hi - i'm all fired up about the prospect of early retirement, and I like the approach in bob clayatt's book on the 4% safe withdrawal method. This may be an old joke (i'm a newbie), but at first i thought this was referring to a contraceptive alternative. Anyway, i have a dilemma which can't possibly be unique (?):
I'm 51 yo, planning to early-retire at 53. I will have approx $1MM in stock and bond mutual fund account assets at early retirement. I figure i need about $36-40K per year for living expenses, all of which i'd like to receive from the account (i.e. hadn't planned on any part-time work yet).
...80-85% of my nest egg is in tax advantaged accounts (401A, 457(b), 403B, IRA). In aggregate, the balance of my taxable savings and the tax advantaged savings is enough (or will be enough) for me to use a 4% safe withdrawal method if i had penalty-free access to all the funds. That's my dilemma - i know i can get access to the tax advantaged accounts before the normal retirement age without penalty, by taking 'substatially equal payments' according to IRS rules, but those payments are based on annuitizing the account balance. Ideally, I'd like to follow the safe withdrawal method and preserve the account assets, rather than draw down the acounts.
Does anyone know of a strategy I can use to efficiently utilize the assets in the tax advantaged accounts prior to normal retirement age which will allow me to preserve the assets and use a safe withdrawal method to fund my early retirement ? Paying a 10% penalty on premature withdrawals would add too much to the withdrawal amount for me to stick to the 4-4.5% safe withdrawal. Is there a way to leverage the substantially equal payments approach without drawing down the account? Or, is there a way to absorb the 10% penalty and stay true to the 4% safe withdrawal.
Any pointers would be appreciated...
I'm 51 yo, planning to early-retire at 53. I will have approx $1MM in stock and bond mutual fund account assets at early retirement. I figure i need about $36-40K per year for living expenses, all of which i'd like to receive from the account (i.e. hadn't planned on any part-time work yet).
...80-85% of my nest egg is in tax advantaged accounts (401A, 457(b), 403B, IRA). In aggregate, the balance of my taxable savings and the tax advantaged savings is enough (or will be enough) for me to use a 4% safe withdrawal method if i had penalty-free access to all the funds. That's my dilemma - i know i can get access to the tax advantaged accounts before the normal retirement age without penalty, by taking 'substatially equal payments' according to IRS rules, but those payments are based on annuitizing the account balance. Ideally, I'd like to follow the safe withdrawal method and preserve the account assets, rather than draw down the acounts.
Does anyone know of a strategy I can use to efficiently utilize the assets in the tax advantaged accounts prior to normal retirement age which will allow me to preserve the assets and use a safe withdrawal method to fund my early retirement ? Paying a 10% penalty on premature withdrawals would add too much to the withdrawal amount for me to stick to the 4-4.5% safe withdrawal. Is there a way to leverage the substantially equal payments approach without drawing down the account? Or, is there a way to absorb the 10% penalty and stay true to the 4% safe withdrawal.
Any pointers would be appreciated...