u/Finance-Goat

Hey everyone, looking for a reality check on our retirement and cash-flow strategy. On paper, our net worth looks OK, but between a high mortgage and three kids, we are essentially living paycheck to paycheck on a day-to-day basis.

Our Stats:

• Ages: 47M / 47F, married. 3 kids (oldest starts college next year; 11-year timeline until the youngest finishes).
• Household Base Salary: ~$220k gross (plus an additional ~10% / $22k employer 401k match).
• Tax Situation: Last year's AGI was ~$170k (thanks to both fully maxing out our pre-tax traditional 401ks and FSA).
• Current Savings:
  • Traditional 401ks: $725k
  • Roth IRAs: $195k
  • Taxable Brokerage: $520k (60k short term bonds for emergencies, rest is mostly index funds, ~100% unrealized gains).
• Primary Residence: $395k left on the mortgage (15 years remaining at 5.75% APR). Total housing (P&I, taxes, insurance): ~$4,350/month ($3,350 P&I + $1,000).

Our Goals:

• Retire around age 58 (earliest), once the youngest finishes college.
• Target retirement budget: $85k/year total draw. Note that this assumes the mortgage P&I is completely paid off by then.
• Current Lifestyle: Because our regular paychecks are entirely spent, we are currently drawing down $10k/year specifically from our taxable brokerage account to fund family travel.
• I would love to Coast FIRE eventually and drop our 401k contributions down, but our current fixed expenses won't allow it.

The Strategy I'm Considering:

• Because our fixed costs are so high, our paycheck cash flow is completely locked up. We can't afford to fund our Roth IRAs out of pocket this year, so I am planning to sell shares from our taxable brokerage to fund our two Roth IRAs, absorbing the 15% capital gains tax on the appreciation.
• Beyond that, my wife has access to a 457(b) plan (pre-tax or roth) that we currently can't touch because we can't afford.
• I am considering a multi-year plan to aggressively crank up her payroll deductions into the 457(b), and simultaneously sell shares from our taxable brokerage to live on and replace that missing paycheck income.

My Question:

• Pre-Tax vs. Roth 457(b) Arbitrage: We are in the 22% federal bracket today, but our $85k retirement target will drop us into a much lower bracket later. Does it make sense to go Pre-tax on the 457(b)? My logic is that the immediate 22% income tax savings on our paychecks will vastly outweigh the 15% long-term capital gains tax triggered by drawing down the brokerage to live on. Is this a clear net win?
• Aside from the immediate capital gains tax hit on the brokerage sales, are there any hidden traps, administrative gotchas, or structural downsides to this strategy?

Appreciate any gut checks. Thanks!