5 years to go..max!

[livingalmostlarge]

College in California is super cheap so you should be good to go?

 

[2029FIREaway]

Covered in other threads but basically many ways to NOT pay full boat for college. #1. Not legally bound to pay for children's college. #2. Have them take as many college credits while still in HS. I had one semester under my belt when I graduated HS. And it was free. #3. CC/junior college or cheaper state school for first 2 years. #4. ROTC or enlist in military (Air Force/Coast Guard) and then use GI bill for free college. #4. Go to college part time while working. #5. Look at the trades. My EE DSIL is upset because he has HS grads fresh out of HS coming to work for him (union) making 80K+ starting salary. He wishes he would have gone that route instead of currently being over 100K in student loan debt while only making $120k/yr.

Thanks for these tips!

 

[2029FIREaway]

College in California is super cheap so you should be good to go?

Ha. Tuition at public UC and/or state college schools is reasonable.

Getting into competitive schools seems hard, so we’re seeing folks choose non CA schools too. Moreover, living costs in CA for college kids can be very high. Ymmv.

 

[pacergal]

OP--
You have done very well in your savings. Besides college, I would also be discussing with your partner what other life experiences you may want to help with as your kids launch: weddings, first home, future grandkids, etc.

Also, if you have not gone through this exercise, I recommend it:
Under Forums>ER FAQs>Some Important Questions to Answer before asking Can I Retire?

 

[2029FIREaway]

OP--
You have done very well in your savings. Besides college, I would also be discussing with your partner what other life experiences you may want to help with as your kids launch: weddings, first home, future grandkids, etc.

Also, if you have not gone through this exercise, I recommend it:
Under Forums>ER FAQs>Some Important Questions to Answer before asking Can I Retire?

Thank you pacergal!

I will discuss with my partner as you mention and check out the faq here.

One of my conundrum questions is should I ratchet down the retirement account savings? For example skip backdoor roth this year? With the goal of bumping up taxable account savings for ER between 50-60.

Is there some rule of thumb that helps with this calculation? For example when would someone who wants to ER clearly have not balanced their savings across taxable and retirement? What ratio do folks look for?

Any pointers would help me I think. I’m worried I’ll have (do have) multi millions in retirement accounts, but may be scrimping in my 50s/ER.

 

[HI Bill]

...should I ratchet down the retirement account savings? For example skip backdoor roth this year? With the goal of bumping up taxable account savings for ER between 50-60.

Is there some rule of thumb that helps with this calculation? For example when would someone who wants to ER clearly have not balanced their savings across taxable and retirement? What ratio do folks look for?

It depends on what tax bracket you're in now, and what tax bracket you anticipate being in during retirement. In my example, when I was w$rking, I maxed out the 401(k), and my gross income was about $150K. Now that I'm ER'd, my total 'income' varies from $150K-250K. When I hit $250K, I'm super grateful to have post-tax accounts, where I can take about 50% of the $ out without paying taxes (basis for the investments). This works out well in my higher tax brackets for the first 5 years, when I want to spend more, but then when I hit 60, I'll mostly have tax-deferred investments to withdraw from. If I want the same $250K income then, I'll be paying about $55K in taxes, about 21% including both state (HI) and Federal (if the tax rates don't revert to the old rates). Which means I'd need to withdraw closer to $275K if I want to maintain the same level of spending power.

Note: I planned ER with a goal of an annual budget of $150K, but the investments did better than expected, and I've experienced lifestyle creep. Too many things I want to do like travel, house renovations, home theater equipment upgrades, and a sports car! Any my wife went from used high-end purses to new, and jewelry. Plan for the future you envision, and then add some!

 

[brydanger]

Thanks! Lmk what I’m missing.

Well... I can tell you what's missing from this post (like so many others here).
What do you WANT?

What are you looking forward to or excited to do in 2yr (or worst case 5yrs)?
What makes you giddy when you think about spending your non-working hours?
What's on the dream board? Have you done one??

Im always amazed at how much time and energy people spend planing the number (presumably to allow them to live their dream lives) but don't seem to spend the same amount of time plenning what that dream life looks like.

So let's hear it.

