51f looking to exit corporate america in 4-6 years. $1.7 in various 401k/IRAs ($2.2M NW) Brokerage account/cash is fairly low. Does it make sense to turn off auto investing (401k, HSA, ESPP) to build cash so I can exit corporate america in 6 years? Spouse wants to continue working. Home paid off, debt free. One child in college(1st yr)— 529 and ESPP enough to pay off for 4yrs.
Feels like we have enough saved in 401ks and need to start building large cash reserves to exit. $80,000 annual annual living. So would need $200,000 to get to 59.5. Would get a PT job too.
Would you stop 401k investing..
byu/LvnLife2019 inpersonalfinance
Posted by LvnLife2019
19 Comments
Retiring in the next 4-6 years doesn’t mean you should forego the next 4-6 years’ worth of tax advantaged contributions.
Would you be losing out on any amount of matching?
Why do you need a bunch of cash to “exit corporate America”? What do you plan on using that cash for?
Might make more sense to do a Roth conversion ladder? But it depends on your expected income at retirement.
Lots more info needed. Keep HSA you’ll need it. Depending on state 529 might make sense. Need to start building Roth and taxable side of the balance sheet. Never go below your match. If you can contribute to a roth and that count towards match then do that. Still lots of details.
Rule of 55:
If you separate from your employer in the year you turn 55 or later, you can take penalty-free distributions from that most recent employer’s 401(k) plan
So keep taking the tax benefits and invest in your 401k assuming you have good investment options in your 401k. Throw extra money into brokerage
Tax brackets are an important input required. If you are in a high tax bracket today and will be in a significantly lower tax bracket after you retire, you might consider continuing Traditional 401k investments for the current tax benefit and then do 72t (or Rule of 55) distributions for the 2.5-4.5 years after you retire until you reach age 59.5.
If spouse plans to keep working and you plan to work part-time, how much would you need to distribute annually to make up the short-fall?
I would build 1-2 years of emergency fund if you want a peace of mind and keep them in either money market or HYSA. I would still leverage 401k or other tax advantaged accounts to continue building wealth though
They always say “don’t try to time the market” but it seems any potential upside moves have few impetus driving it. The downside seems to have a lot of pressure. It was stunning to get clarity on the algorithm concepts and that moves are made at speeds of 80,000 trades per second. And the Algos hate loss so they try try try to ride out smaller down runs, but when they reach a tipping point and mass selling starts- there are no longer “reserves” of retail investors who rescue by buying the dips. It’s so weighted by Algos that a significant move south could become a big reset: I’m noooo pro- just had a similar issue and realized I worked for that money and the growth is a blessing so best to count that blessing and chart a different path… interest rates will surely go down but there is still some safe but fair growth available
Why don’t you just exit corp America and find a job that you don’t hate until retirement?
Reading between the lines here, you may not be aware that there are penalty free ways to tap a 401(k) before turning 59.5. Look up “Rule of 55” and “Rule 72t” to see what your options are.
Continuing to put away pre-tax dollars while you are still earning in a high tax bracket is usually the right choice for most workers.
Ultimately your retirement accounts are not as locked up as you seem to be thinking. [if you retire early, there are a few ways to access that money, it just takes some planning effort.](https://www.madfientist.com/how-to-access-retirement-funds-early/) This means that you should be prioritizing your tax advantaged accounts, [especially if you are wanting to retire early.](https://www.whitecoatinvestor.com/early-retirees-max-out-retirement-accounts/)
2.2 mill net worth. Just retire today, thats at least 80k a year in investment income you can withdraw worry free.
Nothing about this questions makes sense. If you are worried about the market selling off, you can switch your allocation. There is no reason to forego tax-free compounding ever.
So you make $80k annually? Is that what you mean?
Am in student financial aid, so from that perspective (and I know that you don’t probably qualify for most programs I work with students on) but having a bloated brokerage account vs continuing to submit to your 401(k) is going to increase your Student Aid Index unnecessarily, vs you know, not doing that. And I know, you said you have a 529, so it’s unlikely to be necessary, but that’s the advice I have in the place I’m at.
Does your company match? I get 7.5k if I fully max out my contribution. That alone would keep me investing
I’m going to zag from the majority opinion and say beef up your taxable brokerage. You can withdraw up to $96k of long term gains tax free. And the flexibility it will give you is fantastic. I recently was laid off and am kicking myself for not building up my taxable brokerage.
At a minimum take advantage of any 401k matching