re: Early Retirement

Funny...I was just looking into this earlier today. what I found is that every year of early retirement will cost me one hell of a lot of cash in the scheme of things. take into consideration that income, 401K, pension, etc. all reverse directions cashflow-wise. all of that, I could deal with. what I find to be the biggest hurdle to retiring early would be healthcare costs, as there is a pretty big surcharge for every year that I retire early. basically gotta be 62 and eligible for medicare before it gets reasonable for me.

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PeteRose

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Go back to all my posts and see if there's a pattern for "bragging".

The OP asked about early retirement and I gave him my opinions.

So to make you feel better, I'll reverse brag about myself to make you feel at ease. I have zero dollars in 401k and ira.

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Yeah so you basically posted and expected folks to use their MT Secret Decoder Rings to realize your message was merely the first clue that the actual back story that would be applicable to this thread was instead hidden within a cipher that requires the reader to travel back in time here online to read through your post history to figure out how you OH shite I JUST WENT CROSSEYED!

Yep


Or got some kind of disability payment.

I'm in the process of doing so.

To answer your question, look into the "Roth Conversion Ladder" as explained here. Between that and a decent balance in taxable accounts, I should have those bridge years between early retirement and 59.5 covered easily.

Other tips - focus on tax efficiency and be sure to maximize your HSA now to buffer against health care outlays once you give up your employer-sponsored care.

You will find nearly any answer to early retirement questions at one of these two forums:
LINK
LINK


Best of luck.

Thanks for the intelligent replies, folks.

I still have a lot of planning and number crunching to do. My wife will have health insurance coverage for us, so that is a big advantage. The biggest disadvantage I have right now is future tuition for my kid (s). If my mortgage is paid within 10 years, I can work an extra year or two to have tuition covered.

For those of you with real estate/rentals....can the full amount of the interest cost be deducted as a business expense?

And to my down vote stalker, thanks. Good to know I'm important to you.

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The laddering info was something I was ignorant of. Good stuff.

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It isn't as cut an dry as that excerpt makes it out to be. You still pay the taxes on the amount you convert, you just don't pay taxes and penalties again if you leave it for 5 years.

The downside is that you may not actually retire early, so the accounts may not have the time required to make up for the taxes paid during the conversion. A 72(t) SEPP may be a suitable workaround for you as well. The money is still taxable but you don't pay the 10% early withdrawal penalties if you're careful. It may also provide more flexibility in your plan. Talk to a CPA and advisor though. Retiring is "scary" enough on your own, but doing it early is not something you want to do without careful planning.

There is an incredibly high likelihood that you'll underestimate your expenses and overestimate your investment growth, leaving you scrambling for jobs in your 70s.

The penalties are the biggest hurdle I see that laddering would benefit me. I will look into the 72 (t) as well. I believe another poster also mentioned it.

Currently over 50% of our monthly take home goes to the mortgage and extra principle. Once that is gone we can live on far less, especially with my wife still working.

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There is an incredibly high likelihood that you'll underestimate your expenses and overestimate your investment growth, leaving you scrambling for jobs in your 70s.

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yeah, check out r/financialindependence/

They are talking about retiring at 30 and drawing 20k a year. Just not going to happen IMHO.

If you're funding 401K and any typical retirement avenues to the fullest and still have money left to invest, real estate/rental property seems to be a viable option for that type of time table. With interest rates as low as they are, 10 years or so is definitely enough time to buy a decent rental property and pay it off - especially if you're doing it with expendable income and don't need any immediate return on your investment, since this enables you to roll over the rental income right back into paying off the additional principle. Thus, 10 years from now you own it outright and have either a significant source of income for your interim retirement period OR have an appreciated assets that you can sell for a lump sum of cash to fund that interim. Another option, though a bit more risky than an outright rental, is buying a vacation home that you can utilize part of the year in addition to renting, and retire to in the future. Different avenues have different tax implications, but there are also options such as setting up an LLC for rental property ownership. Most of the people I know who are wealthy beyond their income level have achieved it through real estate.