Author Topic: Withdrawl question / 'extra money'  (Read 3485 times)

ChrisRMK

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Withdrawl question / 'extra money'
« on: April 24, 2016, 08:58:09 AM »
1st question:  So at this time we are maxing my 401k, her 403b, her 457b, her/my roth and I have extra money left I am deciding on where to put it.

If I do the mega-roth and take my 401k to the 53k limit then do inservice rollovers to my roth, it looks great.

But if I leave at age 47, then I have large 401k/403b/457/roth balances but little cash.   The other options for the extra cash are taxable investments/mortgage paydown/save for rental property (eh too much work/headache I think).  My wife is also concerned about college, we want to pay for 4 years of what instate tuition would cost for each kid. 

NC does not allow deductions for the 529 plan.  Instead of the mega back door, taxable account could be used for college as well as FIRE - but the roth max more sense tax wise.

2nd question: How do post FIRE withdrawals look with multiple accounts?

401 - 1.5 mil
403 - .6 mil
457 - .6 mil
roth a - .25 mil
roth b - .25 (up to .6 depending on mega backdoor) mil.

The way Im thinking now is the 457 would be the main source until I could access the roths / 401/403 accounts (~12 years).  Does this seem reasonable?

maizeman

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Re: Withdrawl question / 'extra money'
« Reply #1 on: April 24, 2016, 09:05:30 AM »
Remember that you can pull an amount of money out of the Roth accounts equal to your original contributions without paying any tax or penalty at any time/age so depending on how much of that 250k balances are contributions and how much are investment gains you should be in pretty good shape.

That leaves the 2.1M sitting in your 401/403b counts as the least accessible funds right away, but be sure to read this post http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ which explains how to start withdrawing money from those penalty-free after about five years of FIRE regardless of whether you've hit the age criteria for normal withdrawals.

csprof

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Re: Withdrawl question / 'extra money'
« Reply #2 on: April 24, 2016, 10:48:48 AM »
My wife is also concerned about college, we want to pay for 4 years of what instate tuition would cost for each kid. 

NC does not allow deductions for the 529 plan.  Instead of the mega back door, taxable account could be used for college as well as FIRE - but the roth max more sense tax wise.

Remember that the growth in the 529 plan is tax-free if used for qualified educational expenses.  So even though you're not getting an up-front deduction (it would only go against state taxes anyway), you get a big tax savings if it sits around and grows a lot.

A 529 isn't a good idea if your kid is 16 or 17.  It's a great idea if your kid is 2 - as long as you're pretty sure there will be some college expenses involved.  Just don't overdo it.

MDM

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Re: Withdrawl question / 'extra money'
« Reply #3 on: April 24, 2016, 03:29:54 PM »
The way Im thinking now is the 457 would be the main source until I could access the roths / 401/403 accounts (~12 years).  Does this seem reasonable?
Yes.

See www.i-orp.com: understanding what it suggests - and why - can be helpful.

lhamo

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Re: Withdrawl question / 'extra money'
« Reply #4 on: April 24, 2016, 03:57:31 PM »
What do you think your expenses will be at FIRE?  If fairly low, you can probably do a combination of withdrawing the cash from dividends on the taxable account, pulling from the 457 account for the remainder you need to cover estimated expenses for the coming year, and then rolling over whatever amount will keep you below the 10% taxable income amount from your traditional retirement accounts into the Roths each year.  If you keep your expenses low, are clever about exemptions and deductions and manage the cash flow right over time, you could potentially find yourself in the 0% tax bracket in perpetuity....