Do you count your "retirement" accounts as part of your 'stache?

[somebody8198]

I'm just curious if those of you who are aiming for ER consider IRAs and 401ks as part of your 'stache. Obviously you will be able to use that money after standard retirement age or withdraw from those accounts early at a penalty, but should you still factor that money into your 'stache for purposes of targeting an ER date?

[cautiouspessimist]

I'm just curious if those of you who are aiming for ER consider IRAs and 401ks as part of your 'stache. Obviously you will be able to use that money after standard retirement age or withdraw from those accounts early at a penalty, but should you still factor that money into your 'stache for purposes of targeting an ER date?

The answer here is going to be overwhelmingly yes. The short answer is that all you need is to do a Traditional to Roth conversion, as all Roth Contributions can be withdrawn penalty free. The way it works is fairly simple, and the MadFIentist explains it all in several posts on his blog (I would start with this one: http://www.madfientist.com/traditional-ira-vs-roth-ira/).

Basically, you can convert money from a traditional account to a Roth account. After five years, you are able to withdraw the money without penalty as if it were an initial contribution. The amount converted will be taxed as income in the year that you roll it over into a Roth (so basically, you pay taxes today for what is available to be withdrawn in five years).

[seattlecyclone]

Yes, of course. Read http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ and https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/. Keep maxing out the retirement accounts until you retire.

[RedmondStash]

I'm just curious if those of you who are aiming for ER consider IRAs and 401ks as part of your 'stache. Obviously you will be able to use that money after standard retirement age or withdraw from those accounts early at a penalty, but should you still factor that money into your 'stache for purposes of targeting an ER date?

Why wouldn't you? It's your money, and in various ways, you can make it available early.

[Spork]

Of course I do.

I also consider dividends earned in tax sheltered accounts as income. While I don't have immediate direct access to it, accounting for it gives me a better feel for the bigger picture.

[patrickza]

I don't because I'm on a defined benefit plan, and I plan to draw the benefit annually once I reach 62. It has a settlement value, so in theory I could, but I'm ignoring it and keeping it as a "if the sh*t hits the fan at least I won't end up living in a box" fund.

[Cassie]

My hubby and I each have a pension and we count that in our stache as well as any other $ saved for retirement.

[RedmondStash]

I'm amazed by how many people here have pensions. I really thought that died long before the end of the 20th century. Good for you, though; I certainly wouldn't spit in a pension's eye.

[Cassie]

Like many others we decided to work for the government for lower pay but get a pension.  My Dad did that too and that pension supported them for 36 years.  When I first met my hubby it took me awhile to convince him to leave the private sector but now he is glad that he did.

[Rural]

I don't count our pensions but do count 403(b) and 457 accounts. I don't plan to take a lump sum on the pension, so I look at it like social security, only I can access it earlier.

[SMCx3]

Yes, I include my retirement accounts in the stache. 

Soldiers at work for you no matter how they are saved / invested.

[onehair]

I certainly count mine as part of my assets.  It is the major part of them though I hope my stocks catch up one day.

[Bertram]

Obviously you will be able to use that money after standard retirement age or withdraw from those accounts early at a penalty, but should you still factor that money into your 'stache for purposes of targeting an ER date?

Forget stashes, look at cashflows. Even if it is pension that you can only withdraw a fixed amount yearly, it will still factor into your calculations overall for FI as well ER. There is no justification for leaving it out other than "don't know how to factor it into the equations" - which of course is not a justification at all, but just a knowledge gap that needs to be fixed. Just google discounted cash flows, net present value or get a beginners book for controlling, if even MBAs can do it, you know the math can't be difficult.

It only becomes an issue when one is fixated to compare size with other people, and that's something to really grow out of. It's not size that matters. You can't fixate on one tiny detail, you got to look at the big picture.

[soccerluvof4]

ah...YES

[rubybeth]

Absolutely! As others have pointed out, there are ways to access those funds without penalty prior to "traditional" retirement ages. You need to read up on this, because if you're not using these accounts to your maximum benefit, you may be overpaying in taxes as you save.

I don't, however, count my pension funds, even though I could withdraw them as a lump sum (with interest), I am pretty sure I will keep the funds in the pension and draw a monthly amount starting at 55 or whatever makes sense at that point.

[redbird]

I actually didn't count my retirement accounts as part of my 'stache. The reason being is I'm only in my 30's and so that's a long time I can't touch any of it. My 'stache calculations were intending to live on my investments. The extra money from my retirement accounts will serve as a backup in case I somehow start running low on money by then, or it'll be extra fun money if my calculations were right.

So they're part of my assets, but not part of the magic number I was saving for before ER.

[seattlecyclone]

...so that's a long time I can't touch any of it.

People need to stop saying this! Read http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ and https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/ for more information about why your retirement accounts are very much accessible before "traditional" retirement age.

[cautiouspessimist]

...so that's a long time I can't touch any of it.

People need to stop saying this! Read http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ and https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/ for more information about why your retirement accounts are very much accessible before "traditional" retirement age.

Right? Between these posts and the Mad FIentist stuff I linked earlier, there's no reason for anyone reading this thread to think that!

[MVal]

...so that's a long time I can't touch any of it.

People need to stop saying this! Read http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ and https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/ for more information about why your retirement accounts are very much accessible before "traditional" retirement age.

Amen! Your article is one of the best on this subject and helped me to understand this concept a while back. My 401K and IRA make up the bulk of my stache right now.