The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: deek on February 15, 2018, 10:01:22 AM
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Quick question -
When you retire early, what are you living off of since you can't pull out IRA $ until a certain age?
The dividends? Or more savings/general investments?
I am going to start reading the stock series soon, but I thought I could get some helpful info here first. Thanks!
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I will have 5 years worth of living expenses in a taxable account and bank account.
Once I retired and my income drops to $0, I will start converting my IRA to roth. This is a taxable event, but since I have $0 regular income I won't pay taxes (or very little taxes). Once that conversion is 5 years old I can withdraw it from my roth account. Do that every year and after 5 years my taxable account will be mostly spent, but I will have a new 5 year "seasoned" contribution to withdraw each year. I'll keep doing that until I'm old enough to just take it directly out of my IRA. It's called a roth conversion ladder.
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At the very top of this forum that you just posted on is the following sticky:
https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/
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When you retire early, what are you living off of since you can't pull out IRA $ until a certain age?
Note that your original premise is false. The IRS won't tie you up and shoot you if you withdraw your IRA or 401(k) contributions early. They will charge a 10% tax. For many people, simply planning to pay the 10% early withdrawal tax is a perfectly legitimate strategy, depending on your current effective tax rate. Most people plan their way around the tax via the Roth conversion ladder or taxable accounts.
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Looks like I need to read up on taxable accounts. I've done some research and it's still escaping me a little bit. Wish I was better with numbers/tax -_-
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I will have 5 years worth of living expenses in a taxable account and bank account.
Once I retired and my income drops to $0, I will start converting my IRA to roth. This is a taxable event, but since I have $0 regular income I won't pay taxes (or very little taxes). Once that conversion is 5 years old I can withdraw it from my roth account. Do that every year and after 5 years my taxable account will be mostly spent, but I will have a new 5 year "seasoned" contribution to withdraw each year. I'll keep doing that until I'm old enough to just take it directly out of my IRA. It's called a roth conversion ladder.
This ^
(so glad I didn't have to type all that)