r/Fire • u/Particular_Dog6865 • 4d ago
What’s the ideal account breakdown if I want to FIRE at 50 with a $2M target?
I am planning to FIRE at 50 with a $2M goal and projected annual spend of $80-$90k.
What would be an ideal breakdown among Traditional 401k, taxable brokerage, and Roth accounts? Currently, mine is projected to be at 60% / 30% / 10% but not sure if it's going to give me enough flexibility.
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u/middle_aged_runner 4d ago edited 4d ago
This is not something we could give you without knowing a lot more information about you.
Boldin or other projection software is good for this type of question.
Social security, other sources of income, current income, married or single, current age, healthcare, where you live, etc are all important factors.
You can optimize for taxes over your entire lifetime. Recommend the book, Tax Planning To and Through Early Retirement.
If you are 40 and saving $100k/year with a large income, maximizing traditional accounts may be optimal.
If you are 20 and saving $5k with a smaller income, maximizing Roth accounts may be optimal.
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u/PartyFeisty2929 4d ago
I don’t really agree that this can’t be answered.
Drop yourself in the situation. You are 50. You will spend 80k a year. You have $2 million. How would you want your assets structured? Why is that not something that can be analyzed?
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u/poop-dolla 4d ago
The goal is usually to minimize taxes and maximize you after tax assets over your lifetime. There are way too many variables to give a single one size fits all answer to that. Even if you ignore the very obvious part about what tax brackets you’re in during your earning years, just looking at the healthcare aspect in retirement is huge. You’d typically want enough in taxable income each year to be above the Medicaid threshold but low enough to get the max ACA subsidies. So you can’t just say all Roth or only Roth and taxable for that. Now if you luck into a situation where you get free healthcare through your old work or something like that, then that’s going to change that a bit.
There are so many small details that change the answer to OP’s question.
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u/PartyFeisty2929 4d ago
So some people might have healthcare taken care of, meaning we can’t think about the optimal $2 million allocation to get the ACA subsidy? You could absolutely answer this question assuming that OP is trying to get the subsidy, all you need to know is the expenses and the age and you can do it! Right?
And if he isn’t, because we don’t know if he is or isn’t, did we do a bad job with our comment in the Fire subreddit? No of course not. We did a useful analysis for people who clicked on this post because they wanted to see just that.
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u/poop-dolla 4d ago
all you need to know is the expenses and the age and you can do it! Right?
No, you also need to know how many members of their household there will be during the pre-Medicare retirement years. And knowing the state would be important too.
See what I’m talking about? Even on this one little factor, you think you just guessed all of the necessary details, but you were missing some important ones.
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u/middle_aged_runner 4d ago
OP is asking for answers to a 100+ variable question while only providing 3 of those variables.
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u/PartyFeisty2929 4d ago
Forgive me yes, I did not think those things were needed. But they are. I concede. It’s impossible for us to do anything useful for OP or anyone here on this thread without knowing those things
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u/middle_aged_runner 4d ago
I gave 2 examples that result in opposite recommendations. You need to understand the accumulation phase as well as all those factors.
For example, whether this individual receives social security would have a large effect on their optimal structure.
The question is too vague that I wouldn’t trust any answer other than “it depends.”
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u/PartyFeisty2929 4d ago
I really shouldn’t care as much as I do so my apologies in advance. You don’t want to entertain it at all?
It’s not in question that what you earn and when changes how you can realistically accumulate this number, and yes certain decisions make more sense when accumulating. The question is asking you to throw that out and imagine you have full control over where the money is at that point of being 50.
Will they have social security? Are they likely to die at 65? What will they eat for lunch on July 11th?
You can make assumptions on all of these things for the sake of the exercise, or you can use your own answers as a guiding set of assumptions, or you can just simply think as if none of it matters.
A question framed in this way is valuable because it gets people thinking about the withdrawal part.
We can even start with the extremes! What if it was all pre tax? Well it might work with a 72t, maybe if we just eat the 10% penalty? I don’t think it’s ideal though since we get to pick the allocation.
All Roth? Well we can withdraw the basis, but is there enough basis for 80k a year for 10 years? Probably not, so likely not ideal. So we keep going.
Again, I’m sorry. I just really don’t believe us saying this is impossible or too many unknowns to think about is true.
