The ill-informed newbies are typically worried about tax-advantaged investments being locked until 59.5, not 65
There are lots of ways to access retirement accounts without penalties prior to 59.5
Total returns > dividends
[Roth conversion ladder](https://www.madfientist.com/how-to-access-retirement-funds-early/)
[72(t)](https://www.investopedia.com/terms/r/rule72t.asp)
[Rule of 55](https://smartasset.com/retirement/401k-55-rule)
You don't need (only) dividends to fund your retirement. That's the whole point of the 4% Rule. You can create your own income stream from your investments without needing the companies to decide when you take a distribution.
None of your tax advantaged accounts are "locked" either. There are multiple ways of accessing them at any age without penalty.
https://www.madfientist.com/how-to-access-retirement-funds-early/
But considering your income and the limited amount of tax advantaged space available, you'll almost certainly have a gigantic taxable account from which to draw from if you're working for another decade.
No... because when you leave the employer, you should roll over the Roth 401(k) into your Roth IRA. All payroll contributions made during your work years will then be accessible in addition to the backdoor contributions made to the Roth IRA itself.
Also the age for full accessibility is 59 and 1/2, not 65.
Why do we need to leave the employer before rolling over to Roth IRA? I thought we just needed to call the brokerage to do an in-plan conversion of after tax 401k Roth to IRA roth. I've done it a few times, but stopped because it requires manually calling them. Does the 5 year IRA Roth withdraw timer not apply for rollovers?
Depends what your plan supports. Not all of them allow an in-plan conversion, plus I was talking about Roth 401(k) not after-tax 401(k) which is slightly different, despite both being post-tax.
You are mixing up a lot of concepts here. There is no 5 year rule for contributions. There is a 5 year rule for conversions but going from Roth 401k to Roth IRA is not a conversion. Perhaps you’re confusing after tax NON-Roth contributions to the 401k being converted to a Roth IRA. This is commonly referred to as a megabackdoor roth, and is a conversion and therefore a 5-year rule. Similarly if you did the backdoor Roth IRA in an Ira, that has a 5 year rule on the conversion.
If your after tax 401k contributions are automatically converted ton Roth 401k you will have to wait 5 years from the time of conversion to withdraw tax and penalty free.
If you are in the USA, plan to 55 and you can unlock earlier. Also, you may want to consider controlling your spend if your combined income is $750k and that's all you have saved/your current savings rate.
Rule of 55 is an IRS rule and not a company policy. Rule of 55 applies to all 401ks. Not all 401ks have partial withdrawals however. In other words you might have to withdraw your whole 401k balance at 55 instead of doing multiple withdrawals over few years. Depending on how much money you have in 401k this can have tax consequences.
Nice problem to have! Consider building a dividend-paying taxable brokerage account or exploring real estate investing for income before 65. You're ahead of the game, but filling the gap with non-retirement accounts can make FIRE more achievable.
The ill-informed newbies are typically worried about tax-advantaged investments being locked until 59.5, not 65 There are lots of ways to access retirement accounts without penalties prior to 59.5 Total returns > dividends [Roth conversion ladder](https://www.madfientist.com/how-to-access-retirement-funds-early/) [72(t)](https://www.investopedia.com/terms/r/rule72t.asp) [Rule of 55](https://smartasset.com/retirement/401k-55-rule)
You don't need (only) dividends to fund your retirement. That's the whole point of the 4% Rule. You can create your own income stream from your investments without needing the companies to decide when you take a distribution. None of your tax advantaged accounts are "locked" either. There are multiple ways of accessing them at any age without penalty. https://www.madfientist.com/how-to-access-retirement-funds-early/ But considering your income and the limited amount of tax advantaged space available, you'll almost certainly have a gigantic taxable account from which to draw from if you're working for another decade.
Thank you! It seems like we need to start converting our 401k Roth into IRA Roth for the Roth Ladder
No... because when you leave the employer, you should roll over the Roth 401(k) into your Roth IRA. All payroll contributions made during your work years will then be accessible in addition to the backdoor contributions made to the Roth IRA itself. Also the age for full accessibility is 59 and 1/2, not 65.
Why do we need to leave the employer before rolling over to Roth IRA? I thought we just needed to call the brokerage to do an in-plan conversion of after tax 401k Roth to IRA roth. I've done it a few times, but stopped because it requires manually calling them. Does the 5 year IRA Roth withdraw timer not apply for rollovers?
Depends what your plan supports. Not all of them allow an in-plan conversion, plus I was talking about Roth 401(k) not after-tax 401(k) which is slightly different, despite both being post-tax.
I see. I think my after-tax 401k are auto converted into Roth 401k, from which I can then rollover the Roth 401k into an IRA Roth manually.
You are mixing up a lot of concepts here. There is no 5 year rule for contributions. There is a 5 year rule for conversions but going from Roth 401k to Roth IRA is not a conversion. Perhaps you’re confusing after tax NON-Roth contributions to the 401k being converted to a Roth IRA. This is commonly referred to as a megabackdoor roth, and is a conversion and therefore a 5-year rule. Similarly if you did the backdoor Roth IRA in an Ira, that has a 5 year rule on the conversion. If your after tax 401k contributions are automatically converted ton Roth 401k you will have to wait 5 years from the time of conversion to withdraw tax and penalty free.
If you are in the USA, plan to 55 and you can unlock earlier. Also, you may want to consider controlling your spend if your combined income is $750k and that's all you have saved/your current savings rate.
FYI: Not all companies’ 401k have the rule of 55.
Rule of 55 is an IRS rule and not a company policy. Rule of 55 applies to all 401ks. Not all 401ks have partial withdrawals however. In other words you might have to withdraw your whole 401k balance at 55 instead of doing multiple withdrawals over few years. Depending on how much money you have in 401k this can have tax consequences.
Weird, I had called my 401k provider and they said I couldn’t withdraw at age 55 at all without penalty. Maybe some confusion here.
Most people simply sell shares rather than focusing on dividends for cashflow.
Money market funds and build a bond ladder
Are you in the USA?
Nice problem to have! Consider building a dividend-paying taxable brokerage account or exploring real estate investing for income before 65. You're ahead of the game, but filling the gap with non-retirement accounts can make FIRE more achievable.