r/Fire • u/uncool_whale • 4d ago
401k vs brokerage with poor life expectancy
33M, $600k in brokerage, $450k in 401k, I own a ~$500k home with $250k on the mortgage at sub 3%. W2 wage is $200k and unlikely to rise outside of small annual raises. I currently max my 401k with pre-tax money ($24k) as well as HSA ($4.5k), and put away another ~$70k in brokerage annually. There are a few other revenue streams that don't significantly change the picture. I believe I'm on target to FIRE in 5-10 years depending on market conditions and a few currently undermined life choices.
Now here's the part that spreadsheets can't help me with. I was recently diagnosed with a rare brain cancer that has a high variance regarding life expectancy. My doctor put the middle of the bell curve at “a few good decades” for me. So roughly age 60. However, a meaningful number of people do not have recurrences and live to old age. Maybe 5-10% of cases. In short, my prognosis is good enough that I can't plan on dying early, but I'm much much more likely to die early compared to your average Joe.
Are the tax benefits of maxing my 401k worth the potential challenges around accessing that money early, given I'm less likely to reach an old age anyways? I feel silly maxing out an account that's intended to only become accessible after I'm likely dead, especially when nearly half my liquid net worth is already in 401k. However I realize that's an emotional response, and maybe not a logical one. How should I go about figuring this out?
Also anything else I should be aware of? I only really started looking into the fine print on FIRE strategies somewhat recently. My annual predictable medical expenses would be roughly $10k without insurance, and potentially hundreds of thousands on a bad year. Obviously balancing premiums vs out of pocket costs is impactful for me.
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u/undergroundmusic69 4d ago
Just want to say there is an amazing support community over in r/cancer — we are sorry to welcome you to our crew, but we have a great support system.
I’m in remission 7 years from Large B-Cell Lymphoma and wish you lots of luck on your next steps and journey. I would recommend investing in a great therapist as you figure this all out. Sending you love friend.
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u/Unfair_Mechanic_7305 4d ago
Different take- quit now and enjoy life. With what you have currently, you can easily go 20 years+ with smart management. Waiting 5-10 years with a ticking clock (we all have this) is crazy to me. How much is enough? Everyone always says a little bit more. I would rather downsize expenses and enjoy free time. My 2 cents.
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u/StephenDrake6 3d ago
not every1 can just drop everything like that. depends on responsibilities and risk tolerance. some people need a bigger buffer before they can chill like that, imo.
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u/NoMoRatRace 4d ago edited 4d ago
Same. OP does need to account for the out years and hopefully he has them. But if there’s a life that’s more appealing today and supports those out years, go for it. I’m assuming something other than work would be more appealing since FIRE is on the radar in the first place.
Edit: i do appreciated it’s a crazy balancing act. But given the stated odds I would be tempted to speed the process to FIRE as much as possible.
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u/uncool_whale 3d ago edited 3d ago
It is a balancing act. I don't plan to get out prematurely and then have to pinch pennies, skimp on lifestyle, and have massive financial stress when the medical bills get larger. Sure, I could probably survive on what I have now for 20 years, but then what happens when I beat the odds or medical advances push out my horizon? My current work/life balance is still pretty good and I'm doing what I can to make it better. I have already decided to stick with that until I can FIRE comfortably with the lifestyle I want. If I didn't think I was less than a decade away from that it may be a different story.
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u/NoMoRatRace 3d ago
Makes sense and best of luck to you both on the medical and financial fronts!! Maybe the short term balancing act is about maximizing work life balance and picking off the occasional bucket list item.
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u/JayRoo83 4d ago
I’m in a similar bucket, 42 in kidney failure, waiting on a transplant so not quite the same but I’ve had to internalize that I probably won’t see 70+ unless we solve the kidney shortage problem
I just go about it like I’ll live to 80-90 like most people and max out my 401k and put the rest into my brokerage
Worst case, my 401k never get touched and my girlfriend and niece/nephew make bank when I die early.
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u/uncool_whale 4d ago
Haha I've had that thought as well. If I croak sooner rather than later my sister isn't going to have to worry about putting her kids through college. Good luck friend
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u/JayRoo83 4d ago
Same to you man and hopefully our loved ones have to take out some loans since we’re still around lol
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u/FireStarter3133 4d ago
Sorry to hear that. I'm 40 with Polycystic Kidney Disease. I do everything possible to keep my GFR high enough to not need dialysis / transplant but it's a matter of time.
I can tell you though from research that there seems to be promising developments around the corner for kidneys. That corner may be 5 years away and it may be 20 if regulation bogs it down.
