59 1/2 is much more important than turning 60

[disneysteve]

ETA: But I do see plenty of threads "I have enough to retire but how can I get to it I'm 53?" - from ppl who put everything into their 401ks but little other savings. I'd hate to be in that position.

So true. We have a portfolio pretty evenly divided between taxable and tax sheltered accounts. That creates so much more flexibility. For most of my career I didn’t even have an employer sponsored plan so it was IRA/Roth and taxable.

When we spoke to a CFP one of the first comments he made was how well balanced we were. He says a lot of people come to him with a nice chunk of money but all in a 401k and he simply doesn’t have much to offer them.

 

[MRG]

At first I didn't think 59.5 had meant much, I was wrong.

I retired at 56, and had a few years of taxable money, my rollover would require a penalty. But I had money in my legacy profit sharing plan I could use the rule of 55 to access.

When Megacorp's new management team took over they quickly made employees pay the 1% fee the old team covered. But it had 40 great years so why not? The money took off when I was 57-58, big gains. Then it dropped. I lost a six digit number very quickly. More would come until I called Vanguard just before I hit 59.5.

I would learn of a lawsuit that was started against the new management team for beach of fiduciary duty. I wasn't involved until I learned Megacorp's old management team had joined the lawsuit with 9000 of my former peers.

While we won, 150 million, I received about 50% of what I lost. We also lost the use of that money for a decade.

So yeah 59.5 was a mistake for me. Would have, should have, transferred the money at 58.

 

[mebden]

I retired at 57 and wanted to wait till 59.5 but had enough savings to live off of and I had just enough reported income to 59.5 to get the subsidiaries on ACA. Then at 59.5 was able to start my Roth conversions of my IRA without the early withdrawal 10% penalty to have reported income again for the ACA subsidiaries. So, 59.5 did mean something to me and next birthday that will be significant to me will be 62 for Social Security and then 65 for Medicare.

 

[Gumby]

Retired at 60, so it was really a non-event for me.

 

[FREE866]

Interesting thread. OP--I'm in the same situation---retired at 50 and I will be 59.5 in February.

I currently only draw from my taxable account. 59.5 will allow me to draw penalty free from my regular IRA and now that my Roth IRA this year is open for 5 years IF I wanted to I could draw from that tax free so I guess thats good, but don't plan to.

I think the big big one for me will be when I start taking SS, which as of now I plan to take at 67 which will take care of a big chunk of my expenses.

 

[Markola]

We started dialing down work in the year we turned 55, using the Rule of 55. DW is 2.5 years older than me, so we started gaining access to her retirement funds when she was 54 and I was even younger. Yes, it gave us even more flexibility when she turned 59.5, then me.

For SS, she’ll probably start that at 64, while I’m aiming for 70.

 

[Fermion]

ETA: But I do see plenty of threads "I have enough to retire but how can I get to it I'm 53?" - from ppl who put everything into their 401ks but little other savings. I'd hate to be in that position.

I agree to this to a point. We retired at age 45/46 with a decent cash buffer and then everything else in 401K. This would have worked just fine except we got bored and spent a lot of the cash building a house. Before our cash pile was severely depleted, I set up a 72t and it was really not that difficult. About 8 hours of research and worry that I might do something wrong, then an actual 10 minutes on Fidelity to set it up perfectly. Sure, you have to keep it going until age 60 and at least 5 years have passed but I made it give us reliable income for ACA qualification so it was a win/win (could also do IRA to Roth conversions, which we did do in the early years). A Roth conversion ladder can also help to "get money out" of a 401K earlier than 59.5.

 

[Lorenzo]

Yes, reaching age 59-1/2 was a great relief because it was coming out of the dark days of the Covid downturn, and my income from work had taken a big hit. Unlike most here, ER was not on my radar until I was forced to think about it at that time. I had not saved enough in a taxable account to support myself for more than a year or two if I had to. I was looking into 72t withdrawals but in the end did not need to resort to that.

 

[CalBird]

One of my check boxes before pulling the plug is the taxable account can cover the expenses before tax deferred accounts is available for withdrawal. So 59.5 was in my mind until it’s not.

 

[Gallaher]

Rule of 55 is what mattered to me

 

[HtownRose]

I was really looking forward to it so I could withdraw penalty-free from my profit-sharing account but my employer folded the profit-sharing accounts into the 401k accounts so not so much now. My 401k is a Roth so my contributions are post-tax, employer contributions are pre-tax & any withdrawals (can't rollover until my employment ends) are 50-50 pre- & post- tax & I don't want to withdraw any of the post-tax so I guess I won't be doing it.

 

[scrabbler1]

Part of my original ER plan when I planned to ER at age 45 was to get to age ~59.5 intact so I could add the first of my "reinforcements" to my available funds instead of having to live solely off the taxable part of my overall portfolio. (The other reinforcements were my frozen company pension and SS.) But when my overall financial situation only got better and better in my 50s, I realized I would not have to tap into that first reinforcement. So reaching 59.5 three years ago became anti-climactic.

 

[bada bing]

Of all the various age thresholds, 59.5 meant the least to me. It was a non-event. Other age milestones are more impactful:
62 for potential SS benefit initiation and transitioning from AWI to COLA
63 for the IRMAA income look back starting
65 for Medicare
67 (FRA) for the end of the SS earnings cap
70 for end of potential SS deferral
73 (or 75) for RMDs

I'm 67 now and past my FRA, I'm on traditional Medicare + G, still deferring SS and still living from taxable brokerage balances. Still doing Roth conversions. 59.5 changed nothing for my finances but the other milestones do or will. It now looks like my taxable balances will cover the budget until I hit 70, which is better than original planning.

