Investor insight please.

[goalie]

worrying about a market crash at 34 years old is not advisable

This.

At 55, I've been dumping money into retirement through ups and downs since the mid 90's.

I'm just finally starting to be concerned about risk, as I'm close enough to retirement for one to matter.

 

[Hydra6]

I retired at 61 - National Guard retirement kicked in at 60 with pension and Tricare. I put as much money as possible into 401K, TSP (Government 401k), and IRA. Now that I do not have a traditional income, I am using the ROTH conversion strategy every year to move retirement funds.

With the amounts you are saving, at some point you may realize you need to plan for estate and inheritance as you may not spend it all.

401K and IRA money becomes all about minimizing taxes.

 

[EdP]

If you are not doing a Roth at your age you are missing out IMO. Roth money has to be earned income. Perhaps your wife could do it if she works at all. I would suggest using the Roth for more growth oriented investments (ie: more risk). If you hit it big, it is all still tax exempt when withdrawn post 59 1/2.

If you didn’t know the 401k carries a rule of 55 provision that basically states when you separate from your last employment that holds your 401k and you leave it there, you may draw on it penalty free prior to 59.5.

The feds hide this in the small print but this is correct. You can pull from your 401K w/o penalty at 55 1/2 if you retire from the employer holding the 401K. One potential issue is that some 401K plans don't have the type of investment options you might want in retirement where the focus tends to change from growth to protection of principle. I retired at 56 but moved my 401K money to an IRA for more investment flexibility and bridged to 59 1/2 with post tax investments.

Someone suggested a CPA but I think you need a professional investment advisor. A good one will help balance your portfolio between investment types taking in consideration your 401K even though those investments are managed by others.

 

[z987k]

See if your plan supports the mega backdoor roth as well.

 

[Dos Perros]

You should be meeting with a CPA here soon. I would suggest talking with them or a financial planner if you have one.

Do you find planners that will just take a check and make a plan? Everyone I talk to wants to 'manage' my stuff and take 1% or whatever, something I'm not willing to do.

 

[Speaks]

You are factoring in compound returns but not compound inflation. $3mm in 30 years will likely be worth ball park what $1.3 million is today. If you want equivalent purchasing power of $2mm today you would need around $7mm 30 years from now.

Take full advantage of tax advantage accounts first and then load the individual account. You can draw on principle from 401k early without penalty if needed but even if you have funds to retire early you will need funds later as well.

 

[huntnful]

If you didn’t know the 401k carries a rule of 55 provision that basically states when you separate from your last employment that holds your 401k and you leave it there, you may draw on it penalty free prior to 59.5.

Amazes me how many people don’t know this….including financial advisory’s.

72t is also a great option for the OP.

I was not aware of this. Thank you for the insight!

 

[huntnful]

I greatly appreciate all the extra info everyone! I’ll be looking into the ROTH asap.

You are factoring in compound returns but not compound inflation. $3mm in 30 years will likely be worth ball park what $1.3 million is today. If you want equivalent purchasing power of $2mm today you would need around $7mm 30 years from now.

Take full advantage of tax advantage accounts first and then load the individual account. You can draw on principle from 401k early without penalty if needed but even if you have funds to retire early you will need funds later as well.

I also did not account for the dollar value after 25 years of inflation obviously. Thank you very much for bringing that to my attention!

 

[MallardSX2]

Do you find planners that will just take a check and make a plan? Everyone I talk to wants to 'manage' my stuff and take 1% or whatever, something I'm not willing to do.

I agree and a lot of financial advisors are simply placing people's money into the S&P500 and skimming their 1-2% right off the top. It sickens me.

 

[huntnful]

I agree and a lot of financial advisors are simply placing people's money into the S&P500 and skimming their 1-2% right off the top. It sickens me.

This why I have avoided them entirely as well. I’m dumb, but not that dumb lol.

Kind of why I reached out here. I don’t know of any hourly advisors. But know people on here are much smarter and more versed than I am with this stuff.