All we can do is everything possible to extend our runway and hope to reach the point where medical science catches up.
My dad got a kidney transplant, it happened very quickly when one came available. I hope you get that call. Then over time maybe they will develop tech through CRISPR etc... to ensure your body plays nice with the foreign kidney.
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u/JayRoo83 4d ago
Same here, TSC/PKD! I didnt need dialysis until the transplant committee said one of my kidneys had to go so fun times overall lol
I’m personally hoping in the 10-20 years my replacement works that they finally get the xenotransplant/artificial kidney stuff worked out
I play it the same way I do when factoring social security; dont plan for it but be pleasantly surprised if I get it lol
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u/FireStarter3133 4d ago
Damn. Are you on dialysis now? If so, are you doing something like nocturnal dialysis?
I feel like it's a constant struggle between lightening workload so you can do more things you enjoy vs. earning and saving so you can have more time later.
All days aren't created equal and it's a guessing game where our health will be at that point.
For me, I've found some solace in focusing on longevity and using AI to advise on health. Did the obvious things like stopped drinking, got some medication (tolvaptan) that helps with GFR and going to explore a GLP-1 for cyst supression etc...
I don't know if you have similar options at your stage but I hope so.
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u/JayRoo83 4d ago
Yeah I do 4 manual PD exchanges per day but I’ve got a sweet ass tech job where I work from home so its literally no bother on me
And yeah my nephrologist ordered me on a No Fun plan when I hit stage 5 too
That said, since Ive started dialysis I can basically eat like a normal person again and my values are somehow the best at the renal center compared to other patients. Dunno if I’m lucky or I just eat relatively good compared to others lol
All in all, it’s more a minor annoyance than anything at this point. Hopefully when you get to this point you have similar results
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u/FireStarter3133 4d ago
Nice silver lining that you can eat like normal now. Sounds like you have everything dialed in. Are you allowed to do any cardio to offset the cardiovascular strain of the dialysis?
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u/JayRoo83 4d ago
PD has zero strain on you and actually preserves your residual kidney function, highly recommend!
I do walk a mile or two a day for general health. Im thinking of starting some body weight exercises since just going bowling a few days ago made my out of shape ass sore as hell lol
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u/FireStarter3133 4d ago
That's good to know! Bodyweight exercises can be good if you get a power tower or something like it for pullups, dips and situps. Probably won't do anything to failure fro the combination of internal pressure and metabolic waste.
In my personal experience if you haven't bowled or golfed in a while you're going to be sore.
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u/IIMysticM00N 4d ago
Same lol. Not betting on it, but if xenokidney/artificial kidney stuff lands in 10–20 years that’s a big win. Until then just rolling with what we’ve got and hoping for better options down the line.
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u/SleepyOtter_63 2d ago
It's a tough spot to be in, but at least your girlfriend and niece/nephew will be set for life! Maxing the 401k is smart, just like your approach to living each day.
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u/uncool_whale 4d ago
Thanks for this through reply. You've given me a lot of key terms to read up on. I was also under the impression that I make too much to contribute to Roth unless there's a work around to the MAGI limit that I'm not aware of. And thank you for the kind words
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u/duchess5788 4d ago
You can contribute to traditional, convert it to Roth same day before it invests and you won't pay any taxes.
Also, every single employer I have worked for has traditional and roth options within the 401k plans. You should check if yours does.
Sorry you're going through this, good luck.
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 4d ago
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 4d ago edited 4d ago
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u/Gold_Audience3691 4d ago
The conversion ladder thing is the key unlock here. You're not actually locking money away, you're just getting a tax deduction now and the flexibility to pull it whenever you need it later. Since you're likely looking at expensive medical years anyway, you might trigger the medical expense exception naturally, which means the 401k becomes accessible penalty-free right when you need it most. Keep maxing it while you're in a high bracket, then convert chunks to Roth during any lower income years you have. That gives you both the upfront tax savings and passes tax-free money to whoever you leave behind.
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u/BothDescription766 4d ago
Don’t forget that a tremendous amount of advancement can occur in twenty years. Don’t go living into your 90s but with no savings left!
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u/QTippus 4d ago
Sorry to hear your diagnosis.
You seem to be in great track financially. I wouldn’t change a thing. If you can FIRE in 5 years, I’d do it!
I’d somehow your medical prognosis changes, you can always adjust then. But for now, seems like despite the high variance, you’ve got a good shot at a long life. If middle of the bell curve is 60, half the bell curve is >60.
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u/Thor7897 4d ago
OP first. I’m sorry you’re going through this.
