Author Topic: How to access our 'stash?  (Read 2550 times)

Use it up, wear it out...

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How to access our 'stash?
« on: March 27, 2013, 03:44:22 PM »
My wife and I have been saving for some time now, and I feel like we should be able to get to FI within a reasonable time frame. However, I'm worried about passive income when we're ready to retire, because much of it is tied up in traditional retirement accounts and our home! Is there anyone who has been retired for some time who can help with advice about how to manage our portfolio so we can retire during the years before we have access to those accounts without penalties?

Here's a rough of our situation.

We are:
Me & DW, 39 & 34 yo
son & daughter 5 & 3 yo

Expenses (in expensive NYC):
$140K annual after taxes

starting next year, kids will be in public school - if we throw out child care costs + charitable giving, our expenses will be:
$85K annual

Debt:
$85K mortgage @ 3.5% fixed, with 12 years remaining

Total Assets ($1.1M):
Coop apartment: $400K ($485K appraised minus mortgage)
401K: $415K
traditional IRAs: $57K
Roth IRAs: $48K
529 plans: $37K
Brokerage acc'ts: $76K
Savings / checking: $90K

For all the above other than savings / checking, we're invested 95% in equities index ETFs, 5% in REITs. Notice that, of our supposed $1.1m, we really only have $166K in readily accessible accounts!

In addition to the above, when we're finally "of age" we expect some social security benefits (too soon to say what that will look like) and a small pension of about $2400 annual (not inflation adjusted). {edit} FIRECalc gives us an 75% success rate if we retire in 5 years and stay on our savings target, plus sell our apartment and buy in a lower-cost area {/edit}.

Again, I'm specifically looking for advice on how to turn this stash into something we can live on, rather than waiting for my gold watch at 65. Thanks!
« Last Edit: March 27, 2013, 04:13:23 PM by Use it up, wear it out... »

matchewed

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Re: How to access our 'stash?
« Reply #1 on: March 27, 2013, 03:57:02 PM »
Well you seem to have the bulk of your liquid assets in your 401k. Have you looked into the Roth pipeline idea. I'm not really sharp on it but basically you roll over 1 years worth of expenses from your 401k to your Roth IRA, pay the income tax portion, wait five years, and then you can spend it as you like. Wash. Rinse. Repeat. I'd do more research into this than what I'm saying, like I said I'm rough on the details.

Also, and this may be my non-homeownership side of me talking, but are you figuring that the home will be sold come FIRE? Is your home included as a liquid asset when you're playing w/ FIRECalc? This is mostly for my curiosity.

Use it up, wear it out...

  • Stubble
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  • Posts: 224
  • Location: Brooklyn, NYC
Re: How to access our 'stash?
« Reply #2 on: March 27, 2013, 04:12:01 PM »
Also, and this may be my non-homeownership side of me talking, but are you figuring that the home will be sold come FIRE? Is your home included as a liquid asset when you're playing w/ FIRECalc? This is mostly for my curiosity.

Yeah, that's a good point - I was doing this in a hurry. I had been assuming we sell the apartment and buy a home outright in a lower-cost area. Following that plan, FIRECalc gives us a 75% success rate - probably starting to push outside my comfort zone.

Quote
Have you looked into the Roth pipeline idea. I'm not really sharp on it but basically you roll over 1 years worth of expenses from your 401k to your Roth IRA, pay the income tax portion, wait five years, and then you can spend it as you like. Wash. Rinse. Repeat. I'd do more research into this than what I'm saying, like I said I'm rough on the details.

I've heard of it, but haven't looked too much into it - anyone know a reliable source of information on how this works?

matchewed

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Re: How to access our 'stash?
« Reply #3 on: March 27, 2013, 04:19:54 PM »
Some links to check out from a quick search on the main site -
http://www.mrmoneymustache.com/forum/ask-a-mustachian/what-to-do-when-all-of-your-money-is-tied-up-in-home-equity401%28k%29college-savin/
http://www.mrmoneymustache.com/forum/investor-alley/ira-early-withdrawl/
http://www.mrmoneymustache.com/forum/ask-a-mustachian/early-retirement-investing-tax-strategies/

My personal plan is to build up enough in my Roth IRA and personal investments to hold me over for the initial 5yr period, that and part-time work. My 401k at that time will be my biggest asset and I'll start the pipeline plan. A bit more looking into it and what I wrote above seems to be straight forward. I do have to note that with expenses that high you will be paying a heck of an income tax bill if you try this method.
« Last Edit: March 27, 2013, 04:27:19 PM by matchewed »