally started the Roth IRA/401Ks for estate planning reasons thinking they would be spent last and possible passed onto our kids. I’m not specially trying to leave an inheritance. But I am trying to plan conservatively (example – not relying on social security) so we don’t run out, so most likely there should be something left over for the kids.
I don’t recall where I heard this, but one idea which made sense to me was to roll my 401K into multiple smaller IRAs to allow me the flexibility to establish multiple RMDs with different starting dates. Some of those RMDs could be taken prior to age 62.
I would appreciate any suggestions/ideas you can offer.
I’m planning to retire in the next 2 to 7 years which will make me 50 to 55 years old. My wife is about 2 years younger than me and a stay at home mom. We have two children. The oldest starts college this fall and the youngest will start college in 4 years. So a good retirement transition time will likely be in 4 years when the kids are out of the house.
We currently have three main pots of money we could spend from which are summarized below in today’s dollars.
Pot 1 – Private Company stock = 4X current income
Pot 2 – Roth IRA/401Ks = 3X current income
Pot 3 – IRA/401Ks = 10X current income
I will be required to sell Pot 1 stocks upon retire. After paying capital gains, I plan to put the balance into a savings account/money market and spend it till it’s gone. I assume this will take care of our first 5 years or so. I assume we then should start spending from Pot 2 – Roth IRA/401Ks until their gone which would hopefully get us to 62. We would then start taking social security and the remainder from Pot 3 – IRA/401K.
I think this approach is the conventional wisdom and would minimize my taxes/penalties. However, I originally started the Roth IRA/401Ks for estate planning reasons thinking they would be spent last and possible passed onto our kids. I’m not specially trying to leave an inheritance. But I am trying to plan conservatively (example – not relying on social security) so we don’t run out, so most likely there should be something left over for the kids.
I don’t recall where I heard this, but one idea which made sense to me was to roll my 401K into multiple smaller IRAs to allow me the flexibility to establish multiple RMDs with different starting dates. Some of those RMDs could be taken prior to age 62.
I would appreciate any suggestions/ideas you can offer.
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