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Put my IRA on hold to focus on after-tax investment account?

Started by will, December 10, 2018, 07:32:39 PM

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will

After reading https://www.financialsamurai.com/after-tax-investment-amounts-by-age-to-retire-early/ it's clear to me that if I want to reach my goal of financial independence by 45 (I just turned 30), I need to make some changes.

I am maxing out my TSP (essentially a 401K) ($19,000 max in 2019), and my wife and I have each been maxing our respective IRAs for the past few years.  (I wish we had started earlier, but don't we all.) Since I can't touch my retirement accounts until at least age 59.5, we obviously need to bridge the age 45-60 gap with our joint investment account (currently all in VTSAX but our IRAs are more diversified). My wife plans to stop working in 2019 as kids come along, and I will likely continue to make $130-140K/year. Fortunately, cost of living in Mississippi is relatively inexpensive.   

I want to keep fully funding my TSP and wife's IRA, so in order to afford increasing what we are contributing to our joint, I feel like we may need to stop or minimize what is going into my IRA. Per Sam's article, in our 30s, we need to focus on doubling our after-tax accounts compared to our pre-tax. I like to read that as double the account(s) you'll use to bridge the gap before you can start withdrawing from designated retirement accounts at 59.5. In order to reach that goal, we need to start putting a considerable amount into the joint.
 
We currently have about $60K in retirement accounts and only $25K in our after-tax joint. Not ideal. We're behind, but my goal is to save/invest 40-50% of my income starting in 2019. We are also wanting to get into REI in 2019, buying at least one rental property.

mbb_boy

There are plenty of ways to access money earlier than 59.5, so keep maxing your IRA. Lots of discussion on this if you search other places (FIRE reddit for example) but the two primary tools:

1. ROTH ladder - only requires 5 years of advance planning, which you have. Convert from traditional accounts into Roth, wait 5 years, and then the money counts as a Roth contribution and can withdrawn without penalty
2. Use rule 72(t) / SEPP - lets you access funds earlier than 59.5, but on a pre-determined schedule. Not very flexible, but again you have plenty of time to plan