your fire number and retirement investing...

[frugalmaybe]

when people talk about their fire number i assume they are excluding the money in retirement accounts that they don't plan to withdraw until age 60? so is it even meaningful to think about fire if you can't save anything beyond maxing out 401k, etc? if you also consider something like roth ira and mega backdoor roth ira, most people could not possibly save, say 500k, *in addition* to their retirement accounts, no?

[druth]

I don't think that is a fair assumption.  Most people are planning to do roth pipeline conversions to access that money well before 60.

[frugalmaybe]

ah, i'm not familiar with the term 'roth pipeline conversion'

[terran]

Check this out: http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

[Greystache]

I think you include 401k and IRA money in your FIRE number.  Some people people divide their holdings into young person money and old person money.  You need a certain amount of young person money in after tax accounts that you can access from your FIRE date to age 60 and at that time you switch to old person money in the tax deferred accounts plus social security and pension if you have one.

[MVal]

Check out Seattlecyclone's posts and blog for all answers on this matter.

[frugalmaybe]

thanks for all replies

[sol]

ah, i'm not familiar with the term 'roth pipeline conversion'

The short answer is that it's a method that allows you access money in your tax sheltered retirement accounts before your official retirement age, without paying a penalty, by annually transferring money into your Roth IRA after you quiet working in amounts that keep you in the lowest possible tax bracket.  The withdrawal rules for the Roth say that you can access contributed funds without penalty if they've been there for at least part of five different calendar years.

It's most beneficial for people who retire more than five years before traditional retirement age and have most of their wealth tied up in retirement accounts.

[frugalmaybe]

thanks yeah... so i probably won't have my minimum fire savings until around 50, which would mean i couldn't build my roth pipeline until as late as 55. at that point i'll be asking myself if i should just work 5 more years.

[druth]

You would start the pipeline at 45, or just start setting aside money normally.  No reason to wait until 55+

Edit for clarity:

You do lose out on a little bit of tax advantaging this way - you would be taxed during the conversion or on any money that you would put in a tax advantaged account but didn't because of short term savings goals, but I don't think it's worth waiting 10 WHOLE YEARS just to optimize your taxes perfectly.

Any other more advanced mustachians should feel free to correct or supplement my understanding!

[frugalmaybe]

ah i see, thanks, very useful info.