Just getting a little perspective on my initial thoughts while going over my accounts. At the end of the day, I feel comfortable just having some form of “plan”. But wanted others views as well.

I implemented my plan 6 years ago and never re-evaluated anything. Auto invest in a low cost index fund, and rarely ever log in to check what’s going on. Hoping to retire from full time work around 45. But I live a great life and don’t even mind my job. So if plans don’t go perfect, it’s not the end of the world by any means for me.

 

[Tod osier]

I was going over my investment accounts today and started thinking a little bit. I have a 401k through my work that I've been maxing out for 15 years.

They match a certain percentage, and i think it ends up to about $3-4k a year they put in, on top of my $23,000.

The account currently has $712K in it.

I am 34 years old.

I have a personal investment account that I've been contributing to with post tax money for about 6 years now. I plan to use the money in that account to retire as early as possible. Use the personal investment money to bridge to the gap until I can draw my pension at 55, and then eventually my 401k at 59.5.

Is it really doing me any good to keep maxing out my 401k? Or should I just put in the amount that reaches my company's match minimum (free money), and then put the remainder into my personal investment account, post taxed?

I definitely realize the tax advantages of taking $23k off the top end of my income to not pay taxes on it in the highest bracket. But is it worth it when I'm 59.5 if my 401k would be projected near 3 million anyways?

I'm a pretty frugal personal. I only spend money on hunting/shooting and my wife and kids. Don't have, or want a bunch of lavish shit.


Appreciate any insights and perspectives as always!!!

If you want to retire early, like real early, the tax advantaged accounts can be a problem. There are ways to get into some of them (rule of 55, 72t) as has been said by others. If you can not draw 100% of what you need from the specific tax advantaged accounts you need money somewhere else. It seems like you may want to make sure you have money you can get at when you need to get at it (either in tax advantaged accounts you can draw enough from early, or have other sources).

Also think about health insurance. If you need to buy health insurance, you may need some taxable income, however, the more taxable income you have the more it may cost.

 

[huntnful]

If you want to retire early, like real early, the tax advantaged accounts can be a problem. There are ways to get into some of them (rule of 55, 72t) as has been said by others. If you can not draw 100% of what you need from the specific tax advantaged accounts you need money somewhere else. It seems like you may want to make sure you have money you can get at when you need to get at it (either in tax advantaged accounts you can draw enough from early, or have other sources).

Also think about health insurance. If you need to buy health insurance, you may need some taxable income, however, the more taxable income you have the more it may cost.

Health insurance is a BIG one. And one of the major factors with a wife and 2 kids. I have GREAT insurance through my work. So good it’d be terrible to give up and cost a fortune to replace.

Maybe they’ll let me take months off at a time unpaid as well, but remain employed. I don’t need to never work. I just want to be free all of August-December for scouting and hunting.

Really love all these thought provoking insights and questions!

 

[CorbLand]

Do you find planners that will just take a check and make a plan? Everyone I talk to wants to 'manage' my stuff and take 1% or whatever, something I'm not willing to do.

I havent but I also havent really looked into them. For my income level and the options I have for the majority of my investing, it wouldnt make sense to pay them. 90% of my investing is done through mediums that I only have certain options, there really isnt a lot of strategy involved with it.

For OPs level, it might be worth looking into.

 

[CorbLand]

Yeah that is probably a good idea. I just trust my Rokslide homies more than 99% of the general population hahaha. And there’s some smart suckers in here! But someone professional versed in exactly the info I’m seeking is possibly a decent idea….

There are some very smart suckers on here and I dont blame you for asking. Its always good to get some insight from others. Your CPA would be more in tune with your current situation and be able to help more with what will fit your situation best.

 

[eamyrick]

Yeah that is probably a good idea. I just trust my Rokslide homies more than 99% of the general population hahaha. And there’s some smart suckers in here! But someone professional versed in exactly the info I’m seeking is possibly a decent idea….

Haha. I posted a similar thread. I’m pension heavy and 39. I haven’t had good luck with run of the mill Bank of America financial advisor so I found a fee based CFP in Austin and booked a meeting in two weeks. In the comments I explained that I want to better understand the intersection of pension, investments and inflation. I’m want to retire asap, no sooner, no later.