 

[tulak]

For me, getting to 59.5 is like solving a financial puzzle. I’m still working (52). Theoretically I could stop, but I would need to figure out how to pull funds until 59.5. How I go about doing this changes with every additional year, with the easiest in 2028, which is the year I turn 55.

So maybe 55 is the important age for me, but even then it’s really 54, since my birthday is at the end of the year.

 

[Markola]

ETA: But I do see plenty of threads "I have enough to retire but how can I get to it I'm 53?" - from ppl who put everything into their 401ks but little other savings. I'd hate to be in that position.

Nope. See the Rule of 55. One can access 401k money in the calendar year in which one turns 55, so age 54 for most. The catch is, one has to quit one’s job.

 

[Aerides]

Nope. See the Rule of 55. One can access 401k money in the calendar year in which one turns 55, so age 54 for most. The catch is, one has to quit one’s job.

Not everyone can. It doesn't apply at every company. And I'm referring to the pre-55 folks who typically come here and find it doesn't apply and now what. In the example above I said 53, meaning, too young to tap into retirement. If I had written 49 would that be better?

 

[Fermion]

Not everyone can. It doesn't apply at every company. And I'm referring to the pre-55 folks who typically come here and find it doesn't apply and now what. In the example above I said 53, meaning, too young to tap into retirement. If I had written 49 would that be better?

But the only advantage the rule of 55 gives is that it allows you flexibility to start and stop withdrawals anytime. A 72t gets you access to the same level of money (and if you start it at age <55 you can stop it at age 60. I think also using the rule of 55 only allows you access to the most recent 401K, so you would not be able to tap former 401K using that method?

 

[ArmchairMillionaire]

But the only advantage the rule of 55 gives is that it allows you flexibility to start and stop withdrawals anytime. A 72t gets you access to the same level of money (and if you start it at age <55 you can stop it at age 60. I think also using the rule of 55 only allows you access to the most recent 401K, so you would not be able to tap former 401K using that method?

Unless you were able to roll over older 401(k)s into the current one.

I contemplated this, and my 401(k) company advisor suggested it, but then I read the fine print and saw all the fees (John Hancock) and left the old one in Vanguard where it originated.

 

[tulak]

Rule of 55 is out for me, 72t is easier. Even though when I quit, I can split my 401k rollover into two parts: a partial withdrawal and rollover to an IRA. So I can partially get to my 401k when I’m 55, but it’s a one shot deal.

That could cover a year, maybe two, of expenses, but the 72t is easier.

As Aerides says, this all depends on what your 401k plan supports.

 

[RetiredHappy]

Silly question here... why do so many people not have enough taxable money when they retire? I have always had at least 4 times the amount saved in taxable compared to tax deferred.

 

[disneysteve]

Silly question here... why do so many people not have enough taxable money when they retire? I have always had at least 4 times the amount saved in taxable compared to tax deferred.

Same here. The first 23 years of my career I didn’t have an employer sponsored plan. I was on my own. It was only the last 8 years that I had a 401k.

 

[ArmchairMillionaire]

Silly question here... why do so many people not have enough taxable money when they retire? I have always had at least 4 times the amount saved in taxable compared to tax deferred.

I was one of those people with very little taxable (around $100K) compared to pre-tax savings.

From 2000 to 2020, I just put away as much as I could into my 401(k) because I didn't know any better.
I did not discover this site until March of 2000. I did start a Roth IRA in around 2010, but the contribution limits were always so much lower than the 401(k) limits.

I was still able to retire at 54.5 last year. (rule of 55) I don't know if I would have had the confidence to pull the plug if I wouldn't have discovered this site.

 

[jollystomper]

After I turned 59.5 is when I told my Megacorp manager that I would likely be retiring sometime the next year. At that point all the numbers aligned. If they had chosen to walk me out the door at that point, then it would have been a significant milestone . Fortunately they did not want to see me go, and just said to keep them updated of my plans.

I did retire after turning 60 the next year, which was significant beyond just retiring. It was the last year for the peak acceleration of my pension benefit, our college payments for our kids ended, and it was the 35th year of me paying the maximum SS tax, so I will get the maximum SS benefit.

 

[tulak]

Silly question here... why do so many people not have enough taxable money when they retire? I have always had at least 4 times the amount saved in taxable compared to tax deferred.

Between a 401k, Mega-Backdoor Roth, and HSA, I’m saving 80-90k/year. The rest of savings goes into taxable, but I prioritize spending too, otherwise I’ll be old with lots of money. I prefer to spend now when I can, especially with kids before they become settled as adults, which is already happening.

I also divorced over 5 years ago and at the time, I prioritized keeping the tax deferred/sheltered accounts over taxable. My ex preferred taxable, so it worked out well.

No reason not to take advantage of tax deferred/sheltered accounts if they are available to you.

 

[RetiredHappy]

I always maxed out my 401K but I was usually done by the third month of the year. No Mega backdoor Roth and HSA available to us then. So other than spending the money, what else was I do except money going into my bank account. At one point I had so much money that I ended up losing half a million dollars in the stock market due to margin loans, as my ex-husband got me into it. But since then I have been very conservative with my trades.