Hi, I am hoping to retire in 3 years. What to do these next 3 years?

M

MossHawk6

Dryer sheet wannabe
Joined
Oct 17, 2024
Messages
14
Location
Iowa
Hello,

I'm new to this community and have enjoyed reading through all the post. I was hoping to get some suggestions on what I should these next 3 years, to best set me up for a successful retirement. Below is my information.

Current Age Him/Her: 52/52
Assets Him:
401K: $1,600,000 ($120,000 ROTH)
Inherited IRA: $480,000
Roth IRA: $100,,000
Pension: $150,000 (lump sum) or $1,300 month at 55 (Other options as well if I wait)

Assets Her:
403b: $1,000,000
Roth IRA: $100,000

SS
His: $2,300 (62) $3,215 (67) $4,000 (70)
Her: $2,160 (62) $3,100 (67) $3,900 (70)

Home:
Worth: $300,000
Mortage: $100,000 (2.5% 10 years left)

Kids: 2 are out of the house & with 1 Senior in HS now. Have enough in 529 for college for next 4 years.

Current asset allocation: 70/30 stocks/bonds

Currently Saving:
His: $30,000 in 401K (Additional $12,000 match)
Her: $7,000 in 401K (Additional $9,000 match)

Current Expenses: $9,000 month pre-tax


Questions:
1) In your opinion, are we even in position to retire in 3-5 years?
2) What should/could I do in these next 3-5 years that will help set us up for retirement?
3) I plan to draw from inherited IRA and/or use the Rule of 55 in 401K until 59.5. Good plan?


Thanks to all who takes the time to read and offer advice, it greatly appreciated. I am a little way from pulling trigger, but It's kind of scary when I start to think about it.
 
Welcome, and congratulations on your achievement! With 3-5 years left until retirement, you’re on track to accumulate around $4 million in investments. You can take advantage of the Rule of 55 to access your 401(k) funds before Social Security kicks in. And having $1.2 million in your Roth is fantastic!
 
Welcome to the ER Forum MossHawk6,

Two links that many have found helpful with their retirement planning process are Frequently Asked Questions and FireCalc.

Also, before you make any decision on taking your pension as a lump sum, you may want to compare the monthly payout to what you could obtain for the same sum on the open market to decide whether it's a good offer, and of course consider "the other options" prior to making a decision in that regard.

MarieIG
 
MossHawk6 said:
Hello,

I'm new to this community and have enjoyed reading through all the post. I was hoping to get some suggestions on what I should these next 3 years, to best set me up for a successful retirement. Below is my information.

Current Age Him/Her: 52/52
Assets Him:
401K: $1,600,000 ($120,000 ROTH)
Inherited IRA: $480,000
Roth IRA: $100,,000
Pension: $150,000 (lump sum) or $1,300 month at 55 (Other options as well if I wait)

Assets Her:
403b: $1,000,000
Roth IRA: $100,000

SS
His: $2,300 (62) $3,215 (67) $4,000 (70)
Her: $2,160 (62) $3,100 (67) $3,900 (70)

Home:
Worth: $300,000
Mortage: $100,000 (2.5% 10 years left)

Kids: 2 are out of the house & with 1 Senior in HS now. Have enough in 529 for college for next 4 years.

Current asset allocation: 70/30 stocks/bonds

Currently Saving:
His: $30,000 in 401K (Additional $12,000 match)
Her: $7,000 in 401K (Additional $9,000 match)

Current Expenses: $9,000 month pre-tax


Questions:
1) In your opinion, are we even in position to retire in 3-5 years?
2) What should/could I do in these next 3-5 years that will help set us up for retirement?
3) I plan to draw from inherited IRA and/or use the Rule of 55 in 401K until 59.5. Good plan?


Thanks to all who takes the time to read and offer advice, it greatly appreciated. I am a little way from pulling trigger, but It's kind of scary when I start to think about it.
Click to expand...
1. Yes, you have your income covered and just need to be 55 to pull from most of it. great job saving.
2. I would consider paying off the mortgage. It's a great feeling and gives you more income options.
3. I believe you have this figured out.
 
One might also consider the non-financial aspects. The couple would retire from their jobs... but what would they retire "to"? Would they relocate, or stay put? Would they somehow reinvent themselves, or merely fill working-time with leisure? And if retirement turns out to be incrementally less felicitous than expected, what are the opportunities to return to the workforce, whether part-time or full-time?

