How do you Retire Early if your money is stuck in Retirement Accounts? | ChooseFI Shorts
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- čas přidán 2. 03. 2021
- A listener asks us how it's possible to retire early if your money is stuck in retirement accounts that only allow distribution at a later age?
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Chris Hogan talks about having a bridge account
haven't watched your material in awhile, love the new intro!
Excellent post!
Excellent! Thank you!
I am setting up an SEPP with one Traditional IRA's and still doing the Roth conversions at the same time. I have a second traditional IRA to rill my 401k into and make roth conversions when I can. The SEPP IRA for example with me at 52, with $500k in the account- take ~$40k a year till am 59 1/2 depending on interest rate and dividends i will still have ~$450k even though i have taken out almost $360k. Then can start those conversions to Roth as the other accounts have already been converted and the 5 yr rule has passed. I am also retired military os have that pension and a butt load in brokerage account.
Thank you. Excellent video.
You are welcome!
Isn't Roth contributions capped at 6-7k per year? If so, how can I transfer more than that?
You can roll over from a traditional IRA or 401k an unlimited amount.
Once the conversions are done and it’s moved over…is the intention to INVEST it or keep it uninvested? If you invest it and remove it, wouldn’t it be taxed again for capital gains (taxed again)?
Really good question, so I’m hearing start the Roth conversion ladder 5 years prior to retirement.
If you do that you'll pay a lot in taxes because the conversion will add on the lump sum to your total taxable income. Ideally you'd save in a taxable account, and in those first 5 years of retirement you live off of a taxable account, while rolling over 401k > Roth. So you pay the least in taxes, which is what is being discussed in this video.
@@Myselfsama Wouldn't cashing out stocks in your taxable account cause you to bump up your tax bracket and then mess up your conversion (since your tax bracket is higher now)?
@@addd21323 Not nearly as much. Because when you'd be in retirement your W2 income drops to 0. So then you only pull from long term capital gains which are taxed very differently.
In your example of paying 1500 in federal taxes... do you also have to pay Medicare/SSN fees too?
Wouldn't there be an opportunity cost of lost gains from needing to have 5 years of expenses sitting on the sidelines (not invested) while ur waiting for your first conversion to happen (since you can't pull that 5 years of money from investments because it'll bump up your tax bracket and mess up the conversion)? Has anyone done a deep dive comparing that opportunity cost with the alternative of just using a taxable account and paying $0 in taxes as long as you're in the lowest long term cap gains bracket? I'd be curious to see the data. I haven't been able to figure it out on my own.
When you transfer from IRA to Roth IRA you are still investing since the funds in the Roth IRA would be in investments.
In addition, this would be very beneficial where the 401k investments are a lot more than the taxable brokerage investments are. You can do as you stated above, but that's assuming you have enough in your taxable brokerage to cover all your cost of living until you can withdraw from your 401k
What I feel like wasn't answered.... Is... Isn't withdrawing from a ROTH IRA still an impossible without penalties before a certain age? I get the tax savings, but I'm still wondering how you can get to the money in the roth?
Taxable investment accounts is the answer right?
When you convert, whatever you're converting over is considered a contribution to the roth ira. Roth ira contributions can be pulled out anytime penalty and tax free.
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