Age 37 • Income: ~$120k/yr ish. Wife makes the same roughly, usually a little more than
• only debt is house, with about $200,000 left at 3.25%. House value $400,000. Roughly 15 years left to pay off at the rate we’re going. She leases her cars, so I know that’s considered debt.
• Retirement: 401k: $720,000, Roth 401k: $19,000, Roth IRA: $65,100. I’m not entirely sure of my wife’s retirement details. I know she has over $100,000 in her 401k and she just started maxing out a Roth IRA this year. She’s 4 years older than me (40)
• Savings: We usually keep about $10,000-$12,000 on hand.
• Marital status: Married with w 1 kid. Kids will be starting college when I'm around 52. Currently have a 529 with about $2,500 in it. My father in law also has a 529 set up for her but haven’t found the right time or way to ask how much is in there.
• other investments – individual stock act : $9,700, crypto : $1,000, AI stocks : $900. I just started investing in AI recently.
• Medical: my wife plans on working til 60, so I can have insurance through her if I retire early.
I invest 10% into my 401k (my employer contribution is $14/hr), 5% into Roth 401k, and $500 a month into my Roth IRA. My wife does 10% to her 401k with a 10 percent match, and maxes out her IRA.
Here’s my dilemma. My local doesn’t allow for early retirement. No early withdrawal on 401, no rule of 55, none of those things. My pension right now is $3,500 a month but will be double when I am of age to collect. I am not counting on that as income though because I’ll take a significant hit for retiring early. Our retirement age is 59.5 but I am not going that long. I’ll have 41.5 years of being a pipe fitter and too physically broken to enjoy my retirement. How to I invest to have money to bridge that 5-7 year gap of no income?
Want to retire early, not sure I’m on the right track
byu/Ok_Purpose_3661 inpersonalfinance
Posted by Ok_Purpose_3661
17 Comments
Good luck man. That’s all I got to say. Nobody’s gonna be able to really tell you what to do to guarantee anything. I have an after tax brokerage (not including 401ks houses, etc) sitting at $800k and I feel like I fight daily to keep it afloat. Anybody that can tell you to just set it and forget it has never worked with a large sum of money. Good luck!
“My local doesn’t allow for early retirement. No early withdrawal on 401, no rule of 55, none of those things.” Are you sure about that. My understanding is that once you quit, they can’t stop you from moving your 401k into an IRA, and at that point they have no control over it. Is it a 401k or some other type of plan?
Any way for you to get a job in management so your physical health does not deteriorate?
If you cannot withdraw from your retirement accounts you will need to build up a taxable account to use for the gap years or live off your wife’s earnings.
You could also consider a job change late in life to something less demanding even if it makes considerably less.
[projectionlab.com](http://projectionlab.com) or [Boldin.com](http://Boldin.com) can be pretty helpful in planning your retirement.
“I’m not entirely sure of my wife’s retirement details.”
That’s where I would start. A long conversation with my wife on OUR retirement plan, where we stand financially for that plan and what, if any, changes we need to make to be successful in that plan.
I would have done that before marriage but now would be the second best time.
You provided a lot of details, but the real answer comes down to what your yearly living expenses will be at the age you retire, and will the household have enough income to meet those expenses.
Also be aware that if your wife retires at 60, then you both require health insurance for the 5 years before you can get into Medicare. That will not be cheap.
I would also advise you to fill in some blanks: You need to know how much money is in the 529 account for your kid’s college/school. College can cost $30,000 *per year* for a 4 year education with tuition, room, and board for an in-state public college.
Pin down the details of your wife’s retirement accounts. Ultimately you will need to run some numbers to get an idea how much wealth will have been amassed when you are ready to give up your job, and she gives up her job. You need to know how much yearly income your savings will earn, and you need to get an idea of what your expenses will be at that time.
You didn’t share the most important detail which is what your annual (or monthly) expenses are and what you expect those to be in retirement.
How much money you need to amass in order to retire is simply a math problem. How much do you expect to spend in retirement? Multiply that number by 25 and you have your retirement number. You can save more money, or spend less money in order to shorten that timeline until you have enough to retire. Roth IRA contributions can be withdrawn to bridge the gap until 59.5. the other main way to fund the bridge is to have a taxable brokerage account. Check out the Roth conversion ladder for another way to fund that bridge. Good luck
You’re missing your key number which is your annual expenses. You can retire when you have 25-33x your expenses saved.
> She leases her cars, so I know that’s considered debt.
