Join Early Retirement Today
Thread Tools Display Modes
Maxing out pretax and taking 72t vs. taxable and no 72t
Old 07-25-2014, 08:40 AM   #1
Dryer sheet wannabe
Join Date: Sep 2013
Posts: 11
Maxing out pretax and taking 72t vs. taxable and no 72t

Wife and I (34 and 32) make about 180k total gross, and to this point have been maxing out my 401k but only contributing up to the match for hers. We would like to retire well in advance of 59.5 and will need funds from somewhere in order to bridge that gap, either from 72t out of our pretax accounts or our taxable accounts. With our income we are in the 28% bracket, so would it be better to up our pretax contributions and live with the fact that we will have to lock ourselves into a 72t later on, or eat the tax now and have the flexibility down the road? Anyone else had this dilemma in their FIRE planning?

I think the answer is probably to avoid the 28% and prepare to get really knowledgeable about SEPPs in about 20 years. We should have a healthy taxable account at retirement too but probably not enough to bridge fully until 59.5.
whipsaw is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-25-2014, 08:55 AM   #2
Dryer sheet wannabe
Join Date: Sep 2012
Location: Clayton
Posts: 13
Why not do the roth conversion ladder? Save up 5 years of expenses in your taxable. Shove the rest in your pre tax accounts. Get all the tax breaks you can now.

Then when you stop working and income is down convert 1 year of expenses each year for 5 year all the while living on the 5 years of expenses in the taxable account.

Then your first conversion from 5 years previous will be "seasoned" you can take it out tax and penalty free just leave the earnings. You can keep doing this under 59.5 while paying taxes in 1 year worth of expenses for each conversion. This is what i am planning on doing.
borrom2002 is offline   Reply With Quote
Old 07-25-2014, 08:59 AM   #3
Thinks s/he gets paid by the post
nash031's Avatar
Join Date: Jun 2013
Location: Bonita (San Diego)
Posts: 1,795
Yes, but I'm no better prepared to tackle it than you are.

DW and I will likely have a healthy pension to count on to bridge the gap, and we're fortunate enough to be building a substantial taxable account along with our IRA/403bs. I plan on looking in about four years and seeing how we're doing to determine if I need to plan for 72t. Most of our IRA money is Roth, so we'll have a couple of years worth of expenses in there as contributions we can pull at any time.

We may be pushed into the 28% tax bracket soon as well, so more to figure on that one.
"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
nash031 is offline   Reply With Quote
Old 07-29-2014, 07:26 AM   #4
Recycles dryer sheets
Join Date: Mar 2014
Location: Northeast
Posts: 87
Being in the 28% bracket, I would max out any available pretax savings, then save more in Roth's, as $17,500/$35,000 a year isn't likely to get you to RE.

I was thinking we'd have to 72t, but now consider the Roth conversion path that borrom details as our likely route.

Due to our projected retirement at age 47, we aren't comfortable locking in 72t for 13 years.

If we run out of Roth, before 59.5 then we'll reevaluate starting a 72t.
Awaiting cash out of Corp retirement plan, saving, saving and saving more, in hopes of RE in 2016 at age 47.
SoClose is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Taking money out of taxable IRA's first dtbach FIRE and Money 4 02-25-2013 11:18 AM
pretax saving, i dont get it endthefed Other topics 37 06-06-2010 08:49 AM
Maxing out 401k and IRA, now what? newellcr Young Dreamers 18 08-26-2007 05:02 PM
Maxing out your 401k aaronc879 FIRE and Money 23 06-05-2006 11:26 AM
48% of pretax income spent on housing? I think not Syarzhuk Other topics 7 02-09-2003 06:09 AM

» Quick Links

All times are GMT -6. The time now is 06:27 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.