#RetireEarly #Investing #FinancialPlanning
Invest in a taxable brokerage account
If you’re looking to retire early but don’t have access to your 401k/IRA funds until you’re 59.5, one option is to invest in a taxable brokerage account. This type of account allows you to invest in a wide range of assets, such as stocks, bonds, and mutual funds, without any restrictions on when you can withdraw your money.
Maximize contributions to health savings account (HSA)
Another way to prepare for early retirement is to maximize your contributions to a health savings account (HSA). HSAs offer triple tax benefits – contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. Plus, once you turn 65, you can withdraw funds for any purpose penalty-free (though regular income tax applies if not for medical expenses).
Consider investing in real estate
Investing in real estate can be a lucrative way to generate passive income and build wealth for early retirement. Whether it’s rental properties, house flipping, or real estate crowdfunding, there are various ways to get involved in the real estate market.
Side hustle or freelance work
Consider starting a side hustle or doing freelance work to supplement your income during the years leading up to early retirement. This extra cash can help cover living expenses and allow you to continue saving for retirement outside of your 401k/IRA accounts.
Emergency fund and budgeting
It’s important to have an emergency fund in place to cover unexpected expenses during your early retirement years. Additionally, creating and sticking to a budget can help ensure you’re living within your means and not dipping into retirement savings prematurely.
Final thoughts
Planning for early retirement without access to your 401k/IRA funds requires careful consideration and strategic financial planning. By investing in taxable brokerage accounts, maximizing contributions to an HSA, exploring real estate opportunities, taking on side gigs, and prioritizing emergency savings and budgeting, you can set yourself up for a successful early retirement even without tapping into your retirement accounts.
Remember, early retirement is possible with the right financial mindset and disciplined approach to wealth-building. Start planning and saving now to achieve your goal of retiring early and living the life you’ve always dreamed of! 🌟
You invest beyond just a retirement account. Like a brokerage account
There are plenty of ways to pull money out of your retirement accounts early without penalty. Look into 72t withdrawals or 5 year Roth conversion ladders. This is a non-issue.
I don’t think it’s something to worry about until you’re maxing 401k and Roth IRA. You shouldn’t retire early until your money past 60 is taken care of anyway and since you’d be saving less time, you need a fat stack in those accounts.
Some people do it by saving in a brokerage, or by buying rentals and living off that income. Or by selling their business and living off the cash for a few years.
Worst case: just eat the penalty.
Look into SEPP. Also, you can always withdraw contributions from a Roth IRA.
But that being said, you’ll almost certainly need funds in a normal taxable brokerage account. The one good thing is that if it’s your only income, you pay no taxes on the first ~$45k if single (~$90k if married) and then just 15% up to ~$500k.
It’s call a bridge account. If you plan to retire early you can build up a dividend portfolio or have a decent amount into index funds that you can pull from until you are eligible to take from your retirement accounts. Real estate is also a good choice.
Others have mentioned the savings part which is essential.
A key part of saving for retirement and retirement is spending. Learning to live well below your means and also learning or knowing how to enjoy a life fully without spending loads of cash is wildly beneficial in many ways.
So many on retirment forums get to the day and are miserable as their whole life and identity is tied to their job description. Or they have no hobbies or interests.
Early w/d penalty goes away at age 55 from the plan you are retiring from. Also taxable accts or 72t distributions from IRAs are other options.
Edit: If you’re looking to retire before 55 you have to consider taxable accounts instead of retirement accounts as primary vehicle to save into.
Invest in rental prop for income, Use brokerage accounts, rule of 55 for 401 accounts, and 457 accounts allow withdrawals at any time.
Consult a CFP and they will explain all the avenues.
look into rule of 55 but also, if you are planning on retiring even before 55, you probably want to also have an outside, taxable brokerage account.
Ask this question when you’re 45 and actually done it.
https://www.madfientist.com/how-to-access-retirement-funds-early/
25% – 30% of money you have available should not be in an IRA or 401K. They should be more short term and medium term oriented to take care of immediate needs. So if you 500K in a 401K IRA, your should have 150K in medium term savings ( separate ) from your emergency fund.
Roth would be better than conventional for you.
Personal taxable brokerage account. Save enough there to bridge.
You’d only have $1M, best case in a 401k. Assuming you max it out every year, get employer matching and it averages 7% returns.
I would not advise trying to retire at 45 (20 years from now) with just $1M.
Invest additional money in taxable accounts. Long term gains and dividends are taxed at very low rates.
You have other investments for that, or you keep working.
Search “rule of 55”. You can hit 401k at 55 under certain provisions (easy to meet). And you can withdraw ALL Roth contributions at any time – just not capital gains.
No one ever talks about this! Keep feeding your retirements and don’t touch them until 59 and a half. Save like a monster for the donut hole the time after you stop working and before you can touch retirement. In fact you may reach a point where you decide not to put money in retirement and keep it in non-qualified in order to balance. Work this out with a cfp. Don’t forget about Obamacare expenses while you wait for Medicare at 65. I agree this is a challenge for early retirees