39 and looking for your advice to give me a leg up

[Can-i-retire-already]

Plans are evolving.....could use some help.
I'm meeting with a financial planner to give me some more ideas on Friday. Would love to have your thoughts on this plan.

Recap:

Currently 1M brokerage
2.3M IRAs
39 years old. Family of 5.
No debt except mortgage.
College funds set aside for 3 kids and sufficiently funded.
Current salary 175k
Monthly expenses in retirement ~6500.

Current plan/options:

1. Max 401k and save till May 1 2021. Take 7 month sabbatical. To take a break and re-evaluate. If my portfolio is 800k-1.5M more by the end of the year, quit altogether. If portfolio is roughly the same level, go to part time (20 hrs) after jan 1. If potfolio down by jan 1, go back to working full time starting jan 1.
Keep income for the year below 122k to get.ACA healthcare discount.


2. Request to go to part time in May. Use vacation to take 3 months off to do some of the things i want to do. Go back to work part time after long vacation. Re-evaluate portfolio on jan 1 and decide if i can fully retire depending on portfolio size.
Healthcare through work....at about 500 a month (vs the current 250 a month)


3rd alternative??


Key point I've learned:

- if i keep my income below 122k, i can get ACA subsidy
- if income below 78k, long term capital gains and dividends are not taxed at the federal level. HUGE!
- i can definitely keep my income around 78k if inwithdraw about 100k a year (because some of the 100k will be poat tax principle....)

 

[ERObjd]

How can a Roth IRA get to 415K at age 39? From what i understand you can only fund a ROTH with with 6k limit per year 7k if you are over 50, And you can put in a lump some to establish a ROTH but that lump sum cannot exceed the annual limit? Maybe there is some Roth rules or regulations am not aware of.

 

[Markola]

How can a Roth IRA get to 415K at age 39? From what i understand you can only fund a ROTH with with 6k limit per year 7k if you are over 50, And you can put in a lump some to establish a ROTH but that lump sum cannot exceed the annual limit? Maybe there is some Roth rules or regulations am not aware of.

I suppose one could save in a Roth 401k then roll it to a Roth IRA when they leave a job.

 

[Markola]

Plans are evolving.....could use some help.
I'm meeting with a financial planner to give me some more ideas on Friday. Would love to have your thoughts on this plan.

Recap:

Currently 1M brokerage
2.3M IRAs
39 years old. Family of 5.
No debt except mortgage.
College funds set aside for 3 kids and sufficiently funded.
Current salary 175k
Monthly expenses in retirement ~6500.

Current plan/options:

1. Max 401k and save till May 1 2021. Take 7 month sabbatical. To take a break and re-evaluate. If my portfolio is 800k-1.5M more by the end of the year, quit altogether. If portfolio is roughly the same level, go to part time (20 hrs) after jan 1. If potfolio down by jan 1, go back to working full time starting jan 1.
Keep income for the year below 122k to get.ACA healthcare discount.


2. Request to go to part time in May. Use vacation to take 3 months off to do some of the things i want to do. Go back to work part time after long vacation. Re-evaluate portfolio on jan 1 and decide if i can fully retire depending on portfolio size.
Healthcare through work....at about 500 a month (vs the current 250 a month)


3rd alternative??


Key point I've learned:

- if i keep my income below 122k, i can get ACA subsidy
- if income below 78k, long term capital gains and dividends are not taxed at the federal level. HUGE!
- i can definitely keep my income around 78k if inwithdraw about 100k a year (because some of the 100k will be poat tax principle....)

If it’s what you want and your in-home family is on board, why not take your sabbatical break to verify if you’d like it? I’m six moths into an indefinitely-long sabbatical TBD by me and it’s eye-opening in ways I couldn’t have expected while working. I doubt it would be nearly as good if I had “return to the work force in 7 months” hanging over my head. I’m 54 and waited until “return to the workforce is optional”, which is a different thing. Maybe you can also map out a “never return to the workforce” Plan B. Good luck.

PS Are you familiar wit the Root of Good blog? The author sounds similar to you, an engineer for the state with a large family who FIREd. Quite good.

 

[Montecfo]

I think the sabbatical is a great idea if your company allows this and you are not damaging career path.

If you are thinking about pulling the plug in a year, you need to be future-proofing your portfolio now. That may be tough to do as you have had so much success with what sounds like pretty aggressive portfolio for someone who is now a near retiree. (I am also an active investor retired on my stocks, not a pension, so I get it. But still.)

Also on the ACA are you budgeting claims? one of the things I think you want to look at is your max possible cost, premiums plus max claims. That's pretty good as a conservative budgeting tool even if you are not currently experiencing claims at a very high level. It will likely happen at some point.

Otherwise it sounds like you have a really robust opportunity to take some time off and think about things, test drive retirement, and then possibly spend some number of years on a part-time basis as a transition.

It seems ideal.

Let us know what you decide.

 

[Can-i-retire-already]

How can a Roth IRA get to 415K at age 39? From what i understand you can only fund a ROTH with with 6k limit per year 7k if you are over 50, And you can put in a lump some to establish a ROTH but that lump sum cannot exceed the annual limit? Maybe there is some Roth rules or regulations am not aware of.

I started contributing to my and my wife's roth in 2014...maxing the 6k every year. My investments have performed well averaging around 45% annually since.
I also rolled over 37k of traditional ira to a roth ira in 2019. That account alone has grown to 252k.

My total ROTH balance between my wife and mine is now $667k

 

[Can-i-retire-already]

To have $2 million in assets at 39 on an $170k salary you are doing extremely well especially with 3 kids.
Therefore I don't really have any advice but I would caution you about expecting your portfolio to double in only 5 years.
That's over 14 % per year and even though the last 11 and a half years have averaged that I would be much more conservative in my expectations.
Better to be pleasantly surprised than to have 5 years of 0 growth and be disappointed.

The portfolio has grown from 2.2M in Nov to 3.3M as of today. It will likely fall should there be a correction, but i think so far I'm on track to meeting that goal. Fingers crosses.

 

[Markola]

Phew! You must have an AA of Tesla and Bitcoin. Congrats on your winning hand but you prolly don’t want to quit your day job until you diversify.

 

[ERObjd]

I started contributing to my and my wife's roth in 2014...maxing the 6k every year. My investments have performed well averaging around 45% annually since.
I also rolled over 37k of traditional ira to a roth ira in 2019. That account alone has grown to 252k.

My total ROTH balance between my wife and mine is now $667k

Congrats,45%.. that is some powerful growth right there.

just starting with 8k and able to put in 1500 per month in a taxable Vanguard Balance Mutual index fund . 60% stock 40% bond. I just took a peek at VBIAX on Vanguard site and that fund averages about 9.98% over 10 years and 7.01% since inception. It will fall well below that 45%. But with steady investing and "God willing and the creek don't rise" we should manage to get 275K in 10 year 498K in 15. So far in 2021 it is only doing a dismal 1.71% .I expect it to do better over time . Time will tell. In a year when I take SS we plan to put most of that into the fund as well. which should be about 1200 after taxes. That should give it quite a boost. Anyway, Right now focused on baby steps... get the balance to 10k then 15k then 20 etc. If fund can get 7% it should crack the 100K at 5r mark. So looking forward to that milestone.