Advertiser disclosure

Terms and Restrictions Apply
Physician on FIRE has partnered with CardRatings for our coverage of credit card products. Physician on FIRE and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. POF does not include all card companies or all available card offers. Credit Card Providers determine the underwriting criteria necessary for approval, you should review each Provider’s terms and conditions to determine which card works for you and your personal financial situation.
Editorial Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed, or approved by any of these entities.

FIRE Crossroads 013: 50 with 5 Years to fatFIRE

They’re nearly 80% of the way to their personal FIRE goal of $2.5 Million. For this couple in a low-cost-of-living area whose three kids have flown the coop, I agree with the author that the ability to spend $100,000 a year qualifies their pending retirement as fatFIRE, that is, FIRE on a generous budget.

As long as he keeps doing what he’s been doing, and the stock and real estate markets don’t tank, he’ll easily reach his goal. At this point, his portfolio may outearn his software engineering salary in any given year.

His main questions are around the use of Substantially Equal Periodic Payments (SEPP) to access tax-deferred monies early and how to best utilize his taxable investments. Read to the end, and please share your thoughts with our soon-to-be early retiree!

If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.



Getting to Know You


Where are you on your financial independence journey? Have you crossed the halfway point in terms of net worth and/or passive income?

I’m nearing the finish line!  The compounding snowball is really starting to work it’s magic.  Barring some major market correction, an extended 30-40% decline, I’m within 5 years of fatFIRE, and it could happen sooner.

Like many others, I’ll likely fight the one more year syndrome.  I am trying to build in margins of safety because my number is not as big as others I’ve seen.


Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?

I’m 49 and my wife is 50.  We are new empty nesters.  We have 3 kids.  The older 2 are independent adults and on their own.  Our youngest is 20 and living in a town about 30 minutes away.  The only financial support we provide is car insurance and cell phone.

We live in a LCOL area in western Wisconsin and are very happy here.


In what field are you working? How is your career going? What do you like best and least about your chosen profession?

I’m an IT professional at the Director level of a Fortune 100 company.  In terms of what I like best, I’d say I ended up in the right field for me.  I have a couple of degrees in Computer Science, and it’s a field I’ve always had an interest in.  However, at this point, I’m tired of the constant churn in technology and having to keep up.

FYI, In my world, if you don’t keep up with the industry, you’ll quickly be considered a dinosaur.  I’m happy that the finish line is in sight.

Over the course of the last 5-6 years, I’ve moved almost completely to the management side of IT.  Meaning I have to keep up with tech trends, but I no longer need the depth of knowledge or the ability to do hands-on work.  For that I’m glad!


Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?

At this point, I’m probably FI, but not quite ready for RE.  My biggest question at this point is where to invest my taxable account.  I’ll need access to this money between RE and 59.5.  My current thinking is that I’ll tap my retirement accounts using the SEPP rules and supplement with my taxable account.

I also have ~50% of my post tax account in Real Estate Syndications.  The deals I’m in are targeted for 5 year holds.  This timing should work out well with my planned exit from W2 work in 5 years or less.

Having this money come back into the fold at that point would supplement other post tax accounts and SEPP withdrawals (If I choose this path).

When I get close to RE, I’ll really have to firm up the numbers to see if I can span 5-6 years of living expenses from post-tax accounts only.  My current thinking is that I’d rather tap the pre-tax accounts using the SEPP rules for some amount less than living expenses,and then draw down the post-tax accounts at a slower pace.

This approach should be beneficial from a tax perspective, as well.  Notice I didn’t say optimal.  I’m not into the hyper-efficient strategies, as they seem to be more work than I’m willing to put in to save an extra hundred or couple hundred dollars.  Maybe I’ll change my mind when I get closer…




How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

My asset allocation is:

  • 25% US Large Cap
  • 25% International Large Cap
  • 5% Small Cap (Value tilt)
  • 5% Emerging Markets
  • 10% Mid-term Government Bonds
  • 10% TIPS
  • 20% REIT

Every couple of years, I make slight changes to the mix.  For example, I used to have a 5% allocation to Gold.  After the big run-up of the past few years and more reading, I decided to vacate that allocation and move it to REITs.

Overall, I think my allocation is pretty moderate in terms of risk.  My nest egg would be bigger if I had a more aggressive stance over the past few years, but hindsight is always 20/20.

Also, note on the REIT line I include my Real Estate Syndications here.  That line item is currently 50% pre-tax and 50% post-tax.


Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

My current breakdown is:

  • 53% pre-tax
  • 26% tax-free
  • 21% post-tax

I contribute the max to my 401(k,) HSA, do a backdoor Roth for my wife and the rest goes into post tax.  I’d like to get the post tax up over 30% before RE.


Do you have investments in an HSA? How about 529 Plans?

Yes.  I was a little late getting my HSA started, but I’ve been maxing it out for years now.  I also started saving receipts and not drawing on the account about 5 years ago.  My current balance is $50,000 and is 100% in an S&P 500 fund.

