How much to save for the "gap years?"

[JLTinVA]

Long time lurker, first time poster.

My spouse and I are well on our way to early retirement, and are currently saving 65% of our income. I've read a lot of articles on how much you need to save for retirement, and have bought into the 4% rule. However, I'm not sure how this applies when about 50% of what we've saved so far is "locked down" until age 59 1/2 (or later). I'm actually pretty comfortable that we already have enough saved in our traditional retirements accounts; after all, those will continue to grow for another 20+ years! However, how do you determine how much to save to cover the "gap years" between when you retire and when you can access traditional retirement funds (401ks, IRAs, etc.)?

Thanks!

[arebelspy]

You may not need to cover gap years.  That's just one method

http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/

There's at least two easy ways to withdraw from those retirement accounts, penalty free:
1) Google "72t" aka "Substantially Equal Periodic Payments"
2) Google "Roth Conversion ladder" aka "Backdoor Roth"

Read this: http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

Come back with any questions.  If you understand that article, you (probably?) won't worry about gap years.  :)

Welcome to the forums!

[JLTinVA]

Thanks much, reading now!

[JLTinVA]

How did I not know about all this?!? Greatly appreciate the information!

[arebelspy]

How did I not know about all this?!? Greatly appreciate the information!

No problem.  :)

[wtjbatman]

Not trying to hijack your thread, but I grow more intrigued by the Substantially Equal Periodic Payments (SEPP) method of taking money out of an IRA the more I read about it. I think I like it more than the roth laddering, although either can work for you, it just depends on what approach you want to take and how much you plan ahead.

[ShortInSeattle]

If your expenses in retirement will be high (say 75k) I'm not sure that the Roth conversion ladder would work.  You wouldn't be able to roll enough over, and your income might be too high to take advantage of the tax free roll over. Am I wrong?

[Nords]

I'll copy this post from the similar 401(k)/Roth IRA thread at https://forum.mrmoneymustache.com/investor-alley/401k-and-roth-ira-impediment-to-early-retirement/ :

I've taken the links in this thread (plus a bunch of other references) and put together a comprehensive guide on tapping your tax-deferred retirement accounts before age 59 1/2.  It's oriented toward the military pay/accounts system but the tax advice applies to civilians as well.  It includes the usual Roth IRA and 72(t) withdrawals, as well as the Mad Fientist's dreaded Roth IRA conversion ladder:
http://the-military-guide.com/2014/03/20/early-withdrawals-from-your-tsp-and-ira-after-the-military/

[gobius]

If your expenses in retirement will be high (say 75k) I'm not sure that the Roth conversion ladder would work.  You wouldn't be able to roll enough over, and your income might be too high to take advantage of the tax free roll over. Am I wrong?

I don't know as much as many of the people on the forums, but you're probably right.  But, since most on here are looking at spending 1/3 of that amount or less, it doesn't concern us as much.  The Go Curry Cracker guy had an article about how he does enough of the conversion ladder each year to avoid paying taxes; I thought it was a decent number for him and his wife ($25-30K/yr).