Update 33 year old looking to retire at age 56

[MJT411]

Well I have made a few posts on this site before but I wanted to give everyone a update where I'm at. My salary is now at 103k

457b is at 295k
Roth IRA is at 38k
Taxable brokerage account is at 11k
Between my checking and savings I have 50k

At age 67 I'll get a pension that will pay me 80 percent of my final pay. I'm hoping to retire by 56 so it will be based off that age at 67 for life

I also have a small 2nd pension that will pay 1k a month at age 65 for life

I'm not sure if I will get social security because of my pension and the WEP but I know I have at least 40 credits though

 

[SnowballCamper]

Is there a "rule of 55" for the 457b? Review the withdrawal rules for when you're 50-59.5 years old. For myself, at 46 years old, I can't flexibly withdraw from retirement accounts until I'm 59.5. I'd have to set a plan that can't be changed without penalties from the IRS. Depending on what you learn, you might put more in the taxable brokerage... You're off to a good start, and that pension makes it much easier (I have one too).

 

[Out-to-Lunch]

Is there a "rule of 55" for the 457b?

Even better! A 457(b) has NO early withdrawal penalties. (At least a for governmental 457's; not sure about the others.) As soon as you leave the job, you can start taking distributions, penalty-free.

 

[SnowballCamper]

Pfft. That's great! Well you've got the flexibility you need. Just continue to live below your means.

 

[MJT411]

Yes I do have a government job my 1 pension has a cola of 1.5% a year. The smaller pension does not have a cola.

 

[SecondCor521]

For myself, at 46 years old, I can't flexibly withdraw from retirement accounts until I'm 59.5. I'd have to set a plan that can't be changed without penalties from the IRS.

I don't think this is true. You might google "Roth conversion ladder". It's what I'm using, and it's pretty flexible and changeable (not infinitely so like a 457(b), but much better than a 72(t) / SEPP), and is letting me access my retirement accounts before 59.5 without penalties. It simultaneously is helping me address my RMD tax torpedo issue.

(The main drawback is getting started, where ideally you need about 5 years of expenses in taxable or savings or Roth contributions.)

...

OP, you look to be in pretty good shape for your age to me. If you're invested well that ~$400K can double twice by age 56 in real terms, so you'd be looking at $800K which converts to $32K at the 4% rule, plus your pensions and any SS.

 

[MJT411]

I currently max out my 457 at 19.5k a year, max my Roth at 6k a year and I put extra money in my brokerage account when I can

 

[SnowballCamper]

I don't think this is true. You might google "Roth conversion ladder". It's what I'm using, and it's pretty flexible and changeable (not infinitely so like a 457(b), but much better than a 72(t) / SEPP), and is letting me access my retirement accounts before 59.5 without penalties. It simultaneously is helping me address my RMD tax torpedo issue.

Thanks. I did and it looks like its five years after the first conversion in order to get it out. So I'd say it is a way to get the money earlier, but not very flexibly. I don't need it yet, and prospect of having it grow is nice. I suppose I could start a ladder... But I am much enjoying the prospect of a simple tax return for the first time in a while.

 

[teetee]

I would not count pension or SS into my future retirement income at age of 33 (I am one of those if I don't see it, I don't count it. I don't believe SS will be available after 20 years either). But you do have sizeable savings at your age comparing to most of others. Great work. You may be able to do what you want to do (my definition of retirement and financial independence) before 56 since the net worth growth rate picks up after 1M which you should be able to achieve before 40, 2M before 45. Taxable saving would be the key for you (10+ working yrs at your income level with NW less than 500k suggests there might be room on expense cutting. Just a guess not implying anything). Most savers in your category max out all tax advantaged accounts any way.

My avg. income is about the same as yours. My annual saving rate has been over 70% (based on gross) since I started my full time jobs a few years ago and it really paid off.

 

[teej1985]

I would not count pension or SS into my future retirement income at age of 33 (I am one of those if I don't see it, I don't count it. I don't believe SS will be available after 20 years either). But you do have sizeable savings at your age comparing to most of others. Great work. You may be able to do what you want to do (my definition of retirement and financial independence) before 56 since the net worth growth rate picks up after 1M which you should be able to achieve before 40, 2M before 45. Taxable saving would be the key for you (10+ working yrs at your income level with NW less than 500k suggests there might be room on expense cutting. Just a guess not implying anything). Most savers in your category max out all tax advantaged accounts any way.

My avg. income is about the same as yours. My annual saving rate has been over 70% (based on gross) since I started my full time jobs a few years ago and it really paid off.

If you don't believe you'll get Social Security or a government pension that you paid into, you will work considerably longer than you need to.

Could the amounts be reduced? Possibly. Will they be eliminated? Highly unlikely.

 

[TriumphTR3fan]

Are there children that you need to plan for? Do you own a home? Any other significant debt such as college loans?