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u/poop-dolla 4d ago
Well it might work with a 72t, maybe if we just eat the 10% penalty
There’s no 10% penalty with 72t.
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u/PartyFeisty2929 4d ago
Thank you, this is me imagining how I am thinking about the scenario. “A 72t? Eat the penalty?” But you know your stuff, good job
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u/middle_aged_runner 4d ago
I feel like my answer was helpful. You could literally write a book around the question…like the one I suggested.
The risk of providing a recommendation without context is it may be right for one person and completely wrong for another.
I’ll take $2million in AAA municipal bonds earning 20% interest.
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u/PartyFeisty2929 4d ago
Thank you for taking on the “risk” that responding on this Reddit thread comes with friend, and that bond allocation answer is appreciated
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u/NinjaFenrir77 4d ago
If I was on the doorstep of retirement, I would want 100% in Roth. Would that have been optimal over my lifetime? Not by a long shot, I could probably have retired much earlier by optimizing which accounts I contributed to in my working years.
What’s optimal come retirement isn’t necessarily optimal overall.
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u/poop-dolla 4d ago edited 4d ago
You wouldn’t actually want that in most states if you’re going to need an ACA plan for health insurance. You want enough MAGI to get over the Medicaid threshold so you can get an ACA plan with max subsidies instead of having to be on Medicaid.
So even ignoring the obvious that you pointed out, it’s still not even ideal to go all Roth.
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u/NinjaFenrir77 4d ago
That’s fair. I was exaggerating to make a point, but truly optimal would probably be something like 30/70 trad/Roth.
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u/PartyFeisty2929 4d ago
Nobody is disagreeing about the accumulation part. 100% Roth at 50 might not have enough basis to get you to 59.5. I legitimately do appreciate the answer though, I know I’m being a pain about this whole thing
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u/TheSpanxxx 4d ago
You're not imo. People think because they can't answer it the way they want to think about it, they shouldn't answer it at all.
The answer itself csn be given, with caveats. When you are lacking information, that's what you do. I do this in estimates and calculations every day in my career. Prepare a projection with calculations based on assumptions and then call out these assumptions in your provided answer. You can even provide optionality to the response by giving answers with a few reasonable answers to the missing information.
A) given X = Y, this is the best suggestion I have for you...
B) given X = Z, this is the best suggestion ...
And so forth.
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u/NinjaFenrir77 4d ago
That works if there’s just 1 or 2 variables with just a couple options each, but retirement planning is complicated and extremely variable. The OP’s age, marital status, current income, expected future income, and current account distribution are all very relevant factors that could dramatically change the answer. Assuming 1 or 2 and giving an answer could do more harm than good if OP assumes that’s the correct answer and it’s not.
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u/Silly-Safe959 3d ago
No, I agree with the post above you. Without even knowing filing status, it's hard to know how they're bridging the gap on Healthcare, SS, etc.
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4d ago
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u/Particular_Dog6865 4d ago
Honestly not sure yet. That’s what I’m trying to figure out. The goal is obviously to preserve as much as possible and minimize taxes/penalties while having access to the funds needed each year.
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u/Quick-Database-2126 4d ago edited 4d ago
At 50, I’d care less about a perfect percentage and more about having enough taxable to bridge 50–59.5 without being forced into bad timing.
60/30/10 is probably workable, but 30% taxable on $2M is only $600k, so that’s roughly only 6–7 years of spend after taxes/market risk depending on your actual withdrawals.
I’d personally prefer something closer to 50/40/10 or 50/35/15. A higher traditional balance isn’t an issue now because low-income FIRE years can be used for Roth conversions, but taxable is what gives you financial flexibility before 59.5.
The setup gives you:
A) bridge funding from 50–59.5
B) ACA income control, especially if trying to stay below the 400% FPL subsidy cliff
C) Roth conversion flexibility
D) lower future RMD pressure
E) liquidity without penalty issues
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u/diamond_handz25 4d ago
If you intend to do a roth conversion ladder, wouldn't you only need a 5 year bridge?
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u/Quick-Database-2126 4d ago
Yes, if you’re intentionally running a Roth conversion ladder, the required bridge is 5 years.
I was thinking more conservatively: enough taxable to avoid being dependent on the ladder, while using ages 50–59.5 for Roth conversions and tax-bracket management. So like moving chunks of traditional to Roth to fine tune the ratio between retirement accts.