 

[2029FIREaway]

It depends on what tax bracket you're in now, and what tax bracket you anticipate being in during retirement. In my example, when I was w$rking, I maxed out the 401(k), and my gross income was about $150K. Now that I'm ER'd, my total 'income' varies from $150K-250K. When I hit $250K, I'm super grateful to have post-tax accounts, where I can take about 50% of the $ out without paying taxes (basis for the investments). This works out well in my higher tax brackets for the first 5 years, when I want to spend more, but then when I hit 60, I'll mostly have tax-deferred investments to withdraw from. If I want the same $250K income then, I'll be paying about $55K in taxes, about 21% including both state (HI) and Federal (if the tax rates don't revert to the old rates). Which means I'd need to withdraw closer to $275K if I want to maintain the same level of spending power.

Note: I planned ER with a goal of an annual budget of $150K, but the investments did better than expected, and I've experienced lifestyle creep. Too many things I want to do like travel, house renovations, home theater equipment upgrades, and a sports car! Any my wife went from used high-end purses to new, and jewelry. Plan for the future you envision, and then add some!

Ok, thanks. This topic makes my brain hurt.
Current MFJ tax bracket : fed: 35% CA: 9.3%
Retirement tax bracket in ER: ?? 0% ?? My taxable dividends and interest etc will def be under $50k given smallish taxable account.
I guess this is the time to do Roth conversions.

Retirement tax bracket in 60s and 70s: I dunno. Factor wife and I SS + RMDs etc = 30% perhaps total given we’ll be in CA?

How do I think about above and decide whether I’m putting too much into retirement accounts vs taxable? I’m lost on this topic…

 

[2029FIREaway]

Well... I can tell you what's missing from this post (like so many others here).
What do you WANT?

What are you looking forward to or excited to do in 2yr (or worst case 5yrs)?
What makes you giddy when you think about spending your non-working hours?
What's on the dream board? Have you done one??

Im always amazed at how much time and energy people spend planing the number (presumably to allow them to live their dream lives) but don't seem to spend the same amount of time plenning what that dream life looks like.

So let's hear it.

Thanks for asking
DW and I have this topic largely worked out. Neither of us is type A/want to work/super passionate about our jobs etc.

First phase of early retirement will be long stay travel once kids are no longer at home full time. Think 4-6 weeks in Italy, same in Spain and Thailand. These three are likely where we may settle for even longer. But we’ll take baby steps.

We will not completely move out of the US. Ideal would be 6/7 months in US. 4/5/6 months away. While healthy and not having to look after others, this will def be a priority.

Heavy travel phase may not last many years, that’s ok. There are many things we would like to do. If we really want/need to, open to picking up a fun part time job. Top of my list is either total wine and more and/or helping out local hospital/community. Giving back locally is something I aspire to long term.

Friends, I could give up work right now if financial and home situation allowed. Financially we need a bit more Home wise, no point retiring while kids in grade school.

What do you think I’m missing on this topic? Open to suggestions

 

[brydanger]

Thanks for asking
DW and I have this topic largely worked out. Neither of us is type A/want to work/super passionate about our jobs etc.

First phase of early retirement will be long stay travel once kids are no longer at home full time. Think 4-6 weeks in Italy, same in Spain and Thailand. These three are likely where we may settle for even longer. But we’ll take baby steps.

We will not completely move out of the US. Ideal would be 6/7 months in US. 4/5/6 months away. While healthy and not having to look after others, this will def be a priority.

Heavy travel phase may not last many years, that’s ok. There are many things we would like to do. If we really want/need to, open to picking up a fun part time job. Top of my list is either total wine and more and/or helping out local hospital/community. Giving back locally is something I aspire to long term.

Friends, I could give up work right now if financial and home situation allowed. Financially we need a bit more Home wise, no point retiring while kids in grade school.

What do you think I’m missing on this topic? Open to suggestions

Nice!
Sounds like a blast (though we've realized over the years that 4-6months in a place suits us better than 4-6weeks), but that's the beauty... you get to choose your own adventure as you go along.

I get the timeline. Few years younger Id probably say take the kids with you... but at this point you're probably spot on in waiting (or at least the kids probably think so), just don't forget to live for today as well (live/work balance etc).

