How can I access my IRAs early?

[Cybertruck]

I am 41 years old.

Current Income - + - 100,000/year

Retirement savings:

Roth IRA - 1,220,000 (Contributions = 53,500)

TIRA - 15,000

Solo 401k - 415,000

Simple IRA - 342,000

Wife’s Roth - 178,000 (Contributions = 43,500)

Problem: 100% of my life savings is locked up in retirement accounts.

Goal: Find a tax efficient way to pull from retirement accounts before 59 1/2.

Stategy: Build a large balance outside of retirement accounts to invest with by devising a plan to withdraw the greatest amount of retirement funds in the quickest way possible.
- If the balance is large enough & the investments do well I should be able to preserve principle and start generating income from the interest after 1 year and only pay long term capital gains taxes.

Potential plans:

1) Withdraw all Roth IRA contributions immediately. $97,000

2) 72(t) plan for 401k & Simple IRA Roll both accounts into my TIRA (should generate 26,000/year) (should i leave 100,000 in my 401k for child’s college expenses?)
- Can a 72(t) encompass a TIRA & Roth Combined? But only take distributions from the TIRA.

3) Roth conversion ladder. Convert 50,000 to Roth each year. After 5 years start taking yearly $50,000 distributions. (Negatives - Over 60,000 in taxes paid 5 years in advance and funds not available for 5+ years)

4) Solo 401k loan (take out loan for $50,000 to invest with) Not sure if plan allows

5) Mortgage loan (wife says hell no)

6) Withdraw early from TIRA and pay taxes and penalty

My wife will be 59 1/2 in 13 years and can start withdrawing from her Roth IRA at that point. So our plan needs to work for 13 years.

[IlliniDave]

Boy, that's a pretty unique Roth situation (1.2M on 53K contributions).

I'd consider hiring a tax advisor and detailing your situation (still working? looking to retire now? why the big push to invest outside of retirement accounts? etc.) 72(t) is pretty rigid thing that you'll have to stick to for a long time to avoid some potentially pretty draconian penalties, and not sure the breadth of accounts it applies to. Last place I'd look to pull early from just to reinvest somewhere else is a Roth account, but my situation is vastly different from yours I'm thinking. Might alternately consider posing the question on bogleheads.org. Even if you dislike the indexing strategy, there're some folks over there who are extremely knowledgeable financially.

[jacob]

I'd map out the tax consequences of every single plan (6) for every single year (13) in [six] spreadsheets. That's the usual way to learn about the tax code and plan out its consequences. Doing that might reveal some answers in terms of combining strategies.

[The Old Man]

You have an unusual situation. I concur with the suggestions by IlliniDave and Jacob. Additionally, I believe you would strongly benefit from professional advice from an accountant.

[Cybertruck]

I am still working. I have been running a house painting company for the last 20 years. I don’t want to fully retire yet, but I do want to supplement my income. I’m tired of feeling like I’m just getting by. I can’t replace my broken fence, I can’t replace my broken oven. I can’t buy the Tesla I’ve been wanting for the last 5 years.

I have $2 million saved! I don’t want to feel like I'm just barely getting by anymore.

I have set up a call with an early retirement coach for next week. Hopefully he can help me decide on the best strategy.

[IlliniDave]

...
I have $2 million saved! I don’t want to feel like I'm just barely getting by anymore.

I have set up a call with an early retirement coach for next week. Hopefully he can help me decide on the best strategy.

First, congrats on the success of your company. I can relate to the feeling, I found myself there in 2011, albeit with a lot less total money. My net worth was 90+% tied up in my house and retirement account. Due to a shaky job situation I began making it a point to eliminate debt and get some money accumulated outside of retirement accounts so I could get at it without penalty if I needed or wanted to.

I've never heard of an early retirement coach, but a knowledgeable one should be able present the range of options, although you seem to have a pretty good grasp of that. In your shoes I'd still consider an accountant/tax specialist when it comes to the mechanics of some of the potential transactions, especially in the setting up of a 72(t)/SEPP withdrawal plan. Good luck!

[Sclass]

Boy, that's a pretty unique Roth situation (1.2M on 53K contributions).

You’re a rockstar investor.

[Cybertruck]

Thank you Dave and Sclass! Keeping my business open for 20 years seemed much more difficult than accumulating $1 million in my Roth.
It’s hard to believe but I invested only $7,000 in Netflix in 2007 and that one investment turned into over $700,000 last year. And I got extremely lucky that this investment was in my Roth IRA.
0 taxes on so much earnings seems illegal

It’s funny(and a little scary) thinking back to my decision to buy Netflix. I remember actually considering investing in Blockbuster instead. Boy how that would have changed things for me!

I did decide to sell 50% of my Netflix shares about 4 months ago because I couldn’t stomach the risk anymore of a stock making up such a large % of my portfolio and i invested that money into Tesla.

I think Tesla is going to do to original auto manufacturers what Netflix did to Blockbuster.

Not sure if anyone has had experience with this guy but here is the retirement coach I am going to talk to:

https://dialintoretirement.com/ask-eric/

[MidwestCoder]

It’s hard to believe but I invested only $7,000 in Netflix in 2007 and that one investment turned into over $700,000 last year. And I got extremely lucky that this investment was in my Roth IRA.
0 taxes on so much earnings seems illegal

Oh man, I hope you appreciate how amazing of an investment that was. I have been investing for around as long as you have and I've got many stories of just missing Netflix, or Priceline, or Apple, or Amazon. I still beat the market but nothing close to that!

The part that is impressive is you bought 7k of it and never sold, even after their many runups over the years. Good for you!

[Cybertruck]

I definitely appreciate the gains I’ve realized with Netflix. I’ve invested in many stocks over the years and no other stock I’ve owned has had gains even remotely close to Netflix.

Part of my investing philosophy has been to invest in companies that I know and believe in. And by believe in, I mean when the stock drops 30-40%, you are thinking... maybe I’ll add to my position.
Find companies like that and you will have no problem holding for a decade or more(which is where the real returns come from).

[IlliniDave]

Thank you Dave and Sclass! Keeping my business open for 20 years seemed much more difficult than accumulating $1 million in my Roth.
It’s hard to believe but I invested only $7,000 in Netflix in 2007 and that one investment turned into over $700,000 last year. And I got extremely lucky that this investment was in my Roth IRA.
0 taxes on so much earnings seems illegal

Hey, you followed the law and even the IRS encourages taxpayers to take advantage of the law to minimize taxes. But, there is an address you can google where you can send a check to the Treasury any time.

That's an awesome story hitting a grand slam with Netflix. I know people who have been looking to hit it big for 30-40 years, with varying degrees of success, but nothing close to what you've done.