Question

If I want to retire before 59. 5 years old, what is the best investment vehicle to park my cash in? I'm currently using a Roth IRA, 403(b) and a defined contribution plan through my employer. These are all great, but I really should not touch them before age 59. 5 to avoid penalties. My goal is to retire at 55 or sooner if possible. Should I put money into a standard brokerage account (I have a small amount in one that I do't do much with), or should I put that money toward paying down my primary residence mortgage or my rental property mortgage? How are all you FIRE folks doing it?  

Answer 1

I think tax diversification is important, we have some 401k, some Roth, and some brokerage. You didn't say how old you are, so hard to really make a good suggestion. I think the Roth is a good idea since you can pull contributions at any time. Paying down the mortgage might make sense, but only if you can totally pay it off before you retire. That also depends on the interest rate.  

Comments

@azarria94051e Parker excellent point about pulling out Roth contributions I totally forgot about that! I am 35, have about $14k in brokerage, 13k in Roth, 22k in 403b, and am paying into social security and a defined contribution plan with my employer. SS I can draw from at 62, employer plan at 62. 5 (I think). I have a duplex with about 26. 5 years left on the mortgage worth about $500k grossing $38k annually with $330k left on FHA loan at a 3. 375% APR plus . 85 PMI. It cashflows about $465/month. Our tax bracket (blended) is about 11% right now as our baby has some medical issues and my wife and I (both teachers) have missed a ton of work. That low tax bracket prompted me and my wife to take advantage of Roth’s as much as possible. Because of the medical issues we’ve been maxing out my HSA and investing a little, but most is giing to the medical expenses. Maybe I should consider a CFP?  

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Why, you're just a young pup! :-) 20 years is a good long time to work this all out, the world is your oyster as they say. I'll just mention a few other things: Term life insurance since you have dependents. 529 plan since you have a child. Check out Choose FI Good job on the HSA, it's triple tax advantaged. If we could, I think we'd all like to max out everything, but decisions need to be made. I'd continue to do the Roth as long as that makes sense and is allowed. This is just my opinion as a guy on the internet.  

Answer 2

I used the rule of 55 to retire at 56, no penalty for 401k withdrawals. Just mentioning so u know that option.  

Comments

@spelunker9 I was not aware of the rule of 55! I’ll have to do some research on that one! Thanks!  

Answer 3

Perhaps. customize as needed. Work backwards. 59. 5 - 55 = 4. 5 years without a salary before retirement accounts kick in. Assume $120, 000 before tax each year is needed: 120k * 4. 5 years = $540, 000 Now that you have an amount to aim for. How will you accumulate this amount? How much saved and how much growth?  

Comments

@azarria94051 great advice! I think my question is more aligned with the 2 questions at the end of your comment.  

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@vaccinate417 my investing strategies average 20-30% annually (non-retirement accounts), so we can get you to $540, 000 in 4. 5 years starting with $225, 000. So now we just need to figure out how many years you have to reach $225, 000 and work backwards from there