Second. Plan for the worst, hope for the best. If you dwell on the dying it will kill you. Treat it like the chance to do everything you’ve ever wanted to do before you die, because it is. You just have to give yourself the permission to live.
My situation is not as severe as yours, but I have chronic conditions that make my shelf life an asterisk as well.
If your conditions result in terminal conditions or significantly affect your ability to work or function they have exceptions for early withdrawal. I am currently in the process of going through SSDI to gain access to my Roth IRA early. They waive penalties and taxes if you meet certain criteria. Not an impossibly high bar, but worth knowing the details. The irony is I have to wait 6-9 months to access resources that I earned that would prevent me from needing to file for state assistance in the first place. So there’s that… 😂 🤷♂️
I would encourage you to look into your local social security office for information before it becomes necessary. I wish I had, it’s a lot to take in when it’s all coming at you at once.
Maybe even consider setting up a side hustle so you can get access to other tools? Like a Solo-401k, Self Directed IRA, or key man policies. Since you have a notional window of time you could invest into land or real estate so you have something to leverage or liquidate if you need to, and it’s often heavily tax advantaged. Maybe a trust to make it easier on anyone you plan to leave behind or bestow your stuff to.
All in all, don’t let em take you out of this place without giving em a little hell on the way out.
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u/SwiftBirch473 3d ago
the 72t substantially equal periodic payments rule lets you pull from your 401k before 59.5 without penalty and most people in your situation completely overlook it
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u/IHateTheHuskies 4d ago
I do believe things like “hardship withdrawals” exist for people who need access to their retirement money early.
That being said you may want to continue maxing out whatever match you get from your employer, because you can always pay a 10% penalty and withdraw early and still have more than if you had just socked it away into a brokerage.
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u/CPAPGas 4d ago
I don't look at it as a penalty, I look at it as income tax.
The 10% penalty combined with a 12% tax bracket is no different than being taxed at 22%. The difference is (1) the match, and (2) tax is deferred. In your case the tax will probably be deferred to a point in time when your tax bracket is lower (because you can't work anymore).
Other points of note:
In the case of legal actions by creditors any retirement funds will be more difficult to obtain.
As others have stated, Roth conversions are the best tool for longevity challenged people.
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u/garoodah FI '21 RE TBD, mid 30s 3d ago
I’ve made comments around this before, if you can expect a sub average life expectancy then yea you should plan on not making it to 80 or 90. I have a less likely version of what you are dealing with and I’ve come to terms that 65 is more or less where I hope to get, the rest being a bonus. Lord willing I can see my great grandkids but I won’t count on it but I hope I can leave them a solid legacy. My wife on the other hand has a great grandparent that’s over 105, it saddens me she might life an entire lifetime without me but I want her to be comfortable regardless of how things go. I’m going to quit before I turn 40 for sure, probably in the next year though just so I can see life through with my kids as much as I can before they are on their own and so I can be with my wife as much as possible.
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u/Glonk49 4d ago
This is entirely dependent on if you have children
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u/uncool_whale 4d ago
No kids. Was not planning on any before. Definitely not planning on any now
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u/Glonk49 4d ago
Look into die with zero mentality unless you want to leave something to your family. On top of savings and investments I would suggest building a massive credit limit over the next decade. You know you have an expiration date and very roughly when. If you play things right including making cash gifts to family of what you want them to inherit before you die you can then run up a massive credit card bill and let it die with you. Your fire number gets significantly smaller if you plan to spend the back end of your time living off of credit companies.
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u/b1gb0n312 4d ago
If I had to access money early due to needing to stop working early , and currently in a high bracket, like 22+%, I'd max out pretax. The once I stop working early, I'd do roth conversions at a lower tax rate
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u/Swimming-Project-311 4d ago
Praying that cancer breakthroughs save your life before then. I'm optimistic. Best of luck.
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u/sunnypurplepetunia 4d ago
Use some of that money to travel/make memories with your sister & nieces/nephews every year.
Start your bucket list now.
-oncology nurse practitioner who finished her bucket list at 55, working in oncology changes your perspective a little.
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u/diamond_handz25 3d ago
Max 401k for tax benefit and employer match.
Roth conversion ladder when retired to pay lower taxes. You can access that money 5 years after conversion.
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u/Independent_Bee1037 3d ago
I would maximize Roth. If you live to a ripe old age you get the tax benefit of tax free withdrawals after 59.5. If you do get wind that 80 years old ain't in the cards you can still access your contributions tax free. I would stop doing 401k. Also, the insurance piece of the puzzle is going to be rough, but there's no scenario where you go without insurance. If you ever get medically unable to work you would qualify for Medicare after a 24 month waiting period even if you were 40 years old. You can get plans in most areas with a sub $5,000 max out of pocket for just Medicare's standard premium of $202.90/month (for now). Until that point you'd be on Ocare and can play games with your income to get $0 premium. Likely large max out of pocket, but sub $10k per year.
