I’m sure this is a dumb question, but I think I need this clearly spelled out for me to get it. I am beyond confused with the various accounts and how they work together during FIRE. The logistics of coordinating FIRE income are baffling me, and no matter how much reading and research I do I’m still not understanding this – probably because the answers are so obvious that no one bothers to spell it out haha. More details below to fully explain my confusion.
DH and I have the following accounts: DH 401k, my 401k, DH Roth, my Roth, a taxable brokerage acct, and a joint checking/savings. We are maxing contributions to 401ks and roths (with plans to start contributing to tIRAs instead soon), and currently putting ~$700/mo to the brokerage account. Once we finish off paying our student loans in 3 years, we will be able to put ~$4k/mo into our brokerage acct.
Now, for simplicity’s sake, lets say that we need somewhere in the ballpark of $700-800k to FIRE – we need an income of around $32k/yr.
Ok, first dumb question: does that $700k number assume we are using the roth conversion ladder (using 401k funds immediately), or are we assuming we don’t touch the 401k funds until age 65? If our 401ks hold a large chunk of our savings, how the heck does this work?!?!
-- If we don’t touch our 401ks until 65, we still need to generate the $32k/year to tide us over for 30ish years. Doesn’t that mean not counting our 401k funds toward the total $700k needed? Which means it would take longer to reach FI... I must be missing something.
-- On the other side of the coin, I understand Roth conversion – but then you need to coordinate 5 years of living expenses right at the beginning of FIRE using some combination of your other accounts.
**Bonus question: What are people’s thoughts on using the no-touchy-until-65 strategy vs the roth conversion strategy to handle 401k funds? This is a pretty major element to ER plans, and would affect how long we contribute to 401ks.
Then with all these different accounts, how do you draw down the total $32k ER income? Is there some sort of strategy for what money to be used when and how? What accounts do you draw down first? If you are primarily pulling from the Roth via roth conversion, what are you doing with the funds in the taxable brokerage account?
I’m just baffled on how to manage a taxable brokerage acct, roth accts, and 401k/tIRAs. I feel like I’m missing a big, key part of the puzzle here: the actual logistics of coordinating your ER income are mystifying to me. We’ve got the savings down, but when it comes time to use our savings, we have no clue what we’re supposed to do to even get at it! Since we don’t understand how to use the funds in these accounts later on, I’m afraid we could be making bad assumptions now and shooting ourselves in the foot. Does that make sense?
Ugh I have so many questions and am so lost, I'm sorry if I'm talking in circles. I don't even know what I don't know! If anyone is willing to share their logistical plan for pulling down FIRE income and how you are organizing/handling your various accounts/funds, I would love to see examples of how you all are doing it. I can also share additional information if you want. Thank you for being willing to answer my dumb questions!