Are we OK for early retirement?

[SunshineCA]

I am 52 years old, and my husband is 54 years old. We owned a house, all paid for. Currently we have $2 million in cash and stock investment, another $3.5 million in our combined 401K/Roth. We plan to retire next year. I am thinking that once we retire, we can convert $100000 each year from 401k/IRA to Roth. And we will withdraw $120000 per year from cash/stock for living/health care/ travel expenses. Would appreciate any advice on whether this plan works!

 

[mrfeh]

You should go through this exercise yourself. Here's a tool you can use:

https://firecalc.com/

 

[Aerides]

Aside from the overall math (which, high level, looks good assuming your expense estimate is solid, includes taxes and healthcare, etc.)... Do you have enough of those savings in taxable accounts to get you past 59.5?

 

[SunshineCA]

Aside from the overall math (which, high level, looks good assuming your expense estimate is solid, includes taxes and healthcare, etc.)... Do you have enough of those savings in taxable accounts to get you past 59.5?

We have close to 700k cash in the money market with 5% return.

 

[SunshineCA]

You should go through this exercise yourself. Here's a tool you can use:

https://firecalc.com/

Thanks for the feedback. I’ll try that link

 

[REWahoo]

Here is another thread you should definitely read: Some Important Questions to Answer Before Asking - Can I Retire?

 

[Ronstar]

Looks like it will work to me. The $5m cash/ stock should (or come close to) generate the $120k you need for expenses.

One thing to look into. You have $700k in cash, but you won't want to use all cash to fund expenses until you run cash down to zero. Looks like you have $1.3m in taxable. Figure out a tax plan for withdrawing a mixture of taxable / cash, and how that ties into your plan for $100k Roth conversion per year.

 

[Rianne]

I use several calculators, some include tax and inflation scenarios. They tell me our $3 M portfolio will sustain $130 spending but we're 66. We've been able to control our income since 2014 for ACA purposes. RMDs are a big concern on this forum. There are many threads about Roth covering.

https://ficalc.app/

financialmentor.com/calculator

https://www.irscalculators.com/tax-calculator

https://opensocialsecurity.com/

 

[latexman]

You have enough $'s, your brokerage firm should be giving you a free Financial Adviser. I have one at Fidelity. I met with her twice a year until we finalized my retirement plan in Fidelity's Retirement Planner, now we meet once per year to review. She's always available by phone or e-mail. She has been a big help to me without trying very hard to sell me anything. I just say, no, and she moves on.

 

[38Chevy454]

Rough numbers you seem good to go. Great job building up the savings and having no or little debt. Run some of the retirement calculators like Firecalc or Fidelity Retirement Planner, to see the numbers. Reminder that doing the Roth conversions, you will need to get additional money out of the cash account to pay the taxes on the conversions. You can't use the 401k money to pay taxes without the 10% early withdrawal penalty. So that may be approx 15-20% of your Roth conversion amount you will need additional withdrawal from the cash account for fed and state (if applicable, assume you live on CA?) taxes.

You can also set up a 72t withdrawal from your 401k if you want to tap a little of that money before age 59.5, maybe that's a good way to pay the taxes on Roth conversions? The 72t let's you get money out without the 10% early withdrawal penalty. Only drawback is you have to take SEPP (substantially equal periodic payments) and do it for 5 years or until 59.5, which ever is longer. So you are about right now with husband at 54 to set this up if you want.

 

[SunshineCA]

Rough numbers you seem good to go. Great job building up the savings and having no or little debt. Run some of the retirement calculators like Firecalc or Fidelity Retirement Planner, to see the numbers. Reminder that doing the Roth conversions, you will need to get additional money out of the cash account to pay the taxes on the conversions. You can't use the 401k money to pay taxes without the 10% early withdrawal penalty. So that may be approx 15-20% of your Roth conversion amount you will need additional withdrawal from the cash account for fed and state (if applicable, assume you live on CA?) taxes.

You can also set up a 72t withdrawal from your 401k if you want to tap a little of that money before age 59.5, maybe that's a good way to pay the taxes on Roth conversions? The 72t let's you get money out without the 10% early withdrawal penalty. Only drawback is you have to take SEPP (substantially equal periodic payments) and do it for 5 years or until 59.5, which ever is longer. So you are about right now with husband at 54 to set this up if you want.

Thank you for your feedback. I am thinking to use the taxable account (stocks) for the taxes, and just leave 401K grow. The ideal situation is to have 50% Roth and 50% tax deferred IRA.

 

[SunshineCA]

Thank you everyone for your kind feedbacks. I just joined this forum yesterday, looks like there are already a lot of infos here for people in the similar situation as us. I will start to read it up!

 

[flyingaway]

You have more than enough money for your expected expenses.
You can use the concept of Roth ladder to get your money out of IRA if your 401k does not allow early withdrawal.

 

[DrRoy]

~2.2% WR, so good. Make sure you have accounted for the taxes on the Roth conversion.

 

[Flyfish1]

Just a reminder the 401K assets can be tapped after the age of 55, under the Rule of 55, you don't have to wait until 59.5.

 

[hopefullyoneday]

Just a reminder the 401K assets can be tapped after the age of 55, under the Rule of 55, you don't have to wait until 59.5.

That will only work for 1 of them.

 

[Morgan22]

That will only work for 1 of them.

+1

But also, if the plan allows it. The employer does not have to set up a 401k plan to allow the rule of 55.

 

[AZsniper]

You absolutely could retire today. Is it really the money or is it letting go of work and the worry of that?

if for some reason you feel that your money is being spent too fast or your accounts are dwindling too fast, you will know well over 10 years in advance and can make some adjustments.

5 million will pay 100,000 per year for 50 years with no gains.

Live it up! Stay healthy!

 

[Surewhitey]

This is exactly our plan to maximize / balance ACA bene's and taxes paid. We have about 15 years of pre & post tax funds to work with when we get to executing it.

 

[LateToFIRE]

You absolutely could retire today. Is it really the money or is it letting go of work and the worry of that?

if for some reason you feel that your money is being spent too fast or your accounts are dwindling too fast, you will know well over 10 years in advance and can make some adjustments.

5 million will pay 100,000 per year for 50 years with no gains.

Live it up! Stay healthy!

+1, no question OP can retire today on those numbers