Hi, FIRED. Not the good kind!

[statsman]

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

My DW couldn't with her 401(k) rollover. As soon as she moved her 401(k) funds from her old employer's plan to her new one (she did it at age 54), those "rollover" funds were treated separately by her new employer's 401(k) plan and fell under the 59.5 threshold.

 

[latexman]

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

Yes, the retirement tool can be accessed from multiple starting points on Fido’s website. I normally access it through “My Goals” too.

 

[RetiredHappy]

You can plan your expenses and decide to set up at 72t now or wait to see if you will get a job first. If after 12 months or so, you decide that you are not going back to work and you have spent a year of your taxable funds, you can set up your 72t then. You have to take a minimum of 5 years or until 59.5 whichever comes later.

 

[aaronc879]

If I were in your position I would be retired. Based on your stated expenses and savings you don't need to work again. The next few years you live off of your taxable account. Use your taxable savings and your IRA to get your income just high enough to qualify for ACA with a zero premium. Having a low income in 2024 and beyond will allow your Son to apply for FAFSA and get grant money for school since you will be low income. You won't need near that $70K for his schooling. If you need to make early withdrawals from the IRA for a few years no big deal. You can afford it without a problem. Congrats on being forced to retire at 52 with plenty of money. Wish I had that problem.

 

[USGrant1962]

My DW couldn't with her 401(k) rollover. As soon as she moved her 401(k) funds from her old employer's plan to her new one (she did it at age 54), those "rollover" funds were treated separately by her new employer's 401(k) plan and fell under the 59.5 threshold.

IRS regs allow Rule of 55, not require it. But implementation is up to each 401(k) plan. Some don't allow it, some require a lump sum, some let you draw using the same rules as post-59.5. Read your Summary Plan Description (SPD).

 

[aaronc879]

4.5 years until he has to tap deferred accounts.

Probably longer since he said he had some leeway in that $72K and that was with him not likely realizing that health insurance would be very cheap with ACA if he used his taxable savings to keep his MAGI low.

 

[simple girl]

1) Do you possibly have medical receipts you can submit to allow you to tap your HSA penalty-free as needed?

2) What taxable income did you use when calculating your ACA premium? Your MAGI might be lower than you think since you will be selling from your taxable account to create income up until age 59.5. That depends on how large your capital gains will be. If your MAGI will be lower than you think, and therefore your ACA premium is lower than expected, your overall budget could be lower, allowing you more wiggle room.

3) Is there part-time work you might be interested in doing that could allow you to semi-fire and be able to take fewer withdrawals until you reach 59.5, if necessary?

 

[COcheesehead]

Yes, the retirement tool can be accessed from multiple starting points on Fido’s website. I normally access it through “My Goals” too.

I don’t have a “my goals” path on the site I access. Weird.

 

[COcheesehead]

Probably longer since he said he had some leeway in that $72K and that was with him not likely realizing that health insurance would be very cheap with ACA if he used his taxable savings to keep his MAGI low.

Could be higher too. Might need a car in that time frame, house repairs, unexpected medical deductibles.
If it were me, I would get at least a part time gig for a cushion. Something fun.

 

[momoney]

1) Do you possibly have medical receipts you can submit to allow you to tap your HSA penalty-free as needed?

2) What taxable income did you use when calculating your ACA premium? Your MAGI might be lower than you think since you will be selling from your taxable account to create income up until age 59.5. That depends on how large your capital gains will be. If your MAGI will be lower than you think, and therefore your ACA premium is lower than expected, your overall budget could be lower, allowing you more wiggle room.

3) Is there part-time work you might be interested in doing that could allow you to semi-fire and be able to take fewer withdrawals until you reach 59.5, if necessary?

I do have about 10K I could cash in from the HSA. I'm planning on working a few more years. Just was wondering how I would go about things if I did/could not work.

 

[momoney]

If I were in your position I would be retired. Based on your stated expenses and savings you don't need to work again. The next few years you live off of your taxable account. Use your taxable savings and your IRA to get your income just high enough to qualify for ACA with a zero premium. Having a low income in 2024 and beyond will allow your Son to apply for FAFSA and get grant money for school since you will be low income. You won't need near that $70K for his schooling. If you need to make early withdrawals from the IRA for a few years no big deal. You can afford it without a problem. Congrats on being forced to retire at 52 with plenty of money. Wish I had that problem.

That's a good point about FAFSA. You need to show at least 2 years back of income?

I'll admit it wasn't easy for me. Worked multiple jobs at a time, literally ate a lot of peanut butter sandwiches, no far away vacations, drove junk cars and sweated a ton of equity in the house to get this far. It sounds like I might have the essentials covered. If I want to afford a nice vacation and a new to me used car, I should continue working at something I enjoy.

 

[Morgan22]

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

You can manage 72t distributions yourself with no additional fees.
Read through the 72tnet site to learn more about it. https://72tnet.com/

We'll be setting up 72t distributions starting next year if I don't find a j*b before then. Our plan is to withdraw from traditional IRA at the beginning of the year and move to taxable brokerage in a MMF. Then do monthly auto transfers from the MMF to checking.

You can then use the taxable funds to tap into for large purchases.

 

[momoney]

My DW couldn't with her 401(k) rollover. As soon as she moved her 401(k) funds from her old employer's plan to her new one (she did it at age 54), those "rollover" funds were treated separately by her new employer's 401(k) plan and fell under the 59.5 threshold.

Did the plan implement the Rule of 55 for the funds that were not rolled in?

 

[Alex The Great]

My DW couldn't with her 401(k) rollover. As soon as she moved her 401(k) funds from her old employer's plan to her new one (she did it at age 54), those "rollover" funds were treated separately by her new employer's 401(k) plan and fell under the 59.5 threshold.

