Author Topic: Confused Aspect on the Path Towards FIRE  (Read 823 times)

yleeinvest

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Confused Aspect on the Path Towards FIRE
« on: September 11, 2017, 10:57:54 PM »
I recently moved to Australia and have been very keen about FIRE. I've been reading alot of info about FIRE and its been very intriguing. I understand that there are multiple paths for FIRE and one of them is by investing.

One confusing aspect I came upon is withdrawing money from our investments.

If we can not withdraw from an IRA account until 59.5 years old and a super until 65 without a heavy penalty, how can we retire at an earlier age? Is there a separate account that should be made in order to withdraw from investments (index funds) without the penalty? Am I missing something?

Any input will be amazing.
« Last Edit: September 11, 2017, 11:30:14 PM by yleeinvest »

Raenia

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Re: Confused Aspect on the Path Towards FIRE
« Reply #1 on: September 12, 2017, 06:22:14 AM »
Many of us are planning on using the ROTH Conversion Ladder method to access retirement accounts before the age of 59.5.  I recommend you read this thread on teh subject: https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #2 on: September 12, 2017, 07:31:25 AM »
Thank you for the link but that seems only applicable in the States. However, I live in Australia.  From what I can tell Roth IRAs do not exist in Australia.  Any other thoughts??

Raenia

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Re: Confused Aspect on the Path Towards FIRE
« Reply #3 on: September 12, 2017, 08:26:43 AM »
Ah, sorry, you said IRA so I skimmed over the Australia reference.  I was not aware standard IRAs were available in other countries, either, I thought the IRA was a US specific retirement account.  If there are no ways to early access your country's specific retirement accounts, then post-tax investments may be your only option.  You can open a brokerage account with Fidelity or Vanguard and buy index funds or ETFs.

You may have more luck asking for Australia-specific options in Investor Alley (I recommend putting Australia in the subject line) or in the Australia specific Tax sub-board.


marty998

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Re: Confused Aspect on the Path Towards FIRE
« Reply #4 on: September 12, 2017, 03:48:27 PM »
You just have to have investments in your personal name, and cop the higher tax rates along the way.

Also super cannot be withdrawn unless you meet a condition of release (e.g.permanently retired, though you can go back to work later if you need to).

The Government age pension won't be accessible for you until at least age 67 either, so if you want to retire early, you need investments outside the post-retirement tax advantaged structures.

yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #5 on: September 12, 2017, 09:12:51 PM »
Ah, sorry, you said IRA so I skimmed over the Australia reference.  I was not aware standard IRAs were available in other countries, either, I thought the IRA was a US specific retirement account.  If there are no ways to early access your country's specific retirement accounts, then post-tax investments may be your only option.  You can open a brokerage account with Fidelity or Vanguard and buy index funds or ETFs.

You may have more luck asking for Australia-specific options in Investor Alley (I recommend putting Australia in the subject line) or in the Australia specific Tax sub-board.

Thank you Ill take note of your suggestions. Also I was misinformed about IRAs. You are right, they only exist in America.

yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #6 on: September 12, 2017, 09:14:05 PM »
You just have to have investments in your personal name, and cop the higher tax rates along the way.

Also super cannot be withdrawn unless you meet a condition of release (e.g.permanently retired, though you can go back to work later if you need to).

The Government age pension won't be accessible for you until at least age 67 either, so if you want to retire early, you need investments outside the post-retirement tax advantaged structures.

Thank you. I will look into index funds and open up a brokerage account in the future.

urbanista

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Re: Confused Aspect on the Path Towards FIRE
« Reply #7 on: September 13, 2017, 01:01:57 AM »
Super is accessed at 60, not 65.

yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #8 on: September 13, 2017, 01:04:58 AM »
Super is accessed at 60, not 65.

Thanks for the clarification but 5 years is still not enough for a person looking to reach FIRE at an early age

arebelspy

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Re: Confused Aspect on the Path Towards FIRE
« Reply #9 on: September 13, 2017, 01:16:51 AM »
Super is accessed at 60, not 65.

Thanks for the clarification but 5 years is still not enough for a person looking to reach FIRE at an early age

No, but it helps when you're only covering a gap until that point.

Most people in that situation break it apart as "I need this money to fund ages X-Y, then this money to fund Y onward." Meanwhile that second bucket of money will grow from years X to Y, so it can often start out smaller when you ER, then compound over those years.
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yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #10 on: September 13, 2017, 02:02:26 AM »
Super is accessed at 60, not 65.

Thanks for the clarification but 5 years is still not enough for a person looking to reach FIRE at an early age

No, but it helps when you're only covering a gap until that point.

Most people in that situation break it apart as "I need this money to fund ages X-Y, then this money to fund Y onward." Meanwhile that second bucket of money will grow from years X to Y, so it can often start out smaller when you ER, then compound over those years.

Thats a good point. Anything can happen from now to the point I hit FIRE. Super gives the peace of mind that at least things will be financially okay after 60 when you retire if you continuously add to your Super.

I guess my main problem is right now is that I had a plan to reach SUPER using 401k, ROTH IRA, and investing index funds in the states. Now that I am living in Aussie I need to reevaluate my path to FIRE. Also it seems like everything comes back to owning property here as well to reach that goal.

urbanista

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Re: Confused Aspect on the Path Towards FIRE
« Reply #11 on: September 13, 2017, 04:58:39 PM »
The majority of retirees in Australia rely on age pension (or part age pension) to fund their retirement. Thus it makes sense for them to own your own home as it is not assessable under the pension asset & income test. Another reason is that rent market is biased towards landlords, to the point it becomes totally dysfunctional for families with kids and pets. Our neighbours with 2 young children and a big dog had to move twice in the last 12 months. Unable to find a long term reasonably priced rent within a very small school zone. They need a 3 bedroom house with a backyard because of the dog but not many rentals are available.

yleeinvest

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Re: Confused Aspect on the Path Towards FIRE
« Reply #12 on: September 14, 2017, 02:26:18 AM »
The majority of retirees in Australia rely on age pension (or part age pension) to fund their retirement. Thus it makes sense for them to own your own home as it is not assessable under the pension asset & income test. Another reason is that rent market is biased towards landlords, to the point it becomes totally dysfunctional for families with kids and pets. Our neighbours with 2 young children and a big dog had to move twice in the last 12 months. Unable to find a long term reasonably priced rent within a very small school zone. They need a 3 bedroom house with a backyard because of the dog but not many rentals are available.

Thats horrible. From what I can get owning real estate is highly regarded as another means to reach FIRE compared to the states.