Anyone else dealing with this issue of "gap years" before retirement?

[Anonymous]

DH and I, late 40s, were both raised very middle-class. We have been able to save well and have been diligent about it, but we did not have any ideas about tax minimizing etc. We have been doggedly maxing out retirement and only after adding to a brokerage account. Champagne problems, I know, but now I discover that our retirement accounts are likely overfunded. And our brokerage fund isn't that big. So, if you add up our assets, we could probably retire in 5 years, but we can't really because all that money isn't accessible until 59.5. And then by the time we reach the age of RMD, the 401k balances will be huge and we will have to take large RMDs. We weren't previously thinking about retiring so soon or this would probably have been on our radar, but now it's just irritating that our total will be sufficient to retire but not in the right buckets.

I would love to hear any thoughts and also hopefully warn others who may be in a similar boat.

[Anonymous]

You could take out a home equity line for the few years between retirement and 59.

[Anonymous]

Start shifting all saving to outside of retirement accounts

[Anonymous]

Use rule of 55. Make sure your current 401k account at current employer has enough balance to carry you through 59.5 at least.

Just retire at 55


Understanding the Rule of 55
The Rule of 55 allows individuals to take penalty-free withdrawals from their 401(k) or 403(b) plans if they separate from their employer during or after the year they turn 55. Here are the key points to consider:
Eligibility: You must leave your job in the year you turn 55 or later. This applies whether you quit, were laid off, or fired. However, this rule only applies to the 401(k) plan of your most recent employer, not to plans from previous employers or IRAs

[Anonymous]

Why do you have to wait until RMDs?

[Anonymous]

Rule of 55 might work or 72(t) SEPP payments. Save outside of 401(k). There are options

[Anonymous]

I am aggressively building up my brokerage account then I am going to aggressive draw it down for the gap years until I can access my retirement accounts. I also have passive real estate income. And I expect an inheritance from my parents that I will pass to my kids so I feel comfortable with spending down my own savings.

[Anonymous]

Anonymous wrote:I am aggressively building up my brokerage account then I am going to aggressive draw it down for the gap years until I can access my retirement accounts. I also have passive real estate income. And I expect an inheritance from my parents that I will pass to my kids so I feel comfortable with spending down my own savings.

Oh, sounds like this doesn't apply for you then.

[Anonymous]

Anonymous wrote:Start shifting all saving to outside of retirement accounts

Yes, agree, that's the plan. But we would have started more aggressively doing this years ago if we had realized we were overfunding retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Start shifting all saving to outside of retirement accounts

Yes, agree, that's the plan. But we would have started more aggressively doing this years ago if we had realized we were overfunding retirement.

What amount do you have to be overfunded in late 40s? Asking bc we’re also late 40s and wonder what amount that means to you (or others).

[Anonymous]

Hard to belive 401ks accounts can be overfunded in your 40s. Remember, catch ups are not till 50 so you cant even put a ton in pre 50.

[Anonymous]

do you have old 401K that you can rollover into an IRA and then rollover into a Roth?

[Anonymous]

Anonymous wrote:Hard to belive 401ks accounts can be overfunded in your 40s. Remember, catch ups are not till 50 so you cant even put a ton in pre 50.

This. For us the taxable account is higher because we were capped on the retirement accounts. Now for us his is due to only one spouse having 401k access.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Hard to belive 401ks accounts can be overfunded in your 40s. Remember, catch ups are not till 50 so you cant even put a ton in pre 50.

This. For us the taxable account is higher because we were capped on the retirement accounts. Now for us his is due to only one spouse having 401k access.

Not for me. I'm in my 40s. For some reason, I got the message that you have to max out your 401k every year starting in year 1, and that is what I did. It wasn't until years later that I started thinking about retiring early, and by that time, my combined retirement accounts were a large sum. In the interim I was maxing out 529 plans, and they are now fully funded. I just short changed myself on my brokerage account, and now I regret not saving more there from a younger age, as it would allow me to retire earlier. I'm hitting it hard now, but even with very high contributions, I'm not sure it'll ever surpass my 401k. The money you save the earliest grows the most!

[Anonymous]

Anonymous wrote:Hard to belive 401ks accounts can be overfunded in your 40s. Remember, catch ups are not till 50 so you cant even put a ton in pre 50.

When I run a calculation of my current combined retirement accounts, assuming zero additional contributions, growing at 4% real for 15 more years, then applying a 4% withdrawal rate starting in 15 years, I have more than enough retirement income.