We do have a 529 plan with a balance of $30,000, also in an S&P 500 fund.  Our youngest (20) could access this if he chooses to go back to school.  Going virtual during COVID really soured him on the experience, and he is just working full time now while he figures out what his next step is.  The good news is that he is out of the house and figuring these steps out on his own 😊

Should he choose not to return to school, we’ll leave the money invested for the long term.  Future grandkids could be the beneficiaries.  In the case that doesn’t happen, we’ll pay the penalty and use the money for retirement sometime in our 70s.  With a 25-year time horizon, a stock market allocation makes the most sense here.


What has been your best investment?

I don’t have any home runs on the investment side.  I’m the classic example of slow and steady wins the race.  So, I’d say my best investment was in my career field.  I’m not in the physician stratosphere, but software developers (and management) have always been paid well.  I passed $200,000 a few years ago and now earn in the mid-200,000s.


Your worst investment?

Again, nothing on the investment side that I lost a bunch of money on, but we did start a small retail business with friends back in the mid 2000’s.  That was a big mistake, to the tune of $60,000-70,000 and loss of the friendship.

To expand a little further, my wife and a friend wanted to start a side hustle.  So they came up with an idea to purchase an existing storefront that contained a UPS Store and a Wild Bird store.  A bit of a strange combination, but I digress.

Long story short, they hired employees to run the store while they both worked full-time jobs.  This proved to be very difficult!  In hindsight, both couples were clearly over extended.

everyone had full-time jobs and each couple was raising 3 young kids at that time.  Eventually, tensions rose about who was putting in more time, the business losses, the need for additional loans to keep it afloat, etc.  It was not a good experience and led to the business closing, money lost, and the end of a friendship.

I wouldn’t recommend going into business with family or friends!


I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.


Into the FIRE


Numerically, what is your FI goal?

For a very long time, my goal has been $2.5 million.  That will allow us to draw $100,000 based on the 4% rule.

I include my home equity in my net worth.  So, as a margin of safety, I’ll likely target $2.5 million in investable assets and have my home value as that extra margin.

Another margin I’m employing is my Employee Stock Purchase Program (ESPP).  I dedicate 10% or my salary to purchasing stock at a 15% discount.  I plan to hold it for 2 years to get the long-term capital gain status (the rules are different for ESPP plans).  That will give me another ~$60,000 to $75,000 cushion.  Not big, but something, particuarly in a LCOL location.


When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?

My current NW is $1.95 million and I expect to hit my target of $2.5 million within the next 5 years.  I’m currently saving ~$120,000/yr, so the stock market doesn’t need to do much of anything over those 5 years in order for me to make the goal.

I’ll definitely retire once the numbers are there.  As I stated earlier, I’ve grown tired of the corporate world.  I’m definitely ready to get off the hamster wheel.


What are your post-FI plans? How will your life change? What do you look forward to the most?

We plan to do a lot of domestic travel during the winter months.  There is quite a bit of this country we haven’t seen yet, and we are ready to explore.

I’m also looking forward to more time for exercise.  My work schedule tends to get in the way of my preferred workout times.

We’ll spend more time at our summer cabin which we can only visit on weekends now.  I’m just really looking forward to the pace of life slowing down.  I’ve heard other early retirees talk about how the stress just starts to melt away and the transition takes about 6 months.  Boy, am I ready for that!


Have you made any major changes in your lifestyle or investments to accelerate your FI path?

The one thing we did over the past year was to downsize the house and become debt-free.  Moving to a smaller house, lowering expenses, and not having a mortgage payment will accelerate our path as this plays out over the next couple of years.  With the crazy housing market recently, it was also an ideal time to unload the big expensive house.  The kids are gone, so why continue the expensive carrying costs?

The other fairly recent thing we’ve done is get involved in Real Estate Syndications, as mentioned above.  It’s not a big percentage of our NW, but it’s nice that it throws off some passive income.

We recently had one deal that was supposed to have a 5 year hold go full circle in 1 year.  Not expected, but a 32% return in 1 year was nothing to be upset about.  We did the 1031 exchange on that property to defer the capital gains, so I look forward to it going full circle for the cash-out opportunity when I am actually RE!


Are you facing any unique challenges making FI or RE more difficult?

No, not really.  I consider our story to be pretty boring, but hopefully, there’s a nugget or two in there for others 😊


What advice do you have for others who are seeking financial independence?

Education is key.  Personal finance is such a large topic it takes a lifetime of learning.  I started my own education in college, funded my first IRA in those years, and now 30 years later spend many hours every week reading and studying.  All that, I don’t think I know half of what guys like PoF know.

Everyone has their recommended list of books to read.  I’d suggest comparing a few of your favorite bloggers and picking the common books if you’re looking for a place to start.


Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

Is anyone using or planning to use the SEPP(72T) rules to fund the early years of retirement?  I’ll likely have $1 million+ in pre-tax funds available.  Is this a wise tax strategy since withdrawals will be low and post-tax money will fill in the gaps?

I also feel like the complexity around these withdrawals is overblown.  Anyone who deals in personal finance should be comfortable with basic math, and that is all that’s required for this (other than tax forms).


PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.




I thank today’s interviewee for sharing their story, and I’ve shared my feedback privately with them. I wouldn’t want my opinions to influence yours. Please give your take and answer any questions they have had in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.


Share this post:

11 thoughts on “FIRE Crossroads 013: 50 with 5 Years to fatFIRE”

  1. Great interview! I previously worked as a 401(k) advisor and retirement planner, and am versed in SEPP. While I do not think SEPPs are overly complex, the most significant caveat is their continuity of withdraws.

    With IRAs, continuity is a non-issue since you manage the plan and can choose your provider. However, with 401(k) plans, your company determines the provider and plan features. Because of this, SEPP should be avoided within 401(k) plans since it is possible when a 401(k) switches providers (and or has rule changes) that your SEPP could be affected, and thus all prior withdraws made are disqualified and penalized.

    While I am sure arguments could be made to the IRS, I wouldn’t want to have to attempt them. Thus, if you are considering SEPP, heavily consider using an IRA to do so. Otherwise, best of luck on your journey!

    • Thanks Olaf! That is exactly what I plan to do. The majority of my pre-tax money is already in an IRA and when I retire I’ll just roll the current 401k into the existing IRA.

  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. Thanks Matthew! I like your approach, and thanks the board stokes numbers. I have 20+ years of contributions to my Roth account, so you are correct, I could pull out the seasoned contributions tax and penalty free.

  4. I ran through a similar scenario with different withdrawal strategies for my own planning. I was looking at how best to bridge from 50-70 (my planned Social Security retirement age) with account ratios not too different from yours (53% in pre-tax accounts, 9% in taxable accounts, 38% in Roth accounts).

    The details matter a bit, since tax rates are progressive, but in broad strokes: doing proportional withdrawals from taxable, pre-tax, and Roth accounts every year (less whatever income your real estate syndication deals throw off) and paying the early withdrawal penalty for 10 years would leave me with the most money, but also the largest future tax burden (proportional withdrawals wouldn’t be enough to actually make a dent in my 401k). Also note that in my exploration, I was able to withdraw only contributions or seasoned conversions from Roth accounts before turning 59.5, so no penalties arose from that.

    Doing the same thing but withdrawing a bit more from the 401k each year to do a partial Roth conversion up to the limit of the 12% income tax bracket (so still paying a 10% early withdrawal penalty on the part I spent rather than converted) resulted in 8% less money, but no future tax burden (in my case, at least, the 401k would probably be fully converted to Roth well before RMDs enter the picture).

    I haven’t fully modeled doing a 72(t) SEPP plan for the pre-tax portion, but in broad strokes I think it would yield about 1% better return over that kind of time frame than paying the early withdrawal penalties every year. The main difference to call out is that you would not be able to do partial Roth conversions while in the SEPP plan, so when it ends you could expect to have a pretty substantial tax burden waiting in the pretax account. At that point you might want to consider either spending or converting everything in pretax accounts before you have to do RMDs.

  5. Appreciate the note about ESPP holding period being 2 years from offering vs. just 1 year from the exercise date. I’ve been doing ESPP for over a decade and never really paid attention to that aspect and let TurboTax do most of the calcs, so I’ll adjust which shares I sell now to take into account the 2 year offering date requirement.

  6. I decided to go with the partial Roth conversion ladder rather than the SEPP. I feel that you keep more control with the Roth ladder, and since you have 5 years to let the conversions ‘mature’, this may be something to look into. You could also just add to your post-tax account rather than the pre-tax, and bridge to 59-1/2 that way. In any case, you got this!

    • The only issue I would have with this approach is my post-tax accounts won’t support 5+ years of living expenses. I’d need roughly $500k, plus money to cover the tax bill. From a tax perspective I think I’m better off with SEPP and utilizing standard deductions, etc.

      • I’m interested in your comment about not having money to cover the tax bill. Suppose you did have $500k to cover your expenses for those 4.5 years. I would expect the tax bill to be minimal if not zero.

        The funds in your after tax account could be largely tax free. You would need to manage which lots to sell in each year. You wouldn’t owe tax on your contributions but you’d owe tax on the capital gain.

        Taking a look at the long term gains tables for 2022, the tax rate is 0% for Singles having $41,675 and Married having $83,350 in LTG.

        • Hi Chris,

          I was referring to the Roth conversion ladder. This is also referred to as a Mega backdoor Roth. Essentially pulling pre-tax money (IRA, 401k) out, paying the tax, and contributing to a Roth. My tax bracket would be low, and I could do this up until I hit the 10% bracket. However, those dollar amounts are small enough that I’m not sure it’s worth the effort. Plus I’d have to wait 5 years to get access again without paying a penalty.

Leave a Comment


Doctor Loan up to 100% Financing

Related Articles

Subscribe to Physician on FIRE

If you do not see a subscription box above, please navigate here to subscribe.

Join Thousands of Doctors on the Path to FIRE

Get exclusive tips on how to reclaim control of your time and finances.