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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=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.  [/quote]

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.  [/quote]

Why 15 more years? If you’re late 40s and hope to retire ASAP (let’s say at 55), that’s at most 6-7 years before you start to draw down. That makes a big difference. Also, early retirement necessitates a lower safe withdrawal rate than 4%.
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I plan to draw down my brokerage to cover the gap years and let my retirement accounts grow until I'm sixty. I'm in my mid-forties, and will keep working for 2 more years then reassess. I don't see any scenario where I work past 50. I'll draw down my brokerage at 10% from ~48 to 60 with the goal to spend it down to about $200k, then I'll draw down my retirement accounts from 60 on at 4%.  We have a lot of home equity as a buffer if it turns out 4% was too aggressive. We can downsize.[/quote]

This is what I did and it worked out well.  Another useful tool for bridging gaps, so long as it's not abused, is to set up a pledged asset line of credit with your brokerage firm.  Sometimes you're better off borrowing rather than selling things in your brokerage account or withdrawing from your IRAs.

We, for example, retired in our 50s.  We have about $6 million in retirement accounts and $1.2 million in our brokerage account.  All with Schwab.  Based on the size and holdings in our brokerage account, we have a line of credit with Schwab of about $900k.  Interest rates, of course, are higher now than they were a few years ago, but even at the current rates (6.43 at the moment) there are times when it makes more sense to tap the credit line for short term needs instead of cashing something out or withdrawing from an IRA and incurring either capital gains taxed or income taxes.  Honestly, we've forgotten about our credit line at times and it's cost us. [/quote]

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