As for the financials, personally I'd not be comfortable. The assets are a bit over $3M, while the annual spending is $108K. Upon reaching SS eligibility, and especially accounting for the defined-benefit pension, that's fine. But before? Then we're playing the SWR game, which may be statistically vetting (sore subject, yes?), but which some of us would be disinclined to play.
 
Diogenes said:
As for the financials, personally I'd not be comfortable. The assets are a bit over $3M, while the annual spending is $108K. Upon reaching SS eligibility, and especially accounting for the defined-benefit pension, that's fine. But before? Then we're playing the SWR game, which may be statistically vetting (sore subject, yes?), but which some of us would be disinclined to play.
Click to expand...
Can you flesh this out a bit? I'm not sure I see your point. It's typically "okay" to spend more from your stash before SS/Pension and then cut back when those are available. It may even be somewhat advantageous to lower such things as tIRAs and 401(k)s to reduce future RMDs. What am I missing, please?
 
I assume you don't plan to reduce spending once retired, in which case stop reading. IF you do plan to reduce spending, I'd recommend you do so for the last year or two before retiring, to make sure you can really reduce. We did just to be sure we were comfortable cutting back. FWIW
 
Koolau said:
Can you flesh this out a bit? I'm not sure I see your point. It's typically "okay" to spend more from your stash before SS/Pension and then cut back when those are available. It may even be somewhat advantageous to lower such things as tIRAs and 401(k)s to reduce future RMDs. What am I missing, please?
Click to expand...
It's simply that the OP and his wife can expect a decent defined-benefit pension and SS, upon reaching a certain age (what that is, is perhaps a topic for another thread). They're spending $108K/year in today's dollars. The pension + SS will cover about half of that; maybe more. The remaining half would be less than 2%/year of their accessible portfolio - pretty comfortable, right?

So, the battle is all about reaching eligibility age. This is a combination of (1) growing the portfolio in the remaining years of planned workforce participation, and (2) managing withdrawals in the relatively brief number of years between final-FIRE and pension eligibility.

The disclaimer is that the 4% SWR mafia would be quick to bless the OP's retirement plan right now... without reservation. But.. that's a matter of taste!
 
I never give specific financial advice, here. I was nervous nellie the 2 years before I pulled the plug, wanting to be certain my nest egg didn't take a major hit before my retirement date. So my only suggestion is if you think a significant market correction would affect your retirement plan, than consider a more conservative allocation. For my conservative mindset, I also loaded up my taxable savings in my last 2 years, to provide an income cushion in event of a market downturn.
 
I will vote, Yes, you are good at 55.

You could consider 72T/SEPP for a portion of each of your (future) Traditional IRAs.

The lack of taxable might be a slight obstacle, but the inherited IRA should be able to fill in for any lump expenses. I would bolster taxable even if you just leave it in the Fed Money Market for a few years.

We are going to do something similar at 55/56 with less saved. What if we do it for 10 years and "fail" and I end up working part time again? I don't think that will happen, but it could.

We are closer to 50-50 with more in Roth and Taxable, but less in pre-tax/Traditional IRAs. We also have a house downsize to add to taxable upcoming.

Good luck!
 
I agree with the rest, you are looking good for 55. You should be able to access pretax funds using the rule of 55, but if not you can consider 72t withdrawals (SEPP = substantially equal periodic payments) which allow for penalty free withdrawals from pretax accounts.

With your pension and SS, you will be fine, the only issue is to get to that point and how best to have income after 55 and before SS kicks in. I'm in the OK to have higher withdrawal rates, assuming you keep an eye on things and adjust if required. Which it seems you have done great so far and can adapt as needed.
 
MossHawk6 said:
1) In your opinion, are we even in position to retire in 3-5 years?
2) What should/could I do in these next 3-5 years that will help set us up for retirement?
3) I plan to draw from inherited IRA and/or use the Rule of 55 in 401K until 59.5. Good plan?
Click to expand...
Be triple sure you can use the rule of 55 with your company 401k - I could not have, but it was irrelevant as we were retiring before that anyway.

To avoid/reduce this dependency, or either way, I'd recommend you focus on a bit more after-tax savings, especially anything that's above your company match/tax-caps, etc.

Having cash on hand (CD's, etc.) so that you don't always have to withdraw from investments gives you flexibility. I can think of plenty of times in recent history where I would not have wanted to be taking a loss to cover my normal expenses.
 
I’m in the camp that says your plan looks good. That 529 is a nice little kicker for the college-age kids. DW and I have FIREd with a little less than you a few years earlier than you plan; so far so good, but as bloom2708 said, maybe we’ll need PT/contract w-rk if there’s a tough time (I’m loosely lining up options). You should be proud of what you’ve saved up.
 