You say you "need more" but in reality you also get to choose that part of the adventure. The months you're in the bay are might be pricey, but overseas you'll get to pick and choose.
Im also guessing you could leverage the house back home as much as you wanted to (sell, rent, pull liquidity as needed) and be just fine, and like many you may decide that part time job (or starting some business based on your passions is even more fun). Nothing quite like making money for something you're so passionate about you'd be doing it for free anyway!!

Excited for your next phase!!

 

[Bigdawg]

Thank you pacergal!

I will discuss with my partner as you mention and check out the faq here.

One of my conundrum questions is should I ratchet down the retirement account savings? For example skip backdoor roth this year? With the goal of bumping up taxable account savings for ER between 50-60.

Is there some rule of thumb that helps with this calculation? For example when would someone who wants to ER clearly have not balanced their savings across taxable and retirement? What ratio do folks look for?

Any pointers would help me I think. I’m worried I’ll have (do have) multi millions in retirement accounts, but may be scrimping in my 50s/ER.

Without knowing those exact #'s and your expenses and needs (in retirement) in general I would say only contribute to 401K's to get the company match. The next investment dollars should go to HSA then taxable accounts. ROTH is you want to or wait and do ROTH conversions when you are in a lower bracket. Good luck.

 

[2029FIREaway]

Thanks brydanger!

Seems you are living the kind of retirement life I aspire to!
I look at how pricey Bay Area is and cringe most days (even with close to zero debt). $10 coffee. $12 craft beer. Groceries, gas and not to mention knock on effects to restaurants! Yes, as an example, staying in tourist areas of Spain last summer were half or less the cost of here! So some kind of geo arbitrage is planned.

I would love to read more about your story and travel adventures. Is there a post you can point me to where you capture your journey?

Nice!
Sounds like a blast (though we've realized over the years that 4-6months in a place suits us better than 4-6weeks), but that's the beauty... you get to choose your own adventure as you go along.

I get the timeline. Few years younger Id probably say take the kids with you... but at this point you're probably spot on in waiting (or at least the kids probably think so), just don't forget to live for today as well (live/work balance etc).

You say you "need more" but in reality you also get to choose that part of the adventure. The months you're in the bay are might be pricey, but overseas you'll get to pick and choose.
Im also guessing you could leverage the house back home as much as you wanted to (sell, rent, pull liquidity as needed) and be just fine, and like many you may decide that part time job (or starting some business based on your passions is even more fun). Nothing quite like making money for something you're so passionate about you'd be doing it for free anyway!!

Excited for your next phase!!

 

[2029FIREaway]

Without knowing those exact #'s and your expenses and needs (in retirement) in general I would say only contribute to 401K's to get the company match. The next investment dollars should go to HSA then taxable accounts. ROTH is you want to or wait and do ROTH conversions when you are in a lower bracket. Good luck.

Thanks BigDawg.

I don’t have a HSA. My rough account numbers are here. I’m curious what you would do/change with my future investment picture.

Close to $2.5M in 401k and Roth IRA’s. Roth IRA: $300k, Roth 401k (using MBDR): $400k, regular 401k: $1.8M.

Taxable brokerage account: $850k.

Current retirement contributions across DW and I: $100k a year.
Roughly $50k into regular 401k incl matches.
Roughly $50k into MBDR/Roth 401k.

Probably 20k going to brokerage account for retirement each year.

So our picture is roughly $120-130k savings (majority retirement accounts)
$150 k fed plus CA taxes
Spend close to $200k right now. Big drop will occur when private middle school ends next year (so logically those $ would go to taxable brokerage.
I expect our ongoing expenses to be around $150-$160k for next 5 years.

 

[livingalmostlarge]

We are similar situated but $100k less and slightly different mix of assets. More college and taxable and less retirement. I'm not sure which is better.

 

[NgineER]

Thanks BigDawg.

I don’t have a HSA. My rough account numbers are here. I’m curious what you would do/change with my future investment picture.

Close to $2.5M in 401k and Roth IRA’s. Roth IRA: $300k, Roth 401k (using MBDR): $400k, regular 401k: $1.8M.

Taxable brokerage account: $850k.

Current retirement contributions across DW and I: $100k a year.
Roughly $50k into regular 401k incl matches.
Roughly $50k into MBDR/Roth 401k.

