Retirement Savings -- Countup

[LivingAlmostLarge]

Savings to Retire at 55 to be used for Age 56-60
Balance: $ 55K
End-Goal by 55: $100K (that means a living budget of $20K/year for age 56, 57, 58, 59 and 60)
Retirement Condo $400K: Fully Paid (No Renting expense!)

At 61, saved rent income will cover it; at age 62, it is SS onwards
401K Retirement Savings: $ 305K
IRA Retirement Savings: $ 63K
Total Retirement Savings: $ 368K (market dropped 5% the past 30 days)


My Forecasted Monthly Retirement Check Amounts, if to retire starting 2026 (actual withdrawal can only start in Jul of 2031):
401 : $ 1.49K
IRA : $ 0.30K
SS : $ 1.52K
Tot : $ 3.31K
Goal: $4.00K (Adjusted)
The mood is keep buying those yummy discounts!

will you retire early if you hit $100k or keep on working to 55?

[Randomsaver]

will you retire early if you hit $100k or keep on working to 55?

Keep on working to 55 at least if I hit S100K earlier. The thing is if I stop at 54, I would need more than $100K, and more so at 53. 55 really is the soonest.

[LivingAlmostLarge]

Keep on watching maybe it'll hit $100k sooner.

[Randomsaver]

Savings to Retire at 55 to be used for Age 56-60
Balance: $ 60K
End-Goal by 55: $100K (that means a living budget of $20K/year for age 56, 57, 58, 59 and 60)
Retirement Condo $400K: Fully Paid (No Renting expense!)

At 61, saved rent income will cover it; at age 62, it is SS onwards
401K Retirement Savings: $ 318K
IRA Retirement Savings: $ 67K
Total Retirement Savings: $ 385K (market recovered, let's start some growth, c'mon investors buy buy buy!)


My Forecasted Monthly Retirement Check Amounts, if to retire starting 2026 (actual withdrawal can only start in Jul of 2031):
401 : $ 1.64K
IRA : $ 0.32K
SS : $ 1.54K
Tot : $ 3.50K
Goal: $4.00K
The mood is hold and wait for some growth next week!

[Randomsaver]

Every now and then it's nice to remind ourselves of the fruits of our labors.

Mine revolves around a retirement of 3 Bs -- beach, babes, and booze.

[Randomsaver]

People who were able to retire at 50 and start enjoying life early are those who only put the match on their 401K and instead put the rest of savings in their personal brokerage. It's like Roth 401K in that it's tax-paid dollars but minus the long wait of 59 1/2 to have no penalty from using them. As an aside, generally speaking, those who retire earlier than 50, say between 40-45, do not have enough savings yet or are living very frugally until help comes at age 59 1/2 from 401K and at age 62 from SS. There are exceptions of course like those NBA players and Taylor Swift likes. For regular folks like me, 53-58 would be the ideal age to stop working and enjoy life but this can only be possible if one prioritizes personal savings accounts over age-restricted retirement accounts.

This is the lesson I learned on my own and it is something I will teach my kids early. I started on this path around 40y and that is how I was able to save and buy my beach condo which I would not be able to afford now, moreso 10 years from now as prices of these go up fast. Phase 1 is tough because this happens also along the same time 2 other things are happening in one's life -- family (college for kids) and family home mortgage. If you guys remember, I have another thread on my family home mortgage in the Debt section. While I was paying for that mortgage, I was saving also for my retirement property AND kids' colleges. REALLY REALLY TOUGH.

But the retirement property is just Phase 1 of retirement in the 53-58 range. After that purchase, the savings is zeroed out so one has to go to Phase 2 -- rebuilding savings for the retirement that would take care of years up to 60y, when help from 401K and then 62 from SS comes in. It would not say it's easy but it is less hard than Phase 1. This is because, chances are:
- Family home mortgage is done
- College savings is done or -- for those who have kids in their 40s like me - near done
- Salary has for most folks at this time have outpaced cost of living and hence extra money is put into the savings

[disneysteve]

People who were able to retire at 50 and start enjoying life early are those who only put the match on their 401K and instead put the rest of savings in their personal brokerage.

No matter what retirement age you are targeting, it's a very good idea to have a mix of accounts, both taxable, tax-deferred, and tax-free. It gives you far great flexibility when the time comes to draw on those funds. If you are 100% tax-deferred (401k, traditional IRA), you have no way to control your taxable income each year which can mess with ACA subsidies and other income-based concerns.

