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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: C99 on March 27, 2012, 11:10:30 AM

Title: Question about balance in retirement accounts versus non-retirement.
Post by: C99 on March 27, 2012, 11:10:30 AM
Hi,
I have a question prompted by the article about MMM's family spending where it says you need a $600k stash in order to support $24k per year of expenses (simple calculation from the 4% withdrawal rate).    So let's say you have $400k in retirement accounts (401k, IRA) and $200k in non-retirement accounts.   Can you just pull $24k per year out of your non-retirement account until you hit the age limit to draw from the retirement accounts?   It seems like it should work, assuming you don't end up draining the pre-retirement account all the way to zero before you hit the age limit on the retirement accounts.
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: HumanAfterAll on March 27, 2012, 11:27:28 AM
Yes, this is what I've set up in my "countdown" spreadsheet. 
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: sol on March 27, 2012, 12:19:07 PM
Yes, and remember that your "nonretirement" accounts include all of your ira principle and whatever portion of your 401k you can get out via 72t withdrawals and a 5 year rollover plan into you ira.
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: C99 on March 27, 2012, 11:01:59 PM
Yes, and remember that your "nonretirement" accounts include all of your ira principle and whatever portion of your 401k you can get out via 72t withdrawals and a 5 year rollover plan into you ira.

How do you pull principal out of IRA?  I thought you could only do that with Roth IRA.   Also, I'm not following the 5 year rollover plan-- are you talking about rolling over 401k into IRA?  Why use a five year plan?
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: arebelspy on March 28, 2012, 07:55:55 AM

How do you pull principal out of IRA? 

google 72t

aka equal periodic payments
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: sol on March 28, 2012, 07:58:56 AM
Also, I'm not following the 5 year rollover plan-- are you talking about rolling over 401k into IRA?  Why use a five year plan?

You use a five year plan because once you roll over 401k money into a Roth IRA, you have to wait five years before you can withdraw that money without penalty.  See strategy number 2 here:  http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/
Title: Re: Question about balance in retirement accounts versus non-retirement.
Post by: C99 on March 28, 2012, 11:01:54 AM
Thanks for the pointers, folks.