Early retirement strategy
Hi guys,
I am 33 years old. I recently found this thread and decided to start planning out my retirement. I very quickly recognized that I might be on the path to FIRE within the next 10 years, but being so new to this, I am not really sure how I can create the right FIRE path that will allow me to bridge the age gap between early retirement and 401k withdraw w/o penalty. I also don't really know if I am sound in my thinking.
- Married
- ~$1M NW combined with my wife
- my 401k is currently $391k contributing the max allowed + a 6% employer match
- wife's 401k is $172k contributing 7% + a 7% employer match
- $70k in emergency funds in the bank?
- $257k in brokerage account where we contribute $2k a month + a one-time yearly deposit of $15k when our bonuses come around. I try to put as much money whenever I can into the brokerage, but $2k a month minimum is what I deposit.
- We have 2 homes, our primary home and a vacation home. The vacation home is valued at $180k which we would consider selling at some point in the far future and is fully paid off. Our primary home is not calculated in our NW since we do not intend to ever sell it, and we still are paying it off with ~$360k remaining on the mortgage.
- estimated yearly spend during retirement is ~$80k
I tried figuring out where we would land if we chose to retire in 10 years which brings us to a total NW of ~$2.4M which is my conservative estimate. Using the 4% rule, this would mean that we have the ability to stop working as 4% withdraws would be sufficient for our yearly spend of $80k. I included our existing mortgage within the yearly spend just to be conservative, but I would assume our house would be paid off by then which would cut the yearly spend in half.
A lot of our money would be tied up in our 401k so we'd have to figure out a plan to bridge the gap in our brokerage account to last ~17 years before we tap into our 401k, which throws off all of my calculations based on a retirement spend of $80k - I think this would drain our brokerage account. I tried to calculate my 401k vs. brokerage in 10 years and I came up with $1.4M in 401k and ~$1M in brokerage.
I know this was a lot but here are my questions:
- Am I thinking about my calculations the right way - am I sound in my thinking?
- Is there a way to somehow use my 401k or convert it to something else to help bridge the gap to 59 1/2?
- Based on a yearly spend of $80k a year at retirement, does having an estimated $2.4M conservative NW in 10 years sound reasonable enough to stop working if I can figure out a proper bridge strategy?
Just a side note, but my wife and I really don't want to stop working unless we absolutely have to. With everything going on in the world, we really just want to get to a point where if we were laid off, we wouldn't have to stress about ever finding a high paying job again. We want to have options without stress, whether it be to stop working entirely, or find a low paying job but something that we really enjoy doing with no stress attached.