Our CFP pointed out how much he loved our portfolio for that reason. He said a lot of clients come to him looking for help reducing their AGI but they are 100% invested in their 401k and there's simply nothing he can do for them. We have taxable accounts, Roth IRA, traditional IRA, 401k, SEP-IRA, etc. Lots of ways to manipulate where money is coming from to manage our AGI.

[kork13]

Keep in mind as well that retirement accounts CAN be tapped earlier through Roth IRA/401k contribution withdrawals, or a 72t plan ("substantially equal distributions") ..... It's not a flexible method, but it is something I've considered if needed. I'll be "retiring" at 42 (TBD what that'll actually look like), and about half of our assets are in retirement accounts (~80% of that in Roth). If we were to need it, I would readily make use of one/both of those options.

[Petunia 100]

I was just going to mention the 72t rules and Roth conversion ladder, but I see that Kork beat me to it.

Also, you can withdraw from your 401k with no penalty beginning at age 55 if you retire at 55 (or later).

Best of luck to you with your plans, RandomSaver.

[Randomsaver]

Did they lower it to 55? I thought it was 59.5. That is definitely pleasant news. Newer generations and millennials are more global in thinking than our predecessors. Peeps are retiring in their 50s more and more into other countries, living simple lives until that help comes in from 401K.

[Randomsaver]

I was just going to mention the 72t rules and Roth conversion ladder, but I see that Kork beat me to it.

Best of luck to you with your plans, RandomSaver.

Thanks Petunia. Can you elaborate a bit on both 72t and Roth conversion ladder? I've had not paid attention to such as age 62 is still 10 years out for me but maybe if someone can simplify it for me, I'd appreciate.

[kork13]

Thanks Petunia. Can you elaborate a bit on both 72t and Roth conversion ladder? I've had not paid attention to such as age 62 is still 10 years out for me but maybe if someone can simplify it for me, I'd appreciate.

I'm not an expert on it, but in general terms, rule 72t allows people to withdraw "substantially equal periodic payments" (SEPP) from specified retirement accounts (IRA, 401K, 403B, etc.) without penalty, at any age, as long as you follow a very tight set of restrictions. The amount of the SEPP is calculated based on 1 of a few different life expectancy tables, relative to your age & the amount in the account you're withdrawing from. Once you set it up, the SEPP cannot be changed, recalculated, or stopped, and must remain in place for the greater of 5 years, or until you're older than 59½.

Note that SEPP only applies to specified accounts -- if you've got 2x 401k accounts, a Roth IRA, and 2 rollover traditional IRAs, you don't have to include all of them in the 72t calculations. By only using 1 or 2 of them & being deliberate about the calculation method used, you could manage the dollar amount of the withdrawals that you have to take out.

[Petunia 100]

Did they lower it to 55? I thought it was 59.5. That is definitely pleasant news. Newer generations and millennials are more global in thinking than our predecessors. Peeps are retiring in their 50s more and more into other countries, living simple lives until that help comes in from 401K.

The Age 55 rule has been around for awhile. It applies only to 401k plans and only for those who retire at 55 or later. You can't retire earlier and wait until you are 55 to begin withdrawls and use the rule to avoid penalty.

[Petunia 100]

Thanks Petunia. Can you elaborate a bit on both 72t and Roth conversion ladder? I've had not paid attention to such as age 62 is still 10 years out for me but maybe if someone can simplify it for me, I'd appreciate.

Kork did an excellent job on the 72t rules. With the Roth conversion ladder, you convert some money (possibly 1 year's worth) to your Roth IRA (possibly a taxable event), let it age 5 years, then withdraw with no tax or penalty. You do this annually to create a ladder of money which can be withdrawn tax and penalty free.

[Randomsaver]

I'm not an expert on it, but in general terms, rule 72t allows people to withdraw "substantially equal periodic payments" (SEPP) from specified retirement accounts (IRA, 401K, 403B, etc.) without penalty, at any age, as long as you follow a very tight set of restrictions. The amount of the SEPP is calculated based on 1 of a few different life expectancy tables, relative to your age & the amount in the account you're withdrawing from. Once you set it up, the SEPP cannot be changed, recalculated, or stopped, and must remain in place for the greater of 5 years, or until you're older than 59½.

Note that SEPP only applies to specified accounts -- if you've got 2x 401k accounts, a Roth IRA, and 2 rollover traditional IRAs, you don't have to include all of them in the 72t calculations. By only using 1 or 2 of them & being deliberate about the calculation method used, you could manage the dollar amount of the withdrawals that you have to take out.

Thank you so much.