Sense check and potential next steps? : 40M, family of 3, aiming to retire at 45. Current ~$1.28M invested. Does the SEPP + ACA plan hold up?
Situation
Age 40, spouse (earns ~$24K), son age 10. Household income is mostly mine (~$130-140K).
Goal: stop working at 45 or take on less stress work if I have to.
Expense: Approx 75 - 80K / year.
Assets (approx.) :
401k = $827K
Taxable brokerage = $182K
HSA (invested) = $105K. Total = 113K
Cash/CDs/HYSA = $130K
Roth IRA = $42K
Investable total = ~$1.28M
Not counted: a 529 with $65K, and percentage in few shared properties.
Current allocation:
401k: That's 90% stocks ( snp500, large cap, world markets etc) and 10% bonds.
Brokerage: voo, schg and vxus, plus some legacy single stocks. Plan is to fund minmium 200 - 250/ week for another 5 years if possible.
Roth: VOO, SCHG, SMH, VXUS, maxed each year.
Plan:
- At 45, start a 72(t) SEPP on the 401k to bridge to 59½.... this seems very risky due to time horizion till 60.
- Fill the rest of spending from the brokerage, the Roth (contributions only) and the HSA.
- Claim Social Security at 63
My own Monte Carlo (10,000 runs, simplified): at $75K/yr, about a 79% chance the money lasts to 95. Assumptions: 8.5% return on the 401k, 7% on liquid assets, 3% inflation.
Questions:
If you are in same situation or has passed through same scenario...
Is a ~79% success rate over a 50-year horizon acceptable, or should I work 1-2 more years? Do you use guardrails or a variable spending rule?
Would you size the SEPP smaller than my full spending need to stay in a better ACA subsidy tier, and fill the gap from Roth and brokerage?
3)SEPP vs a Roth conversion ladder for a 45-year-old. Am I missing a better bridge?
4)How do you handle family health insurance costs from 45 to 65, given the post-2025 subsidy cliff? what are the options for health care?
Is 10% bonds plus $130K cash enough to protect against sequence risk in the first 5 years?
For FIRE planning, is a 3.25-3.5% withdrawal rate the right benchmark for a 50-year retirement?
What is the withdrawal % of portfolio are you considering or considered? Given it needs to work for 50 years from 45 to age 95..
Appreciate any input and feedback.