The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: uppy on January 24, 2014, 04:31:39 PM
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How does ER work when, in my understanding, you can't withdraw from these kinds of retirement accounts until 59 1/2 or so without penalties? MMM talks about the "safe" 4% withdrawal rate. From where?
This may be a dumb question, but it comes from a person who has neither a 401k, an IRA, or has ever invested a single red cent. (I'm working on those BTW.)
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Read this:
http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/
In fact, read the whole series while you're there:
http://jlcollinsnh.com/stock-series/
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Thanks Eric. Looks complicated to me, but I am inexperienced. Hell, it looks amazing if it's doable. Wow.
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Maybe MMM explains it in easier to understand terms. Move back to the Mad Fientist once you've got the concept under control. And yeah, it is pretty exciting realizing that you're going to have penalty free access; opens up a lot of options.
http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/
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You are actually in a better situation than most if you can ER without needing any pre-tax retirement accounts. It distills down to a complicated discounting for taxes on those (traditional IRA, 401k accounts) vs. a nominal taxed income (e.g. an income like MMM's 'passive income' which seems to be pretty respectable (according to the WSJ article, he had 4 MM unique visitors, and is getting exponentially more by becoming yet more popular via that article... so that's at least 40k 'passive income', conservatively). I do not count on a taxed income going forward from retirement, so all I care about is not getting screwed on taxes, and there is a balance between the #1 best investment for employees (the deferred tax and sometimes employer matched 401k) and taxable accounts (which do not change much between pre and post retirement). Hope this was helpful.