Author Topic: How to access assets after FIRE.  (Read 2995 times)

nab9524

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How to access assets after FIRE.
« on: July 23, 2013, 06:45:36 AM »
I just started reading the MMM blog and forum a little less than a month ago.  I have to stay that is has inspired me to take an in-depth look at our situation.  Before I make any changes I need to figure something out.

I know the recommendations are usually as follows:
1.   Pay off high interest or all debt
2.   Build emergency fund
3.   Contribute to match in 401k
4.   Max out roth IRA
5.   Max out 401k
6.   Put rest in taxable accounts at Vanguard.

My question is, once you have completed all these steps and you want to retire early (say in your 40ís) how can you pull the 4% out of your assets without paying penalties when so much of your assets are tied up in retirement accounts?

jfer_rose

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Re: How to access assets after FIRE.
« Reply #1 on: July 23, 2013, 07:13:00 AM »
I just posted this in someone's journal, but I think this is what I recommend. Max out Roth IRA and 401k until there's enough there to get you through 59.5 and up. Keep in mind that money will continue to grow even after you stop contributing. Once you have enough in those accounts for 59.5 plus, put that money each month into other sorts of investments, whether taxable investment accounts, real estate, etc.

And there are other options too but I will let others who are more knowledgeable post about those. But there are loopholes that allow you to get money out of retirement accounts before 59.5. One option of course is to just pay the penalty. But there are other ways too.


nab9524

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Re: How to access assets after FIRE.
« Reply #3 on: July 23, 2013, 11:13:37 AM »
Thanks for the info.  Apparently I didn't search enough or for the right topics.  Time to move some assets around.

Freeyourchains2

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Re: How to access assets after FIRE.
« Reply #4 on: July 24, 2013, 10:34:01 AM »
One thing to be aware of...if you take this recommended approach.

Your income really limits your investment opportunities in any Business-startup venture or Real estate property at a young age if you follow this approach and make less than $100,000. (without taking considerable business failure risks in borrowing huge loans, margins, or in big mortgages because of the impeding interest rates.)

You will have limited restrictions on these type of investment options until you reach number 6, if you proceed in this order, and if your income allows this to ever occur.

I know the recommendations are usually as follows:
1.   Pay off high interest or all debt
2.   Build emergency fund
3.   Contribute to match in 401k (recommended for free, though heavily restricted, money)
4.   Max out roth IRA (Required: $5,500 per year of your savings per year, if you can reach this. Grants: $1375 savings from the tax man, if single filier.
5.   Max out 401k (Required: $17,500 per year of your savings per year. Grants: $4375 savings from the tax man.)
6.   Put rest in taxable accounts at Vanguard. (which then allows for startup business or real-estate property purchases, aka complete investment freedom.)

 You'll never be able to reach #6 before FI without further increasing your income dramatically. And as everyone knows, increasing you income from $35,000 to $75,000 on up, after tax per year; takes an extreme amount of effort, experience, potential required job leaps, skill set development, time, office politics, branding, marketing, selling, and further education in all frugal and investment matters, plus a considerable investment of money or time in yourself. Aka hard to do unless you work for yourself, which leads back to the " You'll need to borrow considerably in a loan to start a business if you plan on maxing out all of your tax sheltered accounts to approach FI; thus this increases your start-up's chances of financial failure."

Not everyone here is making $100,000 yet.

Another side point. Since these main tax-sheltered accounts don't allow you to invest those savings in your own business startups, (except IRA i guess through some serious loopholes and restrictions) then the only other way is to borrow from banks or lenders, and pay serious amounts of interests per year on your business startup debts. Thus adding a layer of hardship to a lot of start-up business mustachians, which can cause a considerable amount of start-ups to fail in the first 5 years. Because of the extra high interest payments required for borrowing money.

It's an almost Anti-business policy in general for frugal savers/investors inside these 401k/IRA tax sheltered accounts. (By the US government's current policies and agendas. Why is the US government so against mustachians? Because they need to tax consumer workers and thriving businesses for all their lives in order to survive....just to spend trillions most frivolously, IMO.)

