Putting the Early in Early Retirement
We finally feel pretty confident that we’ve hit “CoastFI” with our retirement accounts, but the whole point of FIRE is retiring *early*. Unfortunately, traditional retirement accounts like our SEP-IRA, 401k, and TSP make it exceedingly difficult to start taking money out before age 59½. There is something called a SEPP (Substantially-Equal Periodic Payments), but it’s complicated and risky, so our goal is to fund the gap between whatever age we retire at, and 59½.
If we take that complicated SEPP off the table, that leaves us needing to have money we *can* access before age 59½, which means we’re talking about talking about a taxable early retirement fund (by way of Vanguard index funds, of course!).
So we’ve got a pretty good trajectory with retirement accounts, and we’re making slow & steady progress on our staggering debt…the next thing we want to focus on is investing everything we can into a normal taxable brokerage.
FreedomJar 2.0 – Investments vs Debt:
The jar on the left will slowly fill up as we grow our taxable early retirement fund. It seems so far away right now that we really have no idea how much we’ll need to bridge the gap between early retirement and age 59½, but we have enough of the “stars and stripes” pasta to fill the jar in $2,250 increments up to $1M.
(oh the irony of the little flags and stars pasta representing “freedom,” when in all likelihood we’ll be moving out of the US as soon as this jar is full!)
Hopefully over time more and more of that pasta will move from the bag to the jar, and as we get further along we’ll have a better sense of what we actually need in our taxable early retirement accounts to let us quit working well before “retirement age.”
At the moment we only have 4 little pieces in there, representing ~$9,000, but check back periodically to see how we’re doing!
If you’re planning to retire early, how will you bridge the gap between “quitting age” and “retirement age?”
Ooooh, retiring outside the US! Where will you go? I would love to do this (for at least a few years), but unsure on how to proceed with a young child (whom I don’t want to homeschool).
In regards to accessing your retirement money early, have you consider a Roth conversion ladder? You’d still have to retire with enough taxable funds to cover your living expenses for at least 5 years, but this option let’s you convert your deferred tax accounts to a Roth, and then pull them out 5 years later. You do have to pay taxes on the amounts you convert, but if you’re not working, the tax rates will be the lowest you’ll probably every have. The Mad FIentist and several other OG FIRE bloggers write about this option a lot, and show how much money you really lose by keeping everything in taxable accounts. This is a strategy we’ll use, though we’ll have a lot in taxable just by the nature that I’m now limited in what I can contribute.
Oh man…you just opened my eyes! A cursory search definitely indicates that’s a good thing to investigate further and plan for. Thank you!! I am going to devote lots of time to this idea in the very near future 🙂
As for the expat plan…kicking around ideas right now, we’re very interested in Spain (more Toledo than Barcelona). Really we’d love just about any European country we can afford, and I’ve learned enough to know our plans will change 20x by then, but that’s the current obsession. No kids here, just 2 cats that will probably last roughly as long as our interest in work :/ In the current iteration of the dream we pop smoke, go do the Camino de Santiago and then get a month-to-month rental while we figure out a 1 yr plan, and then rent in 1-2 year increments around Europe as the wanderlust takes us.
Thanks for visiting! Your blog is very much on my Saturday morning list, I have multiple tabs open. If only I were retired I could binge read now XD