I want to retire at 58 with $3.4 million and leave my tax-advantaged accounts untouched – is my plan solid?

Understandably, anyone who wants to achieve FIRE (financial independence, retire early), never mind Chubby FIRE, will have a specific net worth in mind by the time they hit a certain age. This is one of the most universal truths about being a part of the FIRE movement. 

In the case of one Redditor posting in r/ChubbyFIRE, you have someone 54 years old looking to hit the retirement button when they turn 62 and their spouse turns 58. The goal is to retire sometime in 2029 with all expenses covered by interest-bearing accounts. 

As is usually the case with most Redditors posting in r/ChubbyFIRE, this individual has a lofty but seemingly attainable goal based on their current net worth. 

Current Financial Situation 

In one of the rarer cases on Reddit, we almost get too much information from this Redditor, which is refreshing as we often have to beg for more details in the comment sections. Thankfully, we know this Redditor has a household income of $390,000 per year, a paid-off home, and a fully funded college savings account of $425,000 for kids ages 13 and 16. 

Regarding expenses, the family currently spends around $200,000 annually between their cost of living and another $100,000 spread across taxes, Social Security, etc. The hope is that by 2028, they can reduce their spending to around $120,000 net annually or around $170,000 gross. 

Currently, they have a net worth of $3.4 million, which is spread between a $2.75 million tax-advantaged 401(k) and IRA accounts, another $300,000 in a Roth 401(k), and $350,000 in a brokerage, which is spread between vanguard funds, CDs, and treasury bonds. 

The Goal

The goal is to retire by 2029 at age 58.5, with their expense contributions covered by up to $10,000 in interest plus a $50,000 brokerage withdrawal. The hope is to continue building up their current taxable account from the $250,000 it has now to $400,000 by the time they turn 58.5. 

When the Redditor is 62 and the wife is 58, the goal is to have her retire and have everyone on ACA for three years until he is eligible for Medicare while the family remains on ACA. 

The hope is that by the time the Redditor turns 62, they will be able to live off the wife’s income initially while remaining solvent with the remaining accounts available to withdraw from to cover the (hopefully) reduced expenses. 

What Is Possible? 

The ultimate goal of the Redditor is to retire and stay retired without touching the tax-advantaged account of $2.75 million, which doesn’t seem all that impossible. One Redditor suggests that this individual can transition smoothly into retirement while slowly transitioning from higher-risk investments to more fixed-income investments. 

The challenge with this goal and what will ultimately make or break this plan is that they need to reduce their spending. With a home that is paid off, there is no reason this family needs to maintain its current spending levels once there is a transition into retirement. 

If, and it’s a big if, they can reduce overall costs and “economize,” as the original poster suggests, there is hope they can leave their tax-advantaged accounts alone, at least for now. However, another Redditor suggests that the Redditor might also want to consider a Roth conversion strategy, which would help reduce their overall tax burden from paying for both ACA and Medicare.

The challenge with the Roth conversion approach is that once they start taking RMDs (required minimum distributions), they could wait until they have lower earning years and then convert some of their income. 

The Target Number

In the comments, we finally learn the target number the Redditor wants to hit as they recognize they need around $5 million to hit a 4% safe withdrawal rate of $200,000. If they can reduce their gross spending to $170,000, they could do a 3.4% SWF on $5 million. Curiously, to hit this SWR, they would need to use their tax-advantaged account, which is contrary to their initial question. 

This said, if they can grow their $3.4 million net worth to $5 million by the time the original post turns 62, the family should be able to hit their target goal, provided the rest of this growth happens in the non-tax-advantaged accounts. 

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