Recently found the Afford Anything Podcast and lurk on the r/fire Reddit thread. Both have been pretty good. It’s hard to find a tribe that doesn’t have a lifestyle that includes working forever.

Another option that hasn’t been mentioned is whether or not you plan to fund kids college. 529 accounts can be invested in S&P indexes. Post tax contributions can be pulled at penalty free and up to 35k can be rolled into retirement accounts for kids if they don’t need college money. Getting the kid’s college expenses off my plate is another prong of my retire early approach.

 

[huntnful]

Haha. I posted a similar thread. I’m pension heavy and 39. I haven’t had good luck with run of the mill Bank of America financial advisor so I found a fee based CFP in Austin and booked a meeting in two weeks. In the comments I explained that I want to better understand the intersection of pension, investments and inflation. I’m want to retire asap, no sooner, no later.

Awesome! If you remember afterwards, would you mind shooting me a PM with your thoughts on the meeting? I’d love to get some feedback as it seems like your situation is very similar to mine

 

[LostArra]

There are few universal truths in financial planning (save, live below your means, save, no debt, save, fees matter, save) past that everyone's situation is unique and no one can reliably and accurately predict the future (economy, legislation, stock market, interest rates, taxes, health, family,)

Just do your best to educate yourself and cover your bases which may include a person with letters after their name but one size never fits all.

 

[CorbLand]

Haha. I posted a similar thread. I’m pension heavy and 39. I haven’t had good luck with run of the mill Bank of America financial advisor so I found a fee based CFP in Austin and booked a meeting in two weeks. In the comments I explained that I want to better understand the intersection of pension, investments and inflation. I’m want to retire asap, no sooner, no later.

Recently found the Afford Anything Podcast and lurk on the r/fire Reddit thread. Both have been pretty good. It’s hard to find a tribe that doesn’t have a lifestyle that includes working forever.

Another option that hasn’t been mentioned is whether or not you plan to fund kids college. 529 accounts can be invested in S&P indexes. Post tax contributions can be pulled at penalty free and up to 35k can be rolled into retirement accounts for kids if they don’t need college money. Getting the kid’s college expenses off my plate is another prong of my retire early approach.

I would be curious to know your thoughts about your meeting as well. Seems like something that might be useful for me just to be able to double check what I have ran as far as numbers go.

 

[Marshfly]

I am planning to retire in my early 50s as well. But unlike most commenting here I do not have some huge front loaded 401k. The life of a small business owner works that way sometimes. IMHO you will need a way to generate REAL income after you quit your regular job. There's no way about it. Pawning that off to some advisor is crazy to me.

If you want to "retire" early AND continue to thrive financially you need a way to continually increase your annual income in a meaningful way. Not by a few percent but by double digit percent annually. If you have a decade before you want to quit your job you have plenty of time to figure out an income stream that is VERY low on the monthly hourly work scale.

For me, that is trading. It took me over 3 years to figure out what I do but now it is a lifelong skill that will easily generate more than we need virtually forever with very little work each week.

IMHO people should be planning and figuring out how to make MORE after quitting their job than before. Planning to survive on less is scarcity mindset and not how people should be living.

 

[Speaks]

Recently found the Afford Anything Podcast and lurk on the r/fire Reddit thread. Both have been pretty good. It’s hard to find a tribe that doesn’t have a lifestyle that includes working forever.

A note on r/fire, nearly everyone in that sub is planning around a retirement that is far more frugal than I would want. Forget that sitka jacket or new bow, like ever. The number of people on there who think its a good idea to retire in their 40s with only $1.5mm saved and a max draw of $60k using the 4% rule which is already risky at that age is just astounding and will result in lots of folks going back to work eventually. Concept is good but very little factoring in actually having any money to spend during retirement or a reasonable buffer for such an early exit. The chubbyfire sub is maybe slightly overshooting but closer to being realistic when it comes to numbers.