dred pirate wrote: ↑
Wed Mar 06, 2019 5:26 pm
thanks all - and yes livesoft - agree to avoid those, even thou I know they are pushed alot. I am aware of the 55 rule if leave your current job, have the 403b and roth maxed out - so probably will focus on taxed advantaged taxable funds. That being said - this is an area that I don't know a lot about - other than good generic index or growth and mutual funds, any specific vanguard funds you all recommend? Current I use target retirement date funds - I know they have slightly higher fees, but it does allow me to just put it in there and not worry about about re-balancing.
OP, first and foremost, Congrats on doing everything right so far, maxing out all tax-preferred options; looking down the field toward where you and your spouse will be 20 years out; etc.!! Woo-hoo!! To fogies like me, your post was very comforting. Maybe the next generation DOES
"get it". Hooray!
I was in a similar boat as you years ago, except that I was enjoying my career and as a result, it never even occurred to me to think of "early retirement" as a goal. Rather, at the time all I knew was that even after maxing all tax-deferred options, I was paying a ton in taxes. So the first thing I did was look into ways to reduce that. The one tax-prefererred vehicle (with the exception of being self-employed - a total tax bonanza if you have any interest in starting your own thing, but your post indicates that you likely don't) you didn't mention was a 529.
I have no kids but my state offered a deduction for 529 contributions. Moreover, I'm a believer in education as it's benefitted me greatly and put me in the position I'm in. So I opened one of those, and named a relative as the successor owner if I croak before using it. My thinking: When I ultimately retire (at the time, it seemed eons away but oh look! Now it's here in my early 50s, hahaha), maybe I'll take some courses at a local university just for funsies. I could use the account for that. Or maybe down the road one of my loved ones might need a bit of help paying for college. I'd be honored to be in a position to help. SoAnyway, it's something to check out if you're looking for other tax-deferred or tax-free places to stash your money while in your prime earning years. Obviously, a 529 doesn't throw off cash to live on from 55-59 1/2, but if you won't need it, it might be a nice perk under the various tax rules, dep. on your situation.
Back to your question, +1 to LiveSoft's and others' guidance. It's a personal question how close you want to cut things, but I'm pretty risk-averse and decided a long time ago that given how I'm wired, if I were seriously considering/depending on a "Rule of 55"/72(t)/SEPP/Roth conversion ladder" strategy or any other such thing, something had gone HORRIBLY
wrong in my planning!
To be clear, that's just me. I'm grateful to all on this forum for educating me on all of the above. After all, those strategies comprise a good chunk of my plan F, plan G, or further down the hierarchy.
If you're wired along the same-ish vein, hear me now: Open a taxable account. It's not the end of the world. Just structure your holdings properly, in the ways that others have linked, i.e. 3-fund broadly-diversified portfolio of low-cost index funds with an AA suited to your risk tolerance, with tax-inefficient holdings in tax- preferred vehicles and tax-efficient holdings in your taxable account. Yes, it can be a bit scary at the tactical level if all you've known is tax-free or tax-prefererred holdings. But getting to the point of even being able to cross that bridge is an event to celebrate! It's a milestone, for sure. Enjoy it!! More to the point, I recognize that the recommended strategy is stupid-simple, but (thank you, Mr. Bogle!) IT WORKS.
BTW, now that I'm at the other side of it, I'm sooo glad I did as described way back when, scary as it was at the time. I'm now about a decade from Medicare, and (if all goes well, and God willing) not planning to tap SS until 70 or retirement accounts until 70 and a 1/2. I'm comfortable pulling the trigger on ER, knowing I have that "cushion". Good luck, OP!
P.S. Target date retirement funds are great - Until you reach this point. (Again, this is GOOD
, OP - high class headaches, for sure.) You might consider posting your info in the Help with Personal Investments sub-forum in the recommended format
. Once everyone here has a better sense of your available options, they can give more helpful and specific guidance on how to transition from your "all tax-preferred target date portfolio" to an investment portfolio that's going to be split between tax-preferred and taxable.