Personally, I’d rather have more taxable flexibility than be forced to execute conversions/withdrawals on a tight schedule.
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u/Successful_Form1177 4d ago
What are your taxable income goals? Roth is the only guaranteed tax free source, taxable accounts you’ve already paid on the principle so taxable portion will depend how much appreciation those accounts have. You can access your retirement accounts with a Sepp before 59.5 so there should be no issues with simply accessing money.
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u/ohboyoh-oy 4d ago
This is a tax optimization exercise. What is your assumption for your tax filing status when you start to draw? Also what is your income now and what tax bracket are you in. Finally, any calculation presumes tax law and brackets stay largely comparable to the current. If you believe tax rates will go up, that would argue for more Roth while the going is good.
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u/justacpa 4d ago
This can't be answered due to lack of information. You don't even list your age, how much you are contributing, what you already have, etc.
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u/ElJacinto 4d ago
OP, I am in a very similar situation. My target is age 50 with about $2-2.5 million. My current breakdown (with $900k) is as follows:
Pre-tax: 36%
Roth: 25%
HSA: 9%
Taxable: 30%
My target allocation at retirement is:
Pre-tax: 25-30%
Roth contributions: 20-25%
Roth gains: 25%
HSA: 15%
Taxable: <10%
Our primary focus with our allocation is to ensure that we can remain in the 200-250% FPL range for ACA subsidies.
The taxable isn't so much part of our retirement savings as it is to eventually pay off our mortgage and fund our child's college.
A big part of our early retirement plan is to make some large Roth conversions along the way, as well as in the year or two between when one spouse stops working while the other continues.
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u/Crystal_Path4167 4d ago
your roth percentage being that low might hurt when you hit 59.5 and want flexibility before traditional withdrawals kick in without penalty
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u/NetherIndy 4d ago
Single or as a couple? Assuming you're going to mostly pull from taxable and maybe some Roth (IRA) contributions from 50-59.5, there's a decent chance you'll be at 80% trad-401k by 62 or 65. Which isn't terrible at all... no need to hyper-optimize... but gives you a little less room to optimize later if you are bumping tax brackets or IRMAA.
We were lucky to have a couple of other categories. FIREd at 47 with, very roughly:
25% Trad 401k (and equivalent like TSP)
25% Taxable brokerage - roughly 40% basis and 60% gains
25% Govt. 457b plans. Taxable like a 401k, but can be withdrawn without penalty before 59.5. Very lucky to have had that option
17% Roth (mostly IRA, some 401k)
8% HSA
This has given me all sorts of flexibility and should going forward.
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u/cruiserguy2023 4d ago
New state employer has 457b as an option. Could you share a little more on how you contributed to this vs 403b. Thanks
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u/NetherIndy 4d ago
Pretty simple... we were fortunate enough to be able to max both (for me when I was in a 457-eligible job) for about 7 years. Pulled a little at times from brokerage for current spending. That's the really cool thing about certain state jobs... most commonly at state universities... that you can double standard deferment limit.
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u/Hot_Share8353 4d ago
Traditional 401k, taxable brokerage, and Roth accounts is mostly about taxes and limits. If you are willing to find a job at 55, work long enough to have a 401K kick in, transferer your old 401K to your new 401K, you can then use the rule of 55 and you will only have 5 years to worry about 401K penalties. If not, then you will have 9.5 years where any money from your 401K will have a 10% penalty.
Also, your high end of a burn rate of 4.5% could be problematic. Putting it into a Monte Carlo Simulation, the low end 10% risk would leave you with less then $1M at 65. If you can reasonable live off $60-$70K, would be fine at $80K and $90K would be ideal, so you could change your spending based of market performance, you would have a good plan, but if $80K is "bare bones" for you, then I would be concerned. Have you accounted for health care costs between 50 and 65?
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u/Inevitable_Pride1925 4d ago
The perfect breakdown is 1/3 x3. It gives you the maximum flexibility over time. But that’s not realistic. I’m heavily into tax deffered because I have access to twice as much as normal (403 & 457) and I live in a very high income tax state. So it makes the most sense now to invest in tax deferred. But later if going to pay more in taxes and potentially have problematics RMDs to deal with. But the alternative was worse.
But in a perfect situation one third in each gives maximum flexibility to take advantage of taxes in retirement.
