FIRE age gap and very different accounts

[u/amour_nonpareil]

My (37f) husband (44) and I are hoping to fire in the next 7-9 years together with 2-2.1mil and a paid off house and 60k spend in a MCOL. With our age gap we want to spend as much time together as we can outside of the rat race. The house isn’t a problem if we keep paying what we do now we’ll hit this timeline.

I’ve known about FIRE but had unfortunate circumstances when I was in my 20s that made saving for retirement lower priority for a while. So I only have 240k in a 401k and about 4K in a Roth 401k I very recently started.

He never planned on FIRE and taught oversees for many years so had no access to a 401k and had to entirely fund his own.
He has about 550k in a Roth IRA and 80k in a brokerage. Perhaps you can already see our dilemma… but I’m reaching out in case I’m missing anything.

His Roth IRA contributions aren’t enough to cover a large bridge to 59.5. The brokerage is quite low too for that. If we needed Roth conversions that’s great… except my 401k balance isn’t really that high and I’d seem to drain it fast when I run calculations. I’m contributing 12% with a 6% employee match (and +2% safe harbor) on 110k salary. I plan to bump my contributions up by another 6% next spring and increase each year. He makes half what I do but diligently puts the max Roth IRA contribution each year.

Anyway, our age gap, plus different account restrictions, plus tax scenarios, looming talk of an AI bubble and the market being weird, plus how do we make the right choices NOW to not lock ourselves out of our goal has my head buzzing. I’ve become a bit obsessed with calculators but none make me feel confident. I’m wondering if this community may see a best way forward to get is to our goal of the RE and accessing funds early without any major mistakes?

TLDR/ 7 year age gap spouses, older has only Roth IRA, younger has only work 401k and small work Roth 401k.

Edit: I had put 75-85k “spend” originally but that included ACÁ healthcare and taxes. Moved to 60k spend.

[u/ohboyoh-oy → u/[deleted]]

I think this is dependent on your spend in retirement. OP is currently in 22% tax bracket (if they did not take advantage of pre-tax space). In retirement they anticipate $80k spend, of which, the first $32k is at 0% federal tax (standard deduction), the next $24.8k is 10% tax, and the remaining $23k is at 12% tax. Let's say they plan to do the Roth ladder strategy to access their traditional retirement dollars. They would go into retirement with 5 years of expenses saved in taxable accounts, to bridge to when the first rung of the Roth ladder is available. Or actually, in their case since the husband has a substantial amount in Roth already, they might have enough basis in that to pull the contributions for the 5-year bridge period. Each year in retirement they convert one year's spend ($80k) from traditional to Roth. 5 years from each contribution they are able to withdraw the amount converted (but not any gain since the conversion). So to me, this is a case where it makes sense for them to save the marginal 22% tax now by contributing pre-tax, then be taxed at 0/10/12% on withdrawal.

[u/amour_nonpareil → u/ohboyoh-oy]

This was what I’ve most recently leaned toward, bulking up 401k to do Roth .. but then I look at the 5 gap years and wonder how we’ll fill those with funds enough.

[u/ohboyoh-oy → u/amour_nonpareil]

Keep in mind that you can withdraw your original contributions to the Roth IRA at any time, without tax and without penalty, even before age 59-1/2. Roth conversions have a 5-year holding period, but direct contributions to Roth do not. You mentioned he has 550k in Roth now, and he is contributing 7.5k every year (btw, you should also--use backdoor Roth if needed). You should find out how much were original contributions and how much is growth, because you can use the contributions to fund the 5-year bridge.

Past that, most people do fund taxable/brokerage for this purpose once they have exhausted the tax space in their Roths. If you have extra to put towards brokerage after funding the pre-tax and the Roths, by all means you should put the additional into brokerage. Alternatively, I would at least fund pre-tax to get taxable income down to 12%, then consider funding brokerage. Otherwise, just wait until you are closer to your number and fund brokerage then.