Thanks much for the detailed response and prodding!Got it. I would prod you a little more about liquidity concerns. What tools do you think you can and will avail if it does crop up as an issue? HELOC? Spending on 0% APR credit card? I am sure there's more than dozen out there. Are you wanting assurances or you are concerned because the numbers are not panning out? How do you expect the stock funds in brokerage to get to cash? Do you want to do it as needed? Or Manage it carefully for taxes and ACA subsidy? Great thing is you have options.Thanks kd2008!You are in great shape! I would focus on continuing to enjoy the job, continuing to save the amount you have been, making sure taxable brokerage has enough liquidity to cover few years of expenses. Your tax bracket is going to be so much lower in retirement that I wouldn't worry about Roth conversions in the 50-65 yr range. You can do that when you are on Medicare. This assumes you plan to be on ACA during 50-65 yrs. You will need just enough taxable income to reduce ACA plan costs to zero - if you desire that. The rest will be basis (zero tax) you have in LTCG sold funds (for example, sell 100K in taxable, say 60K is LTCG, the rest is 40K which has no tax, doesn't show up in ACA calculations etc) More than "tax optimisation" you need to be able to visualise cash flow - from various locations, time frames etc. This will give you a sense of ACA subsidy, taxes etc (with some assumptions of tax rates)
It is not the end of the world if say you have to withdraw from pre-tax accounts when you are 57-59.5, and pay the 10% penalty - very unlikely given your Roth stash. Don't dread these hypotheticals of future and ruin your peace in organizing perfect tax scenario - because laws change all the time.
Liquidity is one of my questions/concerns. Still time to build a cash buffer, I guess.
Would you do anything differently to figure out cash flow? At present, I’m not adding much to the taxable account, and a little concerned…
Mega backdoor Roth - when you rollover Roth 401k to a Roth ira or another 401k plan, you should get a cost basis statement from the 401k provider. It follows FIFO for withdrawals with contributions coming out first before earnings. If there are enough number of years of contributions, you have nothing to worry about. Oldest Roth 401k needs to be at least 5 years old. There are a few additional details to be met, but you won't have any issues.
If you have settled on brokerage and Roth Ira withdrawals starting at 50, then just calculate cash flow from whatever fraction or combination you feel comfortable. The total portfolio amount is zero concerns here. There are plenty of assets. Asset location may be a minor concern. But with as large numbers as you have presented us, with 5 or more years to retirement, things may need minor tweaks if you want to be absolutely prepared. If the withdrawals from MBR close any gaps from taxable brokerage withdrawals, then it is just an assurance issue. A simple spreadsheet of best and worst case can illuminate you here. Hope this helps.
I think in my mind I need to cover roughly 7 - 8 years completely before my wife can access her 401k at age 59.5.
So the math is somewhere around 8 * $150k = $1.2M needed prior to official retirement access
I think it’s getting comfortable with the various ways I can cover this amount between 50-60 that I’m anxious about. I do use 0% credit cards, and a heloc is a good idea. Hopefully in 5 years I have more than needed and that will be a relief.
I like the idea of not even worrying about Roth conversions until Medicare age 65. Keeps it simple math for ACA and still a number of years before RMDs kick in.
Past 60, I’m not worried much at all. Across the 401k, Roth and then Social security, there should be more than enough.
Statistics: Posted by Wannaretireearly — Tue May 28, 2024 12:12 am — Replies 89 — Views 7276