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Where should I save/keep my money if I plan to be FIRE?

Started by girgawyn, September 14, 2018, 08:11:56 AM

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Dear Financial Samurai Community,

I've read many posts on the blog but I have a few things that have always confused me that I can't figure out. First , as a guy in my mid 20s, where should I keep invest/keep the majority of my savings if I plan to retire way before I turn 59 1/2? 

I ask this because if I just max out my 401k and IRA and follow the SP-500 average return of 6-8% a year, I'll be able to retire in about 20 years  (and this is assuming those are my only savings and net worth).  But if I'm under 59 1/2, I can't withdraw anything from my retirement accounts to provide me with income so what is the point of saving in those accounts to try and become FIRE? Hopefully that makes sense.

Second, if I plan to have a big expense within the next 5-10 years (house,wedding,etc) should I save in a regular savings account first and then max out my retirement accounts so I'll have enough for the expense without having to take it out of my retirement account?

And lastly, what types of accounts and number of each type (investment, savings, checking, retirement, money market, credit cards, etc.) would people recommend I have? 

I guess to sum everything up, if anyone can show me the savings/money "flow chart" they believe I should have at my age , that would be really helpful in my quest to become FIRE.

Sorry if this is long winded I've just been stressing about these things for a few years.  Thanks for everyone's help in advance as I know this is a lot to help with.


P.S. I only have surface level knowledge about retirements accounts and the finance industry in general so I apologize if these are basic questions.



I am also a guy in my 20s and I go back and forth as well. I think to myself if I max out my 401(k) and get a healthy return I will have over $1 million easily by 40. However, I can't touch it until 59 1/2, so what's the point? I think that it comes down to balance. If you're able to max out your 401k right away so you don't miss it and get in that habit it will force you to start focusing on the income rather than the outgo. I think that too many people spend way too much time working on lowering their expenses versus raising their income. If you simply just max your 401k you will be financially strong very quickly, however you cannot touch it which makes it tough to retire early.

To counter the idea, I split up my savings. I have $10,000 in an online money market making 1.85% that I keep there in case I run into a sticky situation or have a 'rainy day'. This money is completely out of sight and out of mind otherwise. I also have a Roth-IRA that I contribute $175 a month to just to have a little after tax growth going for me. I plug away 7% of my compensation to my 401k to ensure I get the full company match always. Then on top of that I have a vanguard account where I send off 10% of my income straight into an S&P500 index. The vanguard account is eventually going to be used to buy real estate down the road so I set up the automatic transfers and forget about it. After all those contributions, I just pretend I only make what is left that way I am always paying myself first.

Focus on getting into the habit of living off of your cash flow after you tuck away your investments that way you're forced to either raise your income or stop paying yourself (which is never an option). If you want to raise your lifestyle, don't ever drop down your investments, rather work on building up passive income or your career to make up for the difference. Hope this helps.

PS. I know that it is tempting to want to think about retiring in your 40s, however, think about what you want to do long term. Many people wish they could just retire early and enjoy their life, but what does that enjoyment look like? Try and focus on building a brand or a side hustle that you love so you can transition into still staying busy after early retirement if that is your goal. Not to mention, most people have their prime earning years in their career between 45-55.
Very Respectfully,


This is great advice I really appreciate.  I guess its really up to finding a balance between saving for different things, both short term and long term.




The other thing is to not get so into thinking about it, rather just start executing. You'll be in a much stronger financial place if you just start chugging away at your financial nest egg now instead of trying to analyze the most perfect strategy.
Very Respectfully,


Hi Girgawyn,

I really wish I had the forward thinking you have when I was in my twenties. The fact that you are already actively investing, saving for retirement and are openly seeking to understand tells me that you will be just fine.

I am from the UK so the Pension rules are different over here but I have been following a number of FI blogs over the years as well as Financial Samurai and one article that is US based that always gets raved about is from the MAD FIentiest around how to access your retirement funds early, which may be worth a read if you have not already:

Personally, Hayden has offered some sound advice and I would just keep it simple, carry on educating yourself, make some mistakes early on and learn from them. My top tips would be:

1. Pay yourself first through automation.
2. Build up an emergency fund as it gives you piece of mind.
3. Keep debt to an absolute minimum.
2. Track your Expenses, savings Rate and Networth as this was a game changer for me.
3. Max out your employer match on pension contributions as it's free money.
4. Minimize Taxes at every opportunity.
5. Minimize costs on investing. In finance and investing the higher fees normally don't equal higher investor returns from my past experience.
6. Keep well diversified across multiple asset classes and savings vehicles.
7. Never stop learning and investing time in your personal growth.

Sorry I can't offer much detail around the savings vehicles in the US as per your post but one book I would 100% encourage anyone starting out to read would be Your Money or your Life by Dominguez & Robin as a starter and a more recent book would be The Simple Path to Wealth by the blogger JL.Collins.

Finally, as for your big expense in 5-10 years I would definitely keep this separate from your retirement savings.

Have a great Weekend !



You may be able to take money out of an IRA/401k before 59 1/2 without penalty using a SEPP  program.
Using a Roth IRA will with some conditions allow removal of contributions but not earnings before 59 1/2.

I think I have that right.


A couple of thoughts:
1.  It is great to be optimistic but do not count your chickens before they hatch.
2.  Front load (put money there first, or put in more money than the calculation says is needed) to the important stuff, e.g., retirement plan before expensive vacation.  If you reach your goal early, direct the freed up monies to other worthy goals.
3.  Whenever considering the "millions" you will have in retirement, run a comparison of your present (and desired) standard of living with a historical 3% inflation rate (much lower in recent years, much higher in other years).  Using the (approximation) Rule of 72, money doubles (or is cut in half) in 24 years.  The deceptively large "millions" may become quite disappointing.


I've got an after-tax investment amount by age guide for FIRE coming soon. Stay tuned! I assume most people will not like it because it is pretty aggressive perhaps.