Hi, FIRED. Not the good kind!

[momoney]

Hi, I’m 52 and I’m soon to be without a job. It’s technically a layoff.

$320K taxable accounts
$1.93M retirement/HSA accounts
$2.25M Total

$70K in 529 for 15 year old

$0 debt
Own Home and cars. No mortgage

$72K of expenses (if I include ACA healthcare) - I could trim this back, but being generous for unknowns.


(Adding in Social Security to below calculators)

FIRECalc says I can do $100K year based on 43 years (Bernicke model) 100% success
Fidelity gives me a score of 127 "on target" @$90K year expense
25X rule: $90K = $2.25M

Looks better than I thought. Glad I've been frugal all these years!

Here is my problem. These calculators don't take into account the percentage of funds in taxable vs. retirement accounts?

I'm looking for jobs and don't plan to FIRE yet. What can I do to get myself to 59.5 without paying a bunch of penalties if I need this money?

SEPP- too complicated and restrictive and expensive to manage?
ROTH conversion that could be ready in 5 years?
Do nothing and just pay the penalty if I need the money?

Thanks for your help!

 

[COcheesehead]

Fidelity’s tool will differentiate between taxable and deferred. You are going to have to tap the taxable account and get more income.

 

[Dtail]

Are you using the "Significant Below Average" module on Fidelity?

 

[momoney]

Are you using the "Significant Below Average" module on Fidelity?

Yes that still shows success.

 

[Aerides]

I'm looking for jobs and don't plan to FIRE yet. What can I do to get myself to 59.5 without paying a bunch of penalties if I need this money?

What was your plan before the RIF? You're right you need more to cover your next few years, there's no easy answer. At least, in most areas, the job market is as hot as you could hope for.

 

[momoney]

Fidelity’s tool will differentiate between taxable and deferred.

I'm using the "My Goals" tool. Are we talking about the same thing?

 

[COcheesehead]

I'm using the "My Goals" tool. Are we talking about the same thing?

No, that’s too basic. Go to planning, then retirement, then click on get started. It will take you to a tool that is very comprehensive and likely will take an hour or more to do correctly. It will help you build a budget, differentiate taxable vs tax deferred and then run a Monte Carlo analysis under three different confidence levels.

 

[momoney]

What was your plan before the RIF? You're right you need more to cover your next few years, there's no easy answer. At least, in most areas, the job market is as hot as you could hope for.

So how much should one target to have in their taxable account for each year prior to 59.5? 1x expenses for every year? 1x expenses+20% for every year?

And would you focus on filling the taxable and stop retirement account contributions going forward?

 

[Dtail]

Yes that still shows success.

Did you try out the "Constant Spending Power" module in Firecalc? The Bernicke model tends to produce higher numbers.

 

[COcheesehead]

So how much should one target to have in their taxable account for each year prior to 59.5? 1x expenses for every year? 1x expenses+20% for every year?

And would you focus on filling the taxable and stop retirement account contributions going forward?

You need a bridge to 59.5, then a bridge to social security, whenever you decide to take it. It’s a simple spreadsheet. Right now you are under funded.

 

[homestead]

Try running the calculators with only your taxable accounts and see how long funds last.

 

[momoney]

No, that’s too basic. Go to planning, then retirement, then click on get started. It will take you to a tool that is very comprehensive and likely will take an hour or more to do correctly. It will help you build a budget, differentiate taxable vs tax deferred and then run a Monte Carlo analysis under three different confidence levels.

I think we are talking about the same thing. That link takes me to the same tool I've been using. It's showing $1.9M assets at end of plan using Significantly Below Average.

 

[COcheesehead]

Try running the calculators with only your taxable accounts and see how long funds last.

4.5 years until he has to tap deferred accounts.

 

[Alex The Great]

FIRECalc says I can do $100K year based on 43 years (Bernicke model) 100% success

Not sure what is so special about Bernicke model that you used it?
I'd start with constant spending power adjusted for inflation 3%.
But it looks like you are still OK even with this conservative model @72K per year.
The only problem as I can see is too much funds in IRA/HSA and after tax money would not cover all expenses till 59.5.
But still there are ways to collect some pretax money without penalty even before 55. Did you look at SEPP?
The alternative could be Roth IRA ladder but it would take some time to build and you did not say how much money do you have in Roth IRA.

 

[COcheesehead]

I think we are talking about the same thing. That link takes me to the same tool I've been using. It's showing $1.9M assets at end of plan using Significantly Below Average.

Well if that is the case, go under accounts and contributions and you can categorize your accounts as taxable or retirement.

 

[JBTX]

https://www.bankrate.com/retirement/72-t-distribution-calculator/

How to withdraw before 59.5

 

[Aerides]

So how much should one target to have in their taxable account for each year prior to 59.5? 1x expenses for every year? 1x expenses+20% for every year?

And would you focus on filling the taxable and stop retirement account contributions going forward?

Pretty much, depending on your risk tolerance and confidence in your expense planning. But yeah, when you retire before 59.5 (or rule of 55), you have to basically plan for the phases of retirement as much as the overall picture.

So your new plan is to work/save and close the gap between time and money.

 

[momoney]

Well if that is the case, go under accounts and contributions and you can categorize your accounts as taxable or retirement.

Yes, they are already assigned an account type including 1 for HSA.

So if I look at the table view of the income/withdrawals, it does not make any distinction of where the money is coming from?

 

[momoney]

https://www.bankrate.com/retirement/72-t-distribution-calculator/

How to withdraw before 59.5

I've read that the fees involved in managing a 72t can be as much as just paying penalties on like amount early withdrawals?

 

[COcheesehead]

Yes, they are already assigned an account type including 1 for HSA.

So if I look at the table view of the income/withdrawals, it does not make any distinction of where the money is coming from?

Click on table view, then income. It will break it down, if you have the data entered correctly.

I gotta to the rodeo. Can’t answer anymore until later.
Good luck.

 

[momoney]

4.5 years until he has to tap deferred accounts.

2.5 years of withdrawing from retirement accounts before 59.5?

After income taxes and penalties that's requires roughly $100K year withdrawal to = $72K? Ouch!

 

[ExPatKiwi]

If you have a 401k account the rule of 55 applies. Use taxable accounts to age 55 then tap 401k penalty free. Don’t rollover the 401k to an IRA until after age 59.5.

 

[momoney]

If you have a 401k account the rule of 55 applies. Yes taxable accounts to age 55 then tap 401k penalty free. Don’t rollover the 401k to an IRA until after age 59.5.

Unfortunately I don't turn 55 until 2026.


Can I roll my old 401K to a new 401K and then take advantage of rule of 55 with old 401k funds?

This is because the early withdrawal penalty exception only applies to the retirement plan of the most recent employer, even if assets in that plan were accumulated at prior companies.
http://www.journalofaccountancy.com/news/2023/jul/financial-planning-aspects-401-k-rollovers.html

 

[Out-to-Lunch]

A Roth conversion ladder could certainly help, as you mentioned. Here is the "standard reference": https://www.madfientist.com/how-to-access-retirement-funds-early/

 

[RetireAge50]

I've read that the fees involved in managing a 72t can be as much as just paying penalties on like amount early withdrawals?

There are no fees for the 72t. I set one up last year at age 56. Prior to that was using taxable but it was running low. I think you are all set. Enjoy!