Do Roth IRA's Apply To FIRE?

[Prancing Llama]

Hello,

I've just started researching FIRE and how I can achieve it. I have about $25k in my roth ira and ive been investing it mostly in index funds and a few individual dividend stocks. I have about $2500 in my taxable account in stock index funds.

If I retire early in 10 years (currently 31 and would be 41 then) I would be too young to draw penalty free from a roth. Yet I'm reading the book Playing With Fire and they are talking about they have $x dollars in their Roth IRA.

So how, if at all, does a Roth IRA fit into FIRE?

[secondcor521]

A few main ways:

1.  The investments inside your Roth IRA count towards your 25 times expenses number that is a simplistic way of figuring out if you have enough assets to FIRE.

2.  Roth conversions which have seasoned more than 5 years and Roth contributions can be withdrawn penalty and tax free at any age.  Research Roth conversion ladders or Roth pipelines.

3.  Roth IRA assets compound tax free, getting you to the 25 times expenses number faster.

There are probably other ways I'm not thinking of at the moment.

[Prancing Llama]

Very helpful. Thank you

[ixtap]

Roth IRAs are excellent tools for FIRE, as listed above. If you plan to use ACA subsidies for healthcare, you will also need to have some income each year (otherwise, you will be on Medicaid). This can be achieved by having savings in taxable (dividends and capital gains will count as income, even if you are under the limit for them to be taxed) or by converting from traditional 401k/IRA to Roth. These will be taxed at your ordinary income rate. As stated by a previous poster, these conversions can be withdrawn tax and penalty free  after 5 years.