Author Topic: How do I access my money when I ER?  (Read 4867 times)

Cookie

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How do I access my money when I ER?
« on: June 21, 2015, 04:13:07 PM »
This is probably a silly question, but I how to I access money once I ER?

I'm currently 22 and plan to ER in my early 30s. Should I be investing a large portion of my money in taxable accounts instead of my 401k so when I ER I have access to money? I've read MMM and these forums, but I haven't much on that topic.

Please share your advice and any books or articles that touch on this subject!


Cookie

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Re: How do I access my money when I ER?
« Reply #2 on: June 21, 2015, 04:29:08 PM »
Thanks! I'm not very good at searching through these forums.

forummm

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Re: How do I access my money when I ER?
« Reply #3 on: June 21, 2015, 04:36:07 PM »
This is a particularly hard topic to find because you don't know the right keywords. Hopefully a mod will sticky it to the top of the section one day. A lot of people ask about this issue.

expectopatronum

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Re: How do I access my money when I ER?
« Reply #4 on: June 21, 2015, 06:29:26 PM »
This is probably a silly question, but I how to I access money once I ER?

I'm currently 22 and plan to ER in my early 30s. Should I be investing a large portion of my money in taxable accounts instead of my 401k so when I ER I have access to money? I've read MMM and these forums, but I haven't much on that topic.

Please share your advice and any books or articles that touch on this subject!

I wish someone would sticky this even tho it's in FAQs. I was digging through archives earlier to find the answers.

@Cookie, other links I found helpful:

http://forum.mrmoneymustache.com/forum-information-faqs/frequently-asked-questions/


Which leads to:
http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/
http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

Supplementing my knowledge of:
http://www.madfientist.com/retire-even-earlier/
http://www.madfientist.com/triple-income-value/

Where I'm currently stuck is doing the math for how much you need to retire once you account for the complicated steps (IRA conversions, SEPP, etc). The simple answer of "25x annual spending" isn't quite so simple when you've got the money in 3-4 buckets, since you need to figure out the allocation (which fund to draw down when). And the Shockingly Simple Math article is gold, but how does one value current assets? In 3 years, we hope to be saving 70% of income, yet that doesn't take into account everything we've saved up til that point..and so on...

Still working my way through the cash flow spreadsheet, but if I develop a more simplified version, I'll post it and ask for it to be stickied so you can see when you've reached FI based on where all the monies are and your age.

arebelspy

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Re: How do I access my money when I ER?
« Reply #5 on: June 21, 2015, 07:17:09 PM »
I wish someone would sticky this even tho it's in FAQs. I was digging through archives earlier to find the answers.

Already done.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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forummm

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Re: How do I access my money when I ER?
« Reply #6 on: June 21, 2015, 07:27:50 PM »
Where I'm currently stuck is doing the math for how much you need to retire once you account for the complicated steps (IRA conversions, SEPP, etc). The simple answer of "25x annual spending" isn't quite so simple when you've got the money in 3-4 buckets, since you need to figure out the allocation (which fund to draw down when). And the Shockingly Simple Math article is gold, but how does one value current assets? In 3 years, we hope to be saving 70% of income, yet that doesn't take into account everything we've saved up til that point..and so on...

Still working my way through the cash flow spreadsheet, but if I develop a more simplified version, I'll post it and ask for it to be stickied so you can see when you've reached FI based on where all the monies are and your age.

It's not too complicated. Do you have specific questions?

The Shockingly Simple Math is a good metric to let you know how you're doing and how long it will take with your current level of spending and saving. Hopefully your savings rate will continue to increase. You can do some simple adjustments to account for the amount you already have. Say you are saving XX% of your income and you already have 12.5 times your expenses in your savings. Then the number of years to work on the chart is just cut by half. So the formula would be

number_of_years_in_the_chart_for_your savings rate/
(years_of_spending_already_saved/25)

And for drawdown, just stick with your asset allocation strategy. Sell the funds to keep yourself in balance. If you're following the Roth Pipeline, just convert the amount you're going to spend 5 years from now each year. Easy right?

MDM

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Re: How do I access my money when I ER?
« Reply #7 on: June 21, 2015, 07:54:39 PM »
Where I'm currently stuck is doing the math for how much you need to retire once you account for the complicated steps (IRA conversions, SEPP, etc). The simple answer of "25x annual spending" isn't quite so simple when you've got the money in 3-4 buckets, since you need to figure out the allocation (which fund to draw down when).

