I’m trying to find a way to retire within the next two to three years and need help. I’m turning 54 this summer and my wife is 48 years old. Between us, we earn about $ 210,000 -one year. We are currently saving $ 1.6 million with $ 680,000 in my former employer 401 (k), $ 300,000 in my wife’s former employer 401 (k), $ 600,000 in my current employer 401 (k) and $ 75,000 in various stocks , we have. I currently contribute approximately $ 25,000 to my 401 (k) each year, which includes my employer’s fight.
We have a holiday home worth $ 225,000 that is paid for and we have approx. $ 250,000 equity in our current home. We have two kids in college right now, but that will happen after next year. I feel like we can live pretty cheaply for around $ 70,000- $ 80,000 every year, but we want to travel in an RV a lot when we retire and we want to do this while still enjoying the outdoor lifestyle. We cut it down to a house, probably the cottage, or we sell both and move / build somewhere else. But we would be sure to stay in the cottage for two years to avoid paying gains on the sale of it.
I feel we have enough savings and it will continue to grow for the next two to three years before we decide to call it quit but the challenge is how to get to the money as it is all in 401
Is it worth just paying the 10% fine on early payments versus paying taxes and converting a large amount of the previous 401 (k) plans into a Roth? My company allows payouts through the 55 rule, but you have to withdraw it all and I know I do not want that tax liability. Any help or advice would be appreciated.
Check out MarketWatch’s Retirement Hacks column for practical advice on your own retirement savings journey
Congratulations on collecting such a high nest egg. You come up with an interesting dilemma that some retirement savers may not be thinking about, which is having your retirement assets locked into investment portfolios that are meant to be used at an older age.
Employer-sponsored retirement accounts, such as 401 (k) plans, are a great tool for investing in retirement because they are tax-deductible, meaning more money grows until it’s time to retire. They also have a higher annual contribution limit than some other tax-distributed portfolios, such as individual pension accounts. However, as you can see, the money can be difficult to withdraw for those who want to retire before the age of 59, as they will be subject to a 10% penalty on top of the taxes they owe on distribution.
Fear not – there are ways around this problem, financial advisers said.
The first task is to double-check your company’s policy for the 55-year rule (for readers unfamiliar with this rule, it allows people aged 55 or older who were separated from their jobs – either because they were fired or voluntarily left – to take advantage of 401 (k) from their current employer before the required age 59 ½). Businesses may have their own provisions on this rule, but an “all or nothing” policy seems rare, said Henry Hoang, founder of Bright Wealth Advisors.
If that really is not possible, there is the 72