Author Topic: Investment Order Question - Taxable vs other  (Read 435 times)

joe189man

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Investment Order Question - Taxable vs other
« on: March 31, 2021, 04:59:26 PM »
i am wondering if others did this calculation and what they did with the information? basically i calculated at what age and 401k balance i could stop contributing to it and let the money grow on its own to fund my retirement at ~age 60.

The reason i did this was to see at what age this would happen and if i could back calculate the required Brokerage account balance necessary to pay off my mortgage and fund early retirement till age 60

General Example: at ~45 we would have enough in a 401k at 8% interest to be left alone to grow to fund my target retirement spending at age 60. Then switch focus to funding the taxable account with previous 401k money from age 45 on till its balance can pay off my mortgage and fund an early retirement till age 60.

So (Brokerage Account Balance - Mortgage Balance) / (60 - age) = Average Target Spend till 60

Example: $1,000,000 - $250,000 = $750,000, $750,000/(60-50) = $75,000 approximate annual distribution for 10 years from 50 to 60, starting with a $1 million brokerage account and a mortgage balance of $250k at age 50

Any benefits or downsides to this plan?
« Last Edit: April 01, 2021, 08:56:49 AM by joe189man »

MustacheAndaHalf

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Re: Investment Order Question - Taxable vs other
« Reply #1 on: April 03, 2021, 12:09:27 AM »
If your 401(k) is pre-tax money, some of the withdrawals will need to pay taxes.  So you might withdraw $75k per year, but owe $10k in taxes on that withdrawal, and then have $65k/year to spend.

That also assumes tax rates stay the same.  The calculations are more straightforward for Roth IRAs, while I favor in cases where Traditional and Roth are a tie.