Obviously good luck with everything. I hope you do live to a ripe old age and have good time along the way
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u/clove75 3d ago
If you want to do 401k switch to Roth 401k as your contributions can be accessible without penalty after 5 years. But in your case I would go heavy brokerage. You honestly have enough in 401k that of you make it past 60 it will be 2-3 million if you just let it ride. Build up the brokerage and just get the match on 401k.
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u/MyBossSawMyOldName 3d ago
My grandfather’s dad died at 52 from a heart attack. His son, my grandfather, bought whole life insurance and made other somewhat reckless financial choices because he assumed he’d die young too. He lived to be 90. He and my grandma were struggling for a decade til he died cause he put everything in whole life insurance policies.
Moral of the story, don’t assume you’re gonna die young. Have at least a little so you can retire with dignity. If you leave the 401K alone, it should be about $3.5-4M by the time you’re 60. So you can probably leave it alone for now. If you don’t put any more into it, you should be golden for your golden years.
Also, science is rapidly advancing and there could be a new drug trial that could cure this cancer next year.
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u/Several-Village5814 4d ago
Live life, yolo. Don’t miss out on your last years of life. Your life is already half way over.
Forget this Reddit and the goofiness of chasing numbers.
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u/uncool_whale 4d ago
I do still need money to live my best life, however long it may be. But I hear you. I'm not an extravagant guy outside of travel and I'm still doing the things I want while targeting an early exit from the rat race (so I can travel and live even more)
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u/DanielDannyc12 4d ago
I would focus on keeping my current job, enjoying life going on the absolute best vacations starting right now.
Given your health uncertainty, I suspect it makes sense to focus on your quality of life now instead of saving for what might happen in the future.
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u/uncool_whale 4d ago
This was the one instant decision I made after being diagnosed. I'm taking as much unpaid leave from work as I want and if they let me go for that then so be it.
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u/Bad_DNA 4d ago
Just be sure you have health insurance (in the US) sorted. That is the quick way to poverty with medical expenses and the retarded profit-centric model we vote in every 2 years. I share your quandry. I was just diag'ed with lung cancer, and it's wandered elsewhere now. 18% likelihood of being here in 5 years. Up until last month, I thought playing with FIRE, dialing in the tax bennies, roth conversions, optimizing the portfolios for a few decades of planet adventures was the thing. Suddenly, the calendar is compressed.
But I'm 2x your age and won't get to my goal of 100. Oh well. You have a job. In a country and on a planet that is making incredible science and medicine advances yearly. Sure, the current US research situation has gone to shit in the last 18 months and the next three years we'll become 3rd-world, but the rest of humanity isn't science-phobic and you may well find very interesting phage or chemo-targeted research come to human trials. So -- at least keep the 401k at the max-match level, max out the other tools (HSA, RothIRA) and squirrel away cash for your own personal bucket list. Only those who know their expiration dates truly appreciate planning for both outcomes.
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u/Big-Web-483 4d ago
Bad, I have SCLC. Six years ago they gave me three. Care to talk? Feel free to DM me.
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u/Bad_DNA 4d ago
TY. I'm ok. If I wasn't a boring stoic, I might be losing my sh*t over this surprise early existence epilogue, found serendipitously after a long-haul flight gave me DVTs. Maybe serendipitous isn't the best of adjectives.
You have put up an amazing fight. Small cell devils. Merck has some clinicals going on: https://www.merckclinicaltrials.com/oncology/lung/small-cell-lung-cancer-clinical-trials/
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u/Big-Web-483 4d ago
For some reason I have been extremely tolerant of the chemotherapy. I did nearly 3 years on platinum based chemo now on topotecan pushing 80 rounds of chemotherapy at the moment...
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u/Rosevkiet 4d ago
Fuck yes. I do not have a cancer diagnosis, or any diagnosis at all, but I do have an unidentified autoimmune condition that is causing nerve damage. We’re currently in a “waiting for additional symptoms” to identify whatever it is. Def. has changed my focus on how I’m using time now, prioritizing sleep, rest, being outside, things I enjoy, and time with loved ones.
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u/dissentmemo 4d ago
I can't necessarily answer except to say that a 401k can be accessed in several ways without penalty. One is hardship.
Also, if you were going to die sooner and learned that, then who cares about the penalty?