Too much money in retirement accounts? I don't want to die rich!

[RetiredHappy]

Each or both of you?

$7.2K first class/business class tickets for 2 to Europe seems too low. I just paid $8.5K round trip flying business to Singapore for one person.

 

[Gumby]

$7.2K first class/business class tickets for 2 to Europe seems too low. I just paid $8.5K round trip flying business to Singapore for one person.

We went JFK non-stop to Tokyo in November. Business class roundtrip for the two of us was $14k. Europe is a substantially shorter trip, though, so maybe it was for two.

 

[Exchme]

OP:
No, 9% is way too optimistic (average real return is about 6.6%). You should use a tool like FireCalc for the entire future, not just the part after retirement. We don't know the future returns of the next 9 years any more than we do years 10-50, so it's best to use a consistent approach.

I recommend you keep saving until you are FI, then you can relax. You aren't there yet, so don't go blowing money that you need for later, that just puts off the day that you can retire.

Tax preferenced accounts are a good place for the money. At some point, you may analyze things and determine that you have so much in tax deferred, that you should be making Roth contributions instead of tax deferred contributions, but it's often hard to know when - in our case, by the time I realized there was a painful tax obligation there, my income was at its peak so it was still right to keep using tax deferred. The time for Roth contributions turned out to be earlier. Roth accounts can be especially useful to draw from to control income if you need ACA.

 

[livingalmostlarge]

seems like so many can help you blow that dough really fast

 

[NeilDH]

Nice work!

I use 7% returns (could do 7.2% to simplify rule of 72) in my calculations. Consider the breakdown of your retirement accounts, how much is tax deferred vs. tax free). I use a 3% rule for an early retirement and because I'm conservative.
You can access your retirement accounts via the 72T at any point, penalty free, you can access your Roth contributions penalty free at any point. There is also the rule of 55 that may or may not apply, employer dependent, that allows you to withdraw from your retirement accounts when you retire or are terminated in the year you turn 55 or later.

I'd take a look at your balance in your retirement accounts and if you are considering not doing a tax deferred investment in your 457/401k I would do a Roth contribution in those accounts rather than going into taxable as it would be tax free gains.
That said, I think it is prudent to invest in taxable investments also, to be able to better manage taxes later on. I'd also consider what you might want to spend in retirement vs. now. You don't want to blow more now and get used to it and not be able to support that in retirement.

I favor this plan the best. Also, it's important to note what MissMolly above says about the Rule of 55 -- it applying only to the retirement plan related to the job you'd be leaving at age 55. That may be enough to get you to 59.5, but I like having some in taxable also just in case.

 

[NextInLine]

Age 46
I have just reached the $1M mark in retirement accounts (457, 401K, Roth)

I understand I can access these accounts early with no penalty (Age 55) if I am unemployed.

At 55 my nest egg is projected to be $2.2M based on 9% for 9 years. This is plenty for the retirement years based on the 4% rule (4% is 80K + I receive a pension of $48K adjusted for cost of living =$128 annual income)


Questions:
Again, I feel I have plenty of money for years 55 - death. What should I do over the next 5-9 years?

Is 9% a good rate for projecting future amount of my nest egg? 10.2% is historical average.
What do I do with my savings over the next 5-9 years?
1. Continue to invest in retirement accounts and looks for early out / no penalty clauses if I want to retire at 50?
2. Invest in taxable investments?
3. Blow it until I retire?
4. Combination of above

I am more or less at your projection now. Age 54, $2.5m lest egg. Plan to retire in 2028 with $50k pension. My current spending is $100K.
I max out Roth 401k, Roth IRA and building up a decent taxable account. I know I’d have more than I need. But upgrade your living standard is much easier than downgrade it.

 

[marko]

46 years old? You could have 46 more years ahead of you. Hyper inflation, LTC, market crashes, black swans and 100 other unknowns are possible over the next half- century.

I'd much rather die with $7MM than be wiped out at 80 and forced into eating cat food for my last ten years.

Enjoy your life, but I'd wait a few more decades before putting the "I don't want to die rich" plan in gear.

The only thing worse than dying rich is dying poor.

 

[TheWizard]

OP is doing well at age 46 and quite likely can be FI at age 55 or before, but it would be good if he changed his theme song to something more like "I want to be financially secure at age 100 if I live that long."

Beyond that, we need a better breakdown of where that $1M in financial assets are held (tax-deferred, taxable, and Roth) to be able to advise on where new money might best go.

And 9% annual gains are actually close to the S&P 500's average total return over the past few decades. But OP may not be 90%+ in stock index funds. Better to pick a lower % for projecting the future and then be pleasantly surprised if more...

 

[Koolau]

46 years old? You could have 46 more years ahead of you. Hyper inflation, LTC, market crashes, black swans and 100 other unknowns are possible over the next half- century.

I'd much rather die with $7MM than be wiped out at 80 and forced into eating cat food for my last ten years.

Enjoy your life, but I'd wait a few more decades before putting the "I don't want to die rich" plan in gear.

The only thing worse than dying rich is dying poor.

Yes. Even at my advanced age and larger stash than OP, I don't believe I can totally forget about these things that could go wrong. It seems to me that OP should plan for a very long life and plan/spend accordingly to insure not running out of money. The world is uncertain and mid 50s retirement could mean 45 years retired with lots of potential pit falls waiting.

 

[RunningBum]

OP is doing well at age 46 and quite likely can be FI at age 55 or before, but it would be good if he changed his theme song to something more like "I want to be financially secure at age 100 if I live that long."

Right. What's more important: not "dying rich", or not being destitute in your final years? The way to avoid the latter (which is my priority) likely means I will die with a lot more money than I could spend. But it's not guaranteed.

 

[Koolau]

Right. What's more important: not "dying rich", or not being destitute in your final years? The way to avoid the latter (which is my priority) likely means I will die with a lot more money than I could spend. But it's not guaranteed.

Yes. If one dies "rich" but was never "deprived" then I see no problem.

If I'm deprived (like in the thread on soap slivers) it's okay because I choose that - even though I don't have to. Just like I could fly 1st class but do not - because I don't see the value vs price BUT not because I'm deprived by a lack of money. It's a choice I make.

 

[Zathras]

I really don’t get the aversion to dying rich, as long as you are comfortable.
As long as I enjoy life, and don’t short change myself, I’d love to die rich.

 

[rembrandt]

Like Stan The Annuity Man says "there are no U-Hauls behind hearses".

 

[nvestysly]

DW and I had a similar situation when we were in our 40's. Our numbers were different than your numbers but we had essentially the same scenario - tax advantaged accounts were adding up more than we thought we needed. We dropped all contributions to retirement accounts down to the minimum without losing matching funds - we didn't want to miss out on "free" money from our employers. Instead, we "filled the gap" by saving as much as possible in a taxable brokerage account. We focused on dividend paying stocks in this account but I realize that is not suitable for everyone.

If by chance you are not eligible for early withdrawals from your retirement accounts in the manner mentioned in your original post (age 55), you would be eligible to withdraw via the 72-t substantially equal periodic payments method if you rollover the retirement accounts to IRAs. There are plusses and minuses but the 72-t methodology worked well for me - I started withdrawing at age 55. There are lots of web pages discussing 72-t SEPP withdrawals.