Leasing a car is the most expensive way to own a car because you’re always paying for the depreciation and you don’t end up with an asset, depreciating or not. I would reevaluate that choice.
> Marital status: Married with w 1 kid. Kids will be starting college when I’m around 52. Currently have a 529 with about $2,500 in it. My father in law also has a 529 set up for her but haven’t found the right time or way to ask how much is in there.
I would stop contributing to the 529 until you are sure you’ll hit your retirement goals. Your kid can take out loans for college. You can’t take out loans for retirement. Especially if you are worried about your health, it’s vital you focus on your own retirement.
> other investments – individual stock act : $9,700, crypto : $1,000, AI stocks : $900. I just started investing in AI recently.
You should not gamble or speculate with money you’re counting on. If you are on track for retirement then it’s fine, otherwise I would stop contributing to any of these and focus on broad market low cost index funds.
> I invest 10% into my 401k (my employer contribution is $14/hr), 5% into Roth 401k, and $500 a month into my Roth IRA. My wife does 10% to her 401k with a 10 percent match, and maxes out her IRA.
I don’t think in your situation Roth 401k makes sense. If you are in the 22%+ tax bracket you would want to take the tax dodge.
> Here’s my dilemma. My local doesn’t allow for early retirement. No early withdrawal on 401, no rule of 55, none of those things.
Are you saying the plan doesn’t offer that? I would double check. You can always withdraw contributions from a Roth IRA.
> My pension right now is $3,500 a month but will be double when I am of age to collect. I am not counting on that as income though because I’ll take a significant hit for retiring early. Our retirement age is 59.5 but I am not going that long. I’ll have 41.5 years of being a pipe fitter and too physically broken to enjoy my retirement.
Make sure you factor it in to your 25-33x expenses calculation
> How to I invest to have money to bridge that 5-7 year gap of no income?
Double check the rules for your 401k. You can always take the penalty (10% plus tax) if you need to – but factor that into your annual expenses.
The best thing to do is max out your tax advantaged spaces (401k, IRA, HSA) and put everything extra into a taxable brokerage account. With a shorter horizon you’ll probably want a bigger cash or cash equivalent (Money Market, treasuries, HYSA) to weather downturns.
Check out /r/FIRE for more early retirement advice.
Check out https://hellonectarine.com/ or https://connect.xyplanningnetwork.com/find-an-advisor for an **advice only** financial planner if you need help (they offer a few sessions at a set price, don’t try to manage your money, and don’t sell you insurance products as investments)
72t?
From what I’ve read so far from you OP, including your responses to others, I think your dream of retiring early is a pipe dream. But good luck to you.
You apparently killed it on the 401k. You put in 10% over 19 years which is about $200k in contributions and you have $720k. But you gotta figure out your wife’s assets and your joint expenses before you can make an informed decision.
The simple answer is you need to save at a higher rate than 15% of your income if you want to be retired in 15 years.
15% is generally modeled around the idea that you’re going to work 40+ years. If you’re going to cut that 10 years short, you probably need to target 25%+. Likely more.
Money Mustache is a somewhat extreme FIRE dude in my opinion, but he does have an article/chart that gives an idea how the savings rate breaks down to how many years you’re removed from retirement if you start at $0
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
If you want to retire before you would be allowed to pull money out without penalties, don’t put all your savings in a retirement account. Yes you may lose some tax advantages but you can access the funds any time & any advantage might be wiped out by the penalties.
The most important thing though is talk to your spouse. This is not a decision you can make on your own in a bubble. What if your wife is also thinking she will retire early & just be in your insurance?
Are there any sort of administrative positions you could take that would get you to the full retirement age for the pension? Or maybe you retire from the physically demanding job & find something that maybe pays less but is less demanding.
> How to I invest to have money to bridge that 5-7 year gap of no income?
You invest in a brokerage account.
You and your wife need to get on the same page. How is it you both don’t know the entire retirement savings plan picture? That, and leasing new cars constantly is a huge waste of money. Hell, a high interest rate over 7 years is better and that is a horrible idea as well. If your wife retires at age 60 and you are already retired, budget at least $40k/year for Medical insurance/care due to the 5-year gap until Medicare for her and an additional 4 years for you. So that right there puts your retirement plan back $350k – $400k.
To bridge the income gap, you’ll need a combination of cash and a taxable brokerage account that you can withdraw from. Most people just have the taxable, but I also know some like to have a large cash reserve.