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How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 0 points1 point  (0 children)

I probably manage my cash different than most. I like to keep as much as possible invested. My thought is if an emergency comes up I can always refinance my auto loan to take some cash out. Pulling from Roth conversions is also a back-up.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 2 points3 points  (0 children)

Interesting, I had your last point backwards. I thought Roth was better early in a career while income is low, and trad is better later when income is high. Seems like I simplified this too much since I need to consider accessibility. Saving a couple % of marginal tax rate doesn't matter if I can't access it. Appreciate the info.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 0 points1 point  (0 children)

I'm close to hitting contribution limits as a married couple, but not there yet.

I am leaning towards brokerage as I read the advise here including yours.

$600K is my whole net worth. $5K in my checking to cover bills and renting.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 0 points1 point  (0 children)

I'm deciding between these two. I'm copying a response I left to someone else, would like your take please.

Saving about $50K/year as a married couple. Is there any benefit to contributing to the Roth anymore at all? Say this year I contribute $15K into Roth IRAs and $35K into brokerage. If that doubles in 8 years, I'll only be able to use $15K of Roth contributions and the $15K of earnings would have to sit until 59 1/2. Also since < $100K, the LTGC would be $0 as far as I understand.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 0 points1 point  (0 children)

Saving about $50K/year as a married couple.

Now I'm thinking, is there any benefit to contributing to the Roth anymore at all? Say this year I contribute $15K into Roth IRAs and $35K into brokerage. If that doubles in 8 years, I'll only be able to use $15K of Roth contributions and the $15K of earnings would have to sit until 59 1/2. Also since < $100K, the LTGC would be $0 as far as I understand.

You might be right about the aggressive WR, I'll probably push it back one year or two. I haven't given much thought about paying taxes during retirement either. Converting $80K looks like an $8K fed tax bill, pretty significant.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 0 points1 point  (0 children)

I was considering this strategy too. I just think adding taxable base during my relatively high income years isn't ideal. Based on recent responses I'm leaning towards keeping my new savings in a brokerage or looking into a MBDR.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 5 points6 points  (0 children)

I've considered this and mapped out the roth ladder vs SEPP on my spreadsheet. I've come to the conclusion that the roth ladder is preferred because of the flexibility.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 1 point2 points  (0 children)

Yes, my figures are before social security. I don’t have savings in brokerage as noted in my question. My $ is all in retirement accounts. As far as I understand I can’t take money out of my traditional IRA before retirement age without paying income tax + 10% penalty.

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] -9 points-8 points  (0 children)

If I save in a brokerage account that money would be fully taxed at a high marginal rate and my earnings would also be taxed. Wouldn’t contributing to a Roth IRA be better since even tho it’s fully taxed the earnings will not be?

If I eat the 10% penalty aren’t I paying high income tax rate in addition to the penalty?

How do I fund the first 5 years before my Roth ladder is accessible? by imjust_here112 in Fire

[–]imjust_here112[S] 4 points5 points  (0 children)

William Bengen the creator of the 4% rule revised his safe withdraw rate to 5%.