Tax Advantaged Accouts

[kgoodguitar]

Long story short, I'm living a life very similar to MMM in terms of nature and amount of work (not much, and I choose it). I just don't have the massive cash pile yet. I'm self-employed and work in an industry where the rates are very good but the work is quite hard to come by; you basically can't get 40 hours a week unless you work 6-7 days a week. That business is, believe it or not, is guitar lessons (being self employed is basically a 100% pay increase over working at a store; my hourly rate is quite high). Its been quite steady income compared to my other freelancing friends; its just very difficult to get students before 5 o'clock.

I made the conscious decision to avoid working 6-7 days a week because I didn't want to become a workaholic. Working 6 nights a week (or even just 5) and Saturday ain't so great for relationships or family. Of course, this means my income is lower, but happiness is higher.

I live incredibly inexpensively (about 1k a month on non-business expenses) and save a substantial portion of my "take-home earnings", which I calculate as gross minus taxes minus business expenses. A world in which I retire before 50 with substantially greater than 100% of my current earnings from 100% passive investments is entirely realistic (I'm just shy of 32 and only got my financial act 100% together last year. I was quite good at paying off student load debt, but not as great at saving money).

Here is the catch; I would be very pleasantly surprised if I ever made enough to max out both my Roth and SEP tax-benefited investment accounts. This means that all of my massive savings will be locked into tax-advantaged accounts for at least another decade after I can retire.

Assuming I'd want to stop working as soon as my account reaches self-sustainability, what is your advice in this situation? Should I invest in non-tax advantaged accounts? This seems very counter-intuitive to me. (note that this isn't a given; I may decide to work 3 days a week, take 2 months off during the summer and 2 weeks of at Christmas, and let my cash-pile continue to grow).

[johnny847]

http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

[Gin1984]

No, you still should not invest in a taxable account yet. How much have you put in your Roth?  Also, do you include health insurance costs in your $1000/month?  And are there business expenses that will become personal when you stop working?
But beyond that, go check out: http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/
This will explain why, as long as you have enough in your Roth, you won't need to wait a decade.

[kgoodguitar]

Bit of a rant here, partially fueled by a time I posted on Bogglehead, another "friendly forum". I asked a simple question and people started asking what my asset level was and other questions that were not relevant to answering my question (when I repeatedly asked how their questions where relevant, a third party confirmed what I suspected; they weren't). How is the size of my Roth account now relevant to answering my question when I won't be drawing it down for at least 10 years (more likely 20)?

Yes, $1000 includes current health insurance costs. No, there are no business expenses that will become personal once I stop working.  I'm also not sure how these are relevant to answering my question.

The provided link, however, does answer my question. Thanks for that. I'll have to look into it a bit more; a quick read makes me worry that it is a loophole that may get shut down in coming decades.

[teen persuasion]

Your Roth account is relevant because all Roth IRA contributions can be withdrawn at any time, tax and penalty free.  Gains are not tax or penalty free until after age 59.5, but contributions are.  This is part of the Roth pipeline strategy: withdraw contributions during the 5 year prime-the-pipeline stretch, then begin withdrawing aged transfer contributions.  And repeat.