My husband wants me to retire in my 40s but I don’t know if it’s financially realistic

For many couples out in the world today, the question of when to retire is naturally starting to come up more and more. With a tough job market, the decision to try and save up as much as possible so you can exit the workforce early is becoming increasingly attractive. 

For one Redditor posting in the r/ChubbyFIRE subreddit, there is now a question of how to handle an age gap retirement between her and her husband. The hope is that they can both retire simultaneously, but given the age gap, this would require some 401(k) math magic to work. 

An Age-Gap Couple

According to the Redditor’s post, there is a 12-year age gap between her and her husband. On top of this, they were also set to have a child right around the time this was posted on Reddit, so the child is almost one year old at this point. However, this story isn’t about the child at all, but is something many age-couples have to navigate around, trying to find the right time for both parties to retire. The Redditor is thinking about retiring at 55, but that would put her husband at 67. 

An alternative scenario is to have him retire at 55, but then she would only be 43, and that would leave her another 16.5 years before she could access her own 401(k). Obviously, this leaves some pretty big questions as to how this couple should move forward, especially when the Redditor indicates her husband could walk away from work at any time. 

While we don’t know financial specifics, as this couple is posting in r/ChubbyFIRE, it’s likely their net worth is at least $3 million. As a result, the husband is now thinking that his wife, the Redditor, can or should retire in her 40s so they can travel together. On the other hand, there is also a consideration about waiting until their kids (assuming there will be a second or third) are either in college or have already graduated. 

So, how should this couple move forward? 

Kids Change Everything

One thing that this Redditor hasn’t seemingly taken into consideration is how the arrival of a child changes everything. It’s not just the financial impact of raising a child that can change their retirement math, since raising a child in today’s world costs hundreds of thousands of dollars. 

No, the money isn’t the focus or worry here, but it’s all about how much someone may want to be around and help with the kids. Is this family planning to let a nanny or daycare do much of the lifting during the day while they are both working?  It doesn’t seem as if this couple has really sat down and sat through, or at least acknowledged, how much a child, never mind multiple children, will change their retirement plans dramatically. 

Look at Rule 72t

Let’s ignore the subject of children for the moment and strictly look at this from a financial perspective. At the very top of the list is the idea that this Redditor might not want to retire early on, as she won’t have access to her 401(k). However, there are two considerations here that should be really focused on. The first is a strategy where the couple initially retires and lives on the husband’s 401(k) and uses this money until the Redditor turns 59.5 and can tap into her 401(k) without any penalties. 

This said, there is one other option, but only with an understanding of how careful they would need to be. Under rule 72(t) and SEPP, the Redditor could conceivably gain early penalty-free access to her employee-sponsored 401(k) account if she meets certain conditions. According to the IRS, Rule 72(t) indicates there is an opportunity to take a series of substantially equal periodic payments. Anyone who goes down this road must take the distributions, even if they don’t need them, for at least five years or until they reach 59.5, whichever is longer.

If the Redditor did so under these conditions, she would not be subjected to the 10% penalty, but would still need to pay any applicable taxes for the year, and any money withdrawn. It would require a “triggering” event, but it’s an excellent idea for someone who has substantial retirement savings and wants to use this money as a bridge to Social Security, Medicare, pensions, etc. 

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