MossHawk6 said:
1) In your opinion, are we even in position to retire in 3-5 years?
2) What should/could I do in these next 3-5 years that will help set us up for retirement?
3) I plan to draw from inherited IRA and/or use the Rule of 55 in 401K until 59.5. Good plan?
Click to expand...
55 or later I would be ok with what you have.

Agreed with taxable account building for flexibility.

Although you have to take the inherited IRA within the 10yr period, it looks like (maybe) you can wait until you lower your tax bracket to start. May save some substantial tax $'s depending on your current income? Check me on this...

Rule of 55 only applies to your current employer 401k (if they allow it), so this may change your equation...

Looking good either way, imo.
 
OP is looking good,as others said.
Definitely keep that pension, just over 10% annual payout at age 55 compared to the cash out option. See if you can buy a few years more of that pension at the same payout rate.

$9000 per month expenses seems a bit high unless you're including a lot of money for new vehicle replacements and discretionary retirement activities (travel).
Perhaps shapen that number to separate Basic Expenses from Discretionary ones especially after the last kid is fully launched from college.

And I would NOT make extra payments on that 2.5% mortgage!
 
I think you’re looking good. I suggest you start building up a taxable brokerage account including a stash of “safe” money in high yield savings or money market. The after tax funds can be handy in allowing you to do Roth conversions or large expenses that might push you into a higher tax bracket if taken from pretax accounts.
 
Aerides said:
Be triple sure you can use the rule of 55 with your company 401k - I could not have, but it was irrelevant as we were retiring before that anyway.

To avoid/reduce this dependency, or either way, I'd recommend you focus on a bit more after-tax savings, especially anything that's above your company match/tax-caps, etc.

Having cash on hand (CD's, etc.) so that you don't always have to withdraw from investments gives you flexibility. I can think of plenty of times in recent history where I would not have wanted to be taking a loss to cover my normal expenses.
Click to expand...
This is great for a successful retirement. Others have posted the same advice and having a larger cash on hand accounts will be huge.
Good Luck and hope to hear more from you in the future.
 
OP doesn’t say if he has any after tax accounts. I assume he does and I echo the recommendation to take the next three years to bolster the after tax account and do so with very liquid investments. Basically build a significant cash reserve. I would even go so far as to recommend scaling back the 401K contributions to only max out the company match. He doesn’t really need anymore money in tax deferred accounts.
 
I think you are looking good.
Is your pension payout for life and does it have survivor benefits?
Definitely run Firecalc and review the questions in MarieG post.
Maybe contribute to an after tax account for the next 3-5 years.
Perhaps a year or two before retirement, live on that $9000 (pre tax per your post) monthly amount, make sure it works.

Welcome to the forum!
 
Target2026 said:
Welcome, and congratulations on your achievement! With 3-5 years left until retirement, you’re on track to accumulate around $4 million in investments. You can take advantage of the Rule of 55 to access your 401(k) funds before Social Security kicks in. And having $1.2 million in your Roth is fantastic!
Click to expand...
Unfortunately I have $120,000 in 401K Roth. I WISH I have $1,200,000. I will feel alot better. :)
 
Diogenes said:
One might also consider the non-financial aspects. The couple would retire from their jobs... but what would they retire "to"? Would they relocate, or stay put? Would they somehow reinvent themselves, or merely fill working-time with leisure? And if retirement turns out to be incrementally less felicitous than expected, what are the opportunities to return to the workforce, whether part-time or full-time?

As for the financials, personally I'd not be comfortable. The assets are a bit over $3M, while the annual spending is $108K. Upon reaching SS eligibility, and especially accounting for the defined-benefit pension, that's fine. But before? Then we're playing the SWR game, which may be statistically vetting (sore subject, yes?), but which some of us would be disinclined to play.
Click to expand...
Agree with this! Wife says she wants to work some parttime stuff that she would enjoy. I "think" I just want to golf, pickleball, workout, etc.... I know that sounds good now, but might get old after a while. I will find something to do for sure, but it is a concern as well.

We both could return to work fairly easy, especially me. But I just want to make sure that we dont HAVE to. If we choose, great, but dont want to go to early where we would have to.
 
Midpack said:
I assume you don't plan to reduce spending once retired, in which case stop reading. IF you do plan to reduce spending, I'd recommend you do so for the last year or two before retiring, to make sure you can really reduce. We did just to be sure we were comfortable cutting back. FWIW
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I wont retire until we can maintain the same level of living as we do now. I like the idea of doing a "test run" for a couple of years to make sure. Good idea
 
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