When you have a complicated, time-dependent situation, the simple tools may come up short.  See http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-the_golden_bee-has-a-lot-of-goals-but-less-time-to-accomplish-them/msg683919/#msg683919 for a few of the more sophisticated options available.

expectopatronum

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Re: How do I access my money when I ER?
« Reply #8 on: June 22, 2015, 03:53:20 PM »
At risk of clogging this thread up (I'll gladly move this conversation to a PM if that's better etiquette?):

- For the mortgage section, I entered both Principal and remaining principal as positive values. Seems to make things work out. Is that right? (Instead of entering them as debts)

- Is it calculating the deduction of our mortgage interest based on cell B53? It appears to be in G26.

- What's PITHI? (Google results only show it's some type of Indian wedding related thing.)

- There's a green box for SL int. (guess) in G12. What's that?

- Time to FIRE doesn't seem to be changing based on my inputs to "current savings", though I can see the "amount needed" at the bottom. What I'm curious about is time to FIRE as of today. The graph jumps around (curve moving left the more I up our savings), but it seems to be "backwards". $600K below FIRE looks like 8 years from now, for instance, but $300K is 12 years from now... Oh, duh. Time to FIRE is an input.

- Is the calculations sheet independent of the others?
« Last Edit: June 22, 2015, 04:01:00 PM by expectopatronum »

MDM

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Re: How do I access my money when I ER?
« Reply #9 on: June 22, 2015, 04:34:42 PM »
At risk of clogging this thread up (I'll gladly move this conversation to a PM if that's better etiquette?):

- For the mortgage section, I entered both Principal and remaining principal as positive values. Seems to make things work out. Is that right? (Instead of entering them as debts)

- Is it calculating the deduction of our mortgage interest based on cell B53? It appears to be in G26.

- What's PITHI? (Google results only show it's some type of Indian wedding related thing.)

- There's a green box for SL int. (guess) in G12. What's that?

- Time to FIRE doesn't seem to be changing based on my inputs to "current savings", though I can see the "amount needed" at the bottom. What I'm curious about is time to FIRE as of today. The graph jumps around (curve moving left the more I up our savings), but it seems to be "backwards". $600K below FIRE looks like 8 years from now, for instance, but $300K is 12 years from now... Oh, duh. Time to FIRE is an input.

- Is the calculations sheet independent of the others?

I'll answer here unless/until wrist-slapping starts. ;)

Yes, enter both Principal and remaining principal as positive values.  Put mortgage in the mortgage row because the tax treatment for mortgage interest differs from other debt interest.

Mortgage interest estimate for itemized deduction purposes is based on the interest rate (cell F49) and the remaining principal (cell I49).

PITHI is Principal, Interest, Taxes, HOA fee, and Insurance.  Sometimes people lump all these together and call the sum "mortgage payment", even though Principal and Interest stop when the mortgage is paid while the others continue.  The cell is used only to calculate that sum, and can be ignored otherwise.

SL stands for Student Loan.  As with mortgage interest, it is estimated based on interest rate and current principal.  Green background means you can override the estimate if you have a better one.

Yes, the calculations sheet is independent of the others.

Great questions!

arebelspy

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Re: How do I access my money when I ER?
« Reply #10 on: June 22, 2015, 07:12:20 PM »
I'll answer here unless/until wrist-slapping starts. ;)



Kidding.  Post away.  It may help more people than just the one.  If it gets too OT, I can split it into another thread.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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forummm

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Re: How do I access my money when I ER?
« Reply #11 on: June 22, 2015, 07:58:17 PM »
Well we've already answered OP's question. Now we have to do something with the rest of the space.

arebelspy

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Re: How do I access my money when I ER?
« Reply #12 on: June 22, 2015, 09:32:18 PM »

Now we have to do something with the rest of the space.

Dance contest?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

forummm

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Re: How do I access my money when I ER?
« Reply #13 on: June 23, 2015, 07:13:07 AM »

Iron Mike Sharpe

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Re: How do I access my money when I ER?
« Reply #14 on: June 23, 2015, 07:46:41 AM »

arebelspy

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Re: How do I access my money when I ER?
« Reply #15 on: June 23, 2015, 07:51:57 AM »
That's not dancing!

We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

forummm

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Re: How do I access my money when I ER?
« Reply #16 on: June 23, 2015, 07:54:29 AM »

arebelspy

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Re: How do I access my money when I ER?
« Reply #17 on: June 23, 2015, 08:24:46 AM »
Wow, that's disturbing.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

brooklynguy

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Re: How do I access my money when I ER?
« Reply #18 on: June 23, 2015, 08:30:13 AM »
Reinsert the wrist-slapping gif so it can serve as backhanded applause instead.