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Old 11-13-2012
eric-the-red eric-the-red is offline
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Re: My Escape Plan - Insights Wanted

Just had a fascinating discussion w/ my financial planner. Basically, he said go for it (!)

Some really interesting thoughts on it as well:

- I can take my 401k, roll it over to an IRA, and set it up to take an annuity - someone here referenced this - and not only will I not have to the 10% fee, I won't even have to pay taxes because my annual income will be below $15k. There's a whole complex formula, but basically I'll be able to pull out $2-3k a year from the 401k tax free. Once you start this, you have to keep doing it though. So every year you have to take out the same amount.

He also suggested I use my savings/IRA as collateral to take out a low-interest loan to purchase the boat instead of just buying w/ cash. He's saying taxable bonds will return 5-6%annually, that I won't have to pay the taxes due to low income, and the loan might only cost 2-3% in interest since it's secured by cash/stocks/bonds. I get there is some added risk with this, and not sure if I'd go this way.

Combined with the 401k annuity, he thought other savings accounts/IRA account returns could provide me $10-15k I'd need to live off of with a fairly conservative portfolio. If I'm only spending 10k I could be growing the principle a bit, at $15k I'd probably be eating into it. It'll fluctuate based on returns. Of course inflation eats into it in any case.

I think the key would be my willingness to make up for poor return years by taking on some additional work. I can see working 2-3 months a year not really bothering me too badly, and maybe providing a welcome change of pace. And with a couple hundred grand cushion, I'll still have flexibility to work when I want and not work when I don't want.

So there you have it, financial advisor says go do it - you'll save on taxes!
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