[Antonio]

I’ve been quietly setting up my life for FIRE, but I just had a major realization…

My wife and I have been investing heavily into retirement accounts—but if we actually retire early, most of that money will be taxed and penalized since we won’t be old enough to access it without a hit.

For those of you also on the FIRE journey—how are you planning around this?

What are you doing now to avoid getting taxed and penalized later?

Would love to hear what strategies you’re using.

[Nicole]

Research 72t distributions and building a roth conversion ladder to avoid early withdrawal penalties.

You’ll never avoid taxes, but you can minimize them by carefully managing your annual income.

[Watson]

I hope my response is helpful. Starting in 2026 I am rolling over about 40-65k a year from traditional to Roth. I’m paying the taxes myself.

By the time I get to 59.5 my Roth will be tax free.

Technically anything you contributed into Roth is available after 5 years without penalty.

So that’s like an extra savings account.

I’m offsetting any gains by purchasing real estate. And improving properties.

I’m doing barista FIRE and keeping my income below 25k

[Abraham]

Read “Quit like a millionaire” by Kristy Shen and Bryce Leung.

It talks about different strategies on the approach of early retirement.

[Jule]

You are going to have to pay taxes on it regardless because the gains have never been taxed.

On the age factor, you could either wait until you are 55 and use the rule of 72T.

Earlier than this you’d have to bridge the age gap through a taxable brokerage account.

[Russell]

Tax advantaged accounts were made to incentivize saving for retirement for those otherwise disinclined so they aren’t left with no retirement money and a burden on society.

You aren’t in that group…so put some in there for your later years and just accept that taxes are part of society and put funds also in a “bridge” account to get you to that phase.

[Anca]

Brokerage accounts and real estate.
I personally know couples who retired in their 30’s with tons of RE and brokerage accounts

[David]

I planned to FIRE way before retirement age so I cashed out all retirement accounts and invested in income producing real estate.

It’s worked out great!

[Shari]

My company has the rule of 55 – so my plan has been to retire at 55, but I also save in taxable accounts and Roth 401k to bridge the gap

[Doug]

We will be selling our business in our mid 50’s. Those proceeds will be used for our gap between then and 59.5.

[Alan]

I have equal amounts in Roth and traditional 401’s and even more in taxable brokerage accounts and plan on practicing tax arbitrage.

[Tony]

I will be utilizing the rule of 55 to lower the amount in my 401k. Also have brokerage accounts and Roth, but the 401k is my first focus to minimize RMD’s in the future

[DeLorenzo]

401(k) money can be accessed early through Roth conversion ladder, 72t distributions, or just paying the 10% penalty + tax (yes this can be cheaper than paying tax now depending on your current earnings.)

You can also save your 401(k) money until you’re old enough to withdraw, because you’ll still be retired then and need money

Roth IRA: you can pull out your principle tax and penalty free
457 plans: you can withdraw (and pay tax) whenever you stop working that job

You can also save money in multiple buckets, like a brokerage account that doesn’t have any age restrictions.

[Tim]

Different buckets do different things at different times – plan accordingly based on time horizon.

This may mean slowing down once you hit a mark in taxable accounts

[Michael]

Retired at 48. I invested in both taxable and tax advantaged accounts (401k, IRAs, and Roth IRAs). No need to pull from the retirement accounts until legally required to do so.

If you still have time, build some investments in after tax taxable accounts too.

[Daszczuk]

Little secret. As much as people hate it. Cash value life insurance doesn’t have tax age restrictions like retirement accounts and no contributions limits.

Make sure it’s structured to have max funding

[Charles]

Just want to point out that you can treat retirement account as another taxable account in a sense the retirement account pays 10% early withdraw penalty while taxable account pays 15% capital gains.

[Lam]

We’re set to Coastfire in 4 years, after that we’re going to increase brokerage contributions to a minimum of 60k/yr (currently doing 24k a year).

4-5 years of that will hopefully be sufficient to fully retire, if not then at least baristafire for 2-5 years.

[Author]

Posts