Probably 20k going to brokerage account for retirement each year.

So our picture is roughly $120-130k savings (majority retirement accounts)
$150 k fed plus CA taxes
Spend close to $200k right now. Big drop will occur when private middle school ends next year (so logically those $ would go to taxable brokerage.
I expect our ongoing expenses to be around $150-$160k for next 5 years.

Nice work on getting to that sizeable nut. Keep doing what you are doing, you can access the Roth IRA and brokerage account to sustain living before 59.5. No need to shift from traditional to brokerage or Roth at this point IMO, you likely won't be in a higher tax bracket in retirement provided you do Roth conversions etc. starting when you retire. I guess you could do your catch-up contributions to a Roth 401k vs. traditional so that you tilt more towards Roth from a contribution perspective. You won't be able to attain a 50/50 balance without conversions I suspect.

It looks like you will have enough in your Roth account to be able to a Roth conversion ladder instead of relying on a 72t setup. This would be easier to manage and not risk any penalties.

 

[2029FIREaway]

Nice work on getting to that sizeable nut. Keep doing what you are doing, you can access the Roth IRA and brokerage account to sustain living before 59.5. No need to shift from traditional to brokerage or Roth at this point IMO, you likely won't be in a higher tax bracket in retirement provided you do Roth conversions etc. starting when you retire. I guess you could do your catch-up contributions to a Roth 401k vs. traditional so that you tilt more towards Roth from a contribution perspective. You won't be able to attain a 50/50 balance without conversions I suspect.

It looks like you will have enough in your Roth account to be able to a Roth conversion ladder instead of relying on a 72t setup. This would be easier to manage and not risk any penalties.

Thanks NgineER (like the name )

Appreciate the validation to continue as-is.

I don’t have catch up contributions as we’re both under 50.
I need to look into Roth conversion ladder. Any pointers to the best source to learn this?

Cheers!

 

[NgineER]

Thanks NgineER (like the name )

Appreciate the validation to continue as-is.

I don’t have catch up contributions as we’re both under 50.
I need to look into Roth conversion ladder. Any pointers to the best source to learn this?

Cheers!

I should have read through the earlier posts I suppose ...

The Roth conversion ladder is pretty simple, just google the term and you'll find a vast array of resources, but this is it in a nutshell.

In five years, if you need $100k to live on do the following steps (not accounting for inflation).

Year	Age	Converstion amount tIRA-->Roth	Roth IRA Withdrawal	Income Source
2029	50	100,000
2030	51	100,000
2031	52	100,000
2032	53	100,000
2033	54	100,000
2034	55		100,000	from 2029 Conversion
2035	56		100,000	from 2030 Conversion
2036	57		100,000	from 2031 Conversion
2037	58		100,000	from 2032 Conversion
2038	59		100,000	from 2033 Conversion
2039	60		100,000	regular withdrawal

Ideally you would use prior MBDR to fund spending in the years 2029-2033 to minimize tax impact and maximize rollovers. You can and should also continue the rollovers beyond 2033 to maximize your rollovers long term and optimize your tax rates.

 

[2029FIREaway]

I should have read through the earlier posts I suppose ...

The Roth conversion ladder is pretty simple, just google the term and you'll find a vast array of resources, but this is it in a nutshell.

In five years, if you need $100k to live on do the following steps (not accounting for inflation).

Year	Age	Converstion amount tIRA-->Roth	Roth IRA Withdrawal	Income Source
2029	50	100,000
2030	51	100,000
2031	52	100,000
2032	53	100,000
2033	54	100,000
2034	55		100,000	from 2029 Conversion
2035	56		100,000	from 2030 Conversion
2036	57		100,000	from 2031 Conversion
2037	58		100,000	from 2032 Conversion
2038	59		100,000	from 2033 Conversion
2039	60		100,000	regular withdrawal

Ideally you would use prior MBDR to fund spending in the years 2029-2033 to minimize tax impact and maximize rollovers. You can and should also continue the rollovers beyond 2033 to maximize your rollovers long term and optimize your tax rates.

Thanks for laying this out!
So in year 2029, would it look something like this?

