If you follow the general advice presented on this forum, one of the biggest obstacles to your early retirement is going to be accumulating enough money in taxable accounts to live off for the first five years after you retire, while your Roth IRA conversion pipeline "seasons" until it can be withdrawn without taxes or penalties.

For most people, that five year span will be covered by some combination of Roth IRA principal contributions, which can be withdrawn without penalty at any time, and savings in a taxable investment account. But I've been thinking about alternative means of funding your expenses for those five years. Like taking out a home equity loan or line of credit.

Stay with me here, because I know it sounds crazy.

If you expect to need $40k/year and you have $1million saved up split between $900k in your 401k and $100k in your taxable account, then your taxable account will only cover 2.5 years of your first five years (because 100k/40k is 2.5). But if you also have 50% equity in a home worth $400k, you could potentially tap that home equity to help pay for the other 2.5 years.

In this example, you could borrow down to 80% combined LTV, or another $120k out of your $200k of equity, at rates comparable to a 30 year mortgage. When your first Roth pipeline payments comes in five years later, you could start paying off the loan, effectively using your 401k to also cover those first five years of expenses (plus the accumulated interest).

Whether or not this idea makes sense for you would depend on the interest rate you can get, how the HELOC is amortized, how much you would need to borrow, and what you think the stock market is going to do over the next five years. It really only makes sense if the market does better than your HELOC interest rate over a five year time period, which means you can potentially get royally hosed if the market tanks.

I'd be interested to hear the opinions of some of our more math savvy members (looking at you, madfientist and friends) on this idea. For example, I don't know if a HELOC counts as income for ACA or EITC reasons, or if interest is also tax deductible, potentially lowering the tax rate on your Roth conversions now and thus letting you convert more in the lowest brackets to help cover the eventual loan repayment.

Generally speaking, the math usually favors investing over prepaying your mortgage and this just seems like a natural extension of that idea, that also happens to help out an early retiree with a five year gap problem.