So regrettably, you must count those startup-business investment options out until FI, if you follow 3-6# in order..and after you have worked 10-death years, based on your savings rate.

Which is fine, but just saying it may extremely delay your greater potential of ever creating a very very successful business startup venture until you are FI (whose age then depends on when you have the willpower to start, income, savings rate, stache, and stable investment returns to support your chosen expenses).

[Warning my Political Opinion:I wish the US Government wasn't so against Mustachians(frugal savers, investors, and job creators), tear. But looks as though they will just keep increasing income taxes, investment taxes, and consumer taxes; as they waste more money being anti-mustachian in their ways.]

matchewed

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Re: How to access assets after FIRE.
« Reply #5 on: July 24, 2013, 10:51:18 AM »
One thing to be aware of...if you take this recommended approach.

Your income really limits your investment opportunities in any Business-startup venture or Real estate property at a young age if you follow this approach and make less than $100,000. (without taking considerable business failure risks in borrowing huge loans, margins, or in big mortgages because of the impeding interest rates.)

You will have limited restrictions on these type of investment options until you reach number 6, if you proceed in this order, and if your income allows this to ever occur.

I know the recommendations are usually as follows:
1.   Pay off high interest or all debt
2.   Build emergency fund
3.   Contribute to match in 401k (recommended for free, though heavily restricted, money)
4.   Max out roth IRA (Required: $5,500 per year of your savings per year, if you can reach this. Grants: $1375 savings from the tax man, if single filier.
5.   Max out 401k (Required: $17,500 per year of your savings per year. Grants: $4375 savings from the tax man.)
6.   Put rest in taxable accounts at Vanguard. (which then allows for startup business or real-estate property purchases, aka complete investment freedom.)

 You'll never be able to reach #6 before FI without further increasing your income dramatically. And as everyone knows, increasing you income from $35,000 to $75,000 on up, after tax per year; takes an extreme amount of effort, experience, potential required job leaps, skill set development, time, office politics, branding, marketing, selling, and further education in all frugal and investment matters, plus a considerable investment of money or time in yourself. Aka hard to do unless you work for yourself, which leads back to the " You'll need to borrow considerably in a loan to start a business if you plan on maxing out all of your tax sheltered accounts to approach FI; thus this increases your start-up's chances of financial failure."

Not everyone here is making $100,000 yet.

Another side point. Since these main tax-sheltered accounts don't allow you to invest those savings in your own business startups, (except IRA i guess through some serious loopholes and restrictions) then the only other way is to borrow from banks or lenders, and pay serious amounts of interests per year on your business startup debts. Thus adding a layer of hardship to a lot of start-up business mustachians, which can cause a considerable amount of start-ups to fail in the first 5 years. Because of the extra high interest payments required for borrowing money.

It's an almost Anti-business policy in general for frugal savers/investors inside these 401k/IRA tax sheltered accounts. (By the US government's current policies and agendas. Why is the US government so against mustachians? Because they need to tax consumer workers and thriving businesses for all their lives in order to survive....just to spend trillions most frivolously, IMO.)

So regrettably, you must count those startup-business investment options out until FI, if you follow 3-6# in order..and after you have worked 10-death years, based on your savings rate.

Which is fine, but just saying it may extremely delay your greater potential of ever creating a very very successful business startup venture until you are FI (whose age then depends on when you have the willpower to start, income, savings rate, stache, and stable investment returns to support your chosen expenses).

[Warning my Political Opinion:I wish the US Government wasn't so against Mustachians(frugal savers, investors, and job creators), tear. But looks as though they will just keep increasing income taxes, investment taxes, and consumer taxes; as they waste more money being anti-mustachian in their ways.]

Obviously if your particular plan to FIRE was to start your own business which requires capital that you do not want to borrow to get then you would need to take different advice. The general recommendations are just that... general. It is also why I would encourage each person to figure out what they want to do in FIRE, how much money will they spend on living and other things. Once they know that you would work your way backwards on how you will save for that and where you would need to.