1. Assume no earned income.
2. Do a Roth conversion from TIra, as your table states. Pay taxes as needed from my taxable account. Hopefully minimal given no earned income.
3. Utilize contributions from MBDR to fund my spending.
4. Don’t spend too much from my taxable accounts.

Rinse/repeat for next four years, after which I can access the first tranche that I converted in 2029.

 

[zekeboz]

Might have missed it but figured out your SS / Pension numbers. Understanding those and leveraging a financial calculator will bring a level of clarity, at least numbers wise in the future. I am a cheapskate and always looked for free ones which on the surface were fine for a general pulse but there are some today that are pretty amazing, newretirement, projectionlabs are two that I use today. Both of them have a small learning curve but the modeling is decent and you can map out Roth conversions,Irma impacts etc.. you are probably closer than you think once you factor in SS.

You numbers are very close to mine, but my kids are wrapping up college, Only 4 more years left (2 out of 3 are done). The biggest impact we have seen so far with them leaving the nest is a 20-30% drop in monthly expenses.

 

[2029FIREaway]

Might have missed it but figured out your SS / Pension numbers. Understanding those and leveraging a financial calculator will bring a level of clarity, at least numbers wise in the future. I am a cheapskate and always looked for free ones which on the surface were fine for a general pulse but there are some today that are pretty amazing, newretirement, projectionlabs are two that I use today. Both of them have a small learning curve but the modeling is decent and you can map out Roth conversions,Irma impacts etc.. you are probably closer than you think once you factor in SS.

You numbers are very close to mine, but my kids are wrapping up college, Only 4 more years left (2 out of 3 are done). The biggest impact we have seen so far with them leaving the nest is a 20-30% drop in monthly expenses.

Thank you!
I will look at both of those calculators. Is there one that tops your list?
I am both lazy and cheap, but willing to spend some $ on a tool like this.

SS: good question. I’ve worked 23 years at or close to max SS earnings. Wife similar at 20 years. My basic (underestimate) assumption is 2k for her a month starting age 62. $4k a month for me starting age 70.

Is it only Tuesday? I’m so done with early work calls!!

 

[cat4ever]

To add:
- in 5 years time, my wife will be 53 & 7 years from 401k penalty free age (59.5). So isn’t the math 7 years of expenses in taxable that I need?

401K's from the company you retire from are tappable penalty free at 55, not 59 1/2. And if you have other 401Ks out there it's possible you can transfer them to your current 401K before then.

 

[2029FIREaway]

401K's from the company you retire from are tappable penalty free at 55, not 59 1/2. And if you have other 401Ks out there it's possible you can transfer them to your current 401K before then.

Thanks. I think this is only valid if I’m still at the company the year I turn 55.
I doubt I want to carry on working for that long.

My wife will be closer, being older. So that could be an option, or something to wait for on her side.

 

[FedRetired50]

This is one of the better resources that describes the potential plans, withdrawal calculations, pitfalls, and penalties (if you don't follow all the rules perfectly). Note that you don't have to use 72t for all of your tax-deferred accounts, you can just do one.

https://72tnet.com/

Actually https://72tcalc.com/ is better. This guy wrote the "bible" on how to do SEPP/72t withdrawals. I've been doing it myself since last year. You do need to give him your email address (yellow box) to get the latest guide, but he doesn't use it for anything other than a single group email I received from him where he discussed something 72t-related. Just be prepared to spend a long Saturday afternoon digesting everything.

 

[2029FIREaway]

Actually https://72tcalc.com/ is better. This guy wrote the "bible" on how to do SEPP/72t withdrawals. I've been doing it myself since last year. You do need to give him your email address (yellow box) to get the latest guide, but he doesn't use it for anything other than a single group email I received from him where he discussed something 72t-related. Just be prepared to spend a long Saturday afternoon digesting everything.

Great, thanks FedRetired50!
I just signed up to receive the latest guide.

 

[HarveyS]

SS: good question. I’ve worked 23 years at or close to max SS earnings. Wife similar at 20 years. My basic (underestimate) assumption is 2k for her a month starting age 62. $4k a month for me starting age 70.

You should double check this estimate. I am not an expert by any means, but I think SS payout is based on your top 35 years. Your SS estimate may be based on you continuing to earn what you did last year until age 67. If you retire, there will be zeros on the list of top 35 years. That will decrease your payout.