Is this treatment also extended into funds transferred from traditional IRA into 401K?

 

[Surewhitey]

Here's what I would do.

Put the $320k (minus some "beginning funds) in CD ladder, 5 yr. You will get ~$10-15k annually from this to add to your principle.

During the 5 years, and past, do some Roth conversions and start using these for the last couple of bridge years & try to maximize ACA subsidies.

If you see more is needed, a side gig would be my last option if you really don't want to completely retire. You said the $72k had fluff... Work on the actual needed...

 

[PlayinwithFIRE]

I am in a similar situation, albeit a little older and with a little less in my accounts.

To me, it seems like spanning the gap to 59 1/2 requires cash on hand.
I would think that means cash in bank, investment accounts (like trading accts), short term CDs etc that you could draw from without touching any retirment accounts which would incur penalties before 59 1/2

You would have to estimate your yearly burn rate and total number of years you need to do this to estimate the cash needed.

Am I wrong in this thinking?

 

[momoney]

I am in a similar situation, albeit a little older and with a little less in my accounts.

To me, it seems like spanning the gap to 59 1/2 requires cash on hand.
I would think that means cash in bank, investment accounts (like trading accts), short term CDs etc that you could draw from without touching any retirment accounts which would incur penalties before 59 1/2

You would have to estimate your yearly burn rate and total number of years you need to do this to estimate the cash needed.

Am I wrong in this thinking?

Correct and then analyze your situation and see if there are any opportunities to withdraw penalty free:
72t
Saved up HSA bills
Rule of 55 with current 401k
Roth contributions
Cash in an old whole life policy
Pay the 10% penalty
https://www.madfientist.com/how-to-access-retirement-funds-early/

 

[aaronc879]

That's a good point about FAFSA. You need to show at least 2 years back of income?

I'll admit it wasn't easy for me. Worked multiple jobs at a time, literally ate a lot of peanut butter sandwiches, no far away vacations, drove junk cars and sweated a ton of equity in the house to get this far. It sounds like I might have the essentials covered. If I want to afford a nice vacation and a new to me used car, I should continue working at something I enjoy.

Yes, they look back two years from the year you apply. If you apply for 2023-2024 they will look at 2021 income. If both you and your Son have low income then he could pay almost nothing if he goes to a state university.

 

[aaronc879]

I am in a similar situation, albeit a little older and with a little less in my accounts.

To me, it seems like spanning the gap to 59 1/2 requires cash on hand.
I would think that means cash in bank, investment accounts (like trading accts), short term CDs etc that you could draw from without touching any retirment accounts which would incur penalties before 59 1/2

You would have to estimate your yearly burn rate and total number of years you need to do this to estimate the cash needed.

Am I wrong in this thinking?

The thing is if you have more money than you need then you don't need to "span the gap to 59.5". Just pay the penalty and retire if you have the funds like this guy does. If you want to work to have a high spend rate later that is fine but he could never work again if he doesn't want to and would be completely fine.

 

[Morgan22]

The thing is if you have more money than you need then you don't need to "span the gap to 59.5". Just pay the penalty and retire if you have the funds like this guy does. If you want to work to have a high spend rate later that is fine but he could never work again if he doesn't want to and would be completely fine.

Ya, but if you have enough, and its stuck in retirement accounts, you don't need to pay a 10% penalty. Just do a 72t for base expenses from an IRA. Then use taxable to supplement for large purchases or for unexpected expenses that may pop up. Like needing a new car or a new washing machine.

 

[aaronc879]

Ya, but if you have enough, and its stuck in retirement accounts, you don't need to pay a 10% penalty. Just do a 72t for base expenses from an IRA. Then use taxable to supplement for large purchases or for unexpected expenses that may pop up. Like needing a new car or a new washing machine.

72t seems like it would be a major pain the a$$ but yes it would be an option.

 

[momoney]

72t seems like it would be a major pain the a$$ but yes it would be an option.

Yes it does. And risky if you don't know exactly what you are doing. That's why I mentioned some folks hire an advisor to help them get it right.

 

[momoney]

The thing is if you have more money than you need then you don't need to "span the gap to 59.5". Just pay the penalty and retire if you have the funds like this guy does. If you want to work to have a high spend rate later that is fine but he could never work again if he doesn't want to and would be completely fine.

I get your point. Fidelity suggests you plan into your 90s. No males in my family have lived to 85. At some point you have to realize your best health years are behind you.

 

[aaronc879]

I get your point. Fidelity suggests you plan into your 90s. No males in my family have lived to 85. At some point you have to realize your best health years are behind you.

My Grandfather's died in their 50's and 70's and my Dad will almost certainly not make it to 80. I am taking OTC pain meds almost every single day, sometimes several doses per day, and will for the rest of my life so i'm sure I won't top 80. Not everyone has to plan to make their money last to 90+. I have no kids so I would be pi$$ed if I died with even 6-figures let alone the 7-figures that many on this site will die with. It would mean I worked longer than I needed to. YMMV

 

[RetireAge50]

Our 72t was a one time setup for life. I was going to do something similar anyway regardless of my age. Total effort was less than one hour of my time. Steps:

1. Research calulation method: 30 minutes
2. Gather inputs (Interest Rate, Life Expectancy, Balance): 5 minutes
3. Calculate $ amount: Instant via PMT function in excel
4. Call Vanguard to setup automatic payment and federal withholding: 10 minutes
5. Report yearly on taxes: Just check a box on tax software

Now every month I get $2,125 deposited into my checking account automatically for the remainder of my life. Excelent. Dang, just spent more time explaining this here. Off to spend my money now.