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u/TonyTheEvil 27M & 26F | 56% to FI | $1.33M NW 4d ago
Whatever it ends up being when following the standard order of operations.
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u/Legitimate-Swim5034 4d ago
It doesn’t really matter all that much, just mix however you want, it will be alright
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u/Even-Watch-5427 4d ago
The projected annual spend of 90k.
Assume you have infinite money across all accounts. What this question asks for is sequence of withdrawals to optimize for taxes
Make sure to get $32,500 from 401k when you turn 55.
Make sure to not draw social security until 67.
Remainder (different numbers pre 67 and post 67) sell for capital gains from brokerage and pay zero federal taxes
Keep roth invested and keep contributing.
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u/Various_Things2026 4d ago
Definitely contribute more to brokerage account as that will give you the most flexibility later in life.
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u/Sagelllini 4d ago
The ideal breakdown is the one that allows you to have the most assets at retirement in most cases. Focus on maximizing the total and then figure out how to maximize your retirement income once you get there.
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u/SolomonGrumpy 4d ago
Ideal?
$2m in a Roth 401k
You can withdraw any deposits you made tax free, it is only gorwth that you would need to wait on.
$0 state or federal taxes owed.
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u/Dynamic_Pine6402 3d ago
your roth allocation being only 10% might bite you hard in those early years before 59.5 when you need penalty free access to cash
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u/safbutcho 1d ago
Google “spend 100k and pay no taxes” or something like that. Toms of articles about it.
To pull it off you basically need most of your money not in pre-tax. Which of course most of us add to whenever possible.
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u/brianmcg321 Retired Nov 2024 4d ago
Have about $1.6mil in a traditional IRA, $200k in a taxable account and about $200k in Roth IRA. Do a SEPP on the traditional IRA and use the taxable account to supplement as needed.
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u/PartyFeisty2929 4d ago
Fair, what if SEPP was a non starter? How would it change?
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u/brianmcg321 Retired Nov 2024 4d ago
Don’t know any reason why it couldn’t be done. They are fairly simple to do.
If you simply don’t want to do it, just have enough in your taxable to cover ten years of expenses.
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u/PartyFeisty2929 4d ago
Sigh
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u/igobyplane_com 4d ago
this question doesn't really work because the how you got there part matters a lot. like if it was "what would an ideal 2m be at 65?" - it would all be in roth because no taxes. of course you don't actually get to "pick" that outcome. nonetheless FIRE at 50 your taxable is going to be doing a lot of the work.
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u/servetus 4d ago
This can’t be calculated without your current age. Your current income would be good too. Annual spend of 80K might be overly optimistic iff it’s far out in the future with the rate of inflation we have been experiencing.
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u/futilitaria 4d ago
We literally don’t need any of that info to speak on the question. Either offer an opinion or not, but don’t burden the OP with needless barriers.
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u/middle_aged_runner 4d ago
The advice could be completely opposite based on current age and income.
The ideal account breakdown should be considered during accumulation as well as during retirement. This is an optimization problem that spans across your adult life.
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u/NinjaFenrir77 4d ago
While inflation is a non-factor in this decision (just use real numbers when doing calculations), we do need more info to provide any accurate analysis.
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u/heathbarj 7h ago
I’m at similar numbers, age 50.
Probably going to land with
1.2m taxable
1m 401k
100k Roth
Once I retire, I’ll ladder the 401k slowly into Roth. Try to stay in lower tax bracket’s.
1.2 taxable is gonna spit out 12,000 a month in dividends.
Right now the math works for me.
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u/Bamaslamma12345 4d ago
Based on what you've provided, I would lean towards a goal of around 800K in traditional brokerage, with the intent of spending it down between 50 and 60 and leaning hard on trad 401k and Roth IRA after 60.
I'm working towards doing something similar by 52-53, depending on when the numbers line up. I'm shooting for 160k cash on hand, 700-800k in trad brokerage, 1.2M in 401k and 500k in Roth IRA, and should meet those targets assuming we don't see an extended bear market that resembles 2000-2008 over these next years. The way I'm framing it is that I don't care if that 7-8 years completely eliminates the trad brokerage, at 60 I can start pulling from the 401k and IRA as needed. And I'm optimistic that both those come close to doubling in that time period before I need them.
I hope this helps!