Early Retirement: Roadblocks & Contemplations

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I never thought I would be the type of gal who stays up late reading about taxes, 401k’s and Summary Plan Descriptions (SDC), yet here I am and I blame my friend Fritz

After-Tax 401k Contributions

Last week, during an early morning van ride to the airport in Tucson, I popped in my earbuds to listen to Fritz wax poetic about his retirement plans on the Choose FI podcast.  During his interview, Fritz mentioned a not so commonly known way to pad your retirement with After-Tax 401k contributions.  You can read all about the method and its pros and cons HERE, but the main issue is whether or not your company allows it.  My employer, I have come to find, sadly does not.  Roadblock #1.

Ok, honestly, I am not all that upset about it.  I mean, I don’t like knowing I can’t do something (I have never been great with authority), but until a week ago I never even considered doing an after-tax contribution so it’s easy for me to let this one fly.  The next roadblock, however, I am not taking so lightly…

In-Service Rollovers

While I had my retirement provider on the line, I figured it was as good a time as any to confirm another huge (for me) early retirement factor, In-Service Rollovers.  An in-service rollover means taking money from your 401k and rolling it to an IRA while you still maintain employment at your company.  Why would anyone want to do this?  Easy – more diversity, better investment options, and increased control over the future of those funds.  What kind of control you ask??  For me, early retirement control via the Roth IRA conversion ladder.  Let’s dissect this a bit…

Have you heard of the Roth IRA conversion ladder?  If not, here is an overly simplified explanation:

  1. Contribute max to traditional 401k (18k pretax as of 2017)
  2. Quit job, roll 401k to a Traditional IRA
  3. Roll a portion of your Traditional IRA into Roth IRA (yes, taking a tax hit on the conversion but skipping the 10% early withdrawal penalty)
  4. Let it season for 5 years
  5. Withdraw the rolled portion from the Roth IRA free and clear of taxes and penalties

Further reading can be found by these dudes who can explain it far better than I…

So back to the phone conversation with my retirement provider.  Turns out…


I know what you’re thinking.  So what?  Who cares??  Do what all the cool kids are doing.  Build up a savings of 5 years of expenses, quit your job (hello #2??), and start your Roth conversion ladder.  But that’s the problem.  I haven’t written much about my retirement plans because I wasn’t planning a traditional mic drop on my last day of work…in fact, I don’t plan on quitting my job at all once I am FI.  Or ever.  Well, not necessarily never ever but not in the foreseeable future.  Why??  Two words – NO MINIMUMS.  Here is why that matters:

Like most jobs, the airline industry expects you to show up and work.  They pay you to be there, they give you fancy benefits, and you take home a paycheck in return.  Simple, right?  In order to enforce this equation, most airlines make flight attendants work a minimum amount of hours each month.  For example, my aunt flew for AA and their minimum was around 80 tfp (“hours” for you common folk 🙂 ).  My stepmom flew for the now-defunct NWA (the airline not the hip-hop group) and their minimum was similar.  My airline??  0.  In theory, I can choose to stay home & not get paid but still collect my 4 weeks vacation pay (in 2 years it will be 5!), have access to insurance, full flight benefits, and still be considered a full-time employee.  Rotten, right??

Now don’t be getting your undies in a wad, there are a few caveats. First. I still have to bid for my line (schedule) and I am responsible for passing my trips off to someone else.  Sometimes I can do it easily, other times you have to bribe someone with an incentive like $100 per trip.  The second caveat is that I stay current on evacuation and medical emergency training each year by attending a day of recurrent training.  Did I mention training is paid?  It is.  And, for the sake of balance, I also have to keep my union dues current as well as pay for my insurance so it doesn’t lapse (currently $9/month but next year it will jump a whopping $4!)…  Ok, ok – no gripes here.  But you can see why keeping my job is beneficial.  Of course, this arrangement could change at any time during any of our contract negotiations but in the meantime, “no minimums” are the two words that are allowing me the potential to have my overly frosted cake and eat it too.

Once I reached financial independence (FI), my plan was always to keep my job but to cut my hours…to nothing.  😉 Actually, that’s not true.  My plan was to work minimal trips just for fun but never enough so that it would feel like “work”.  One leg to Cancun, overnight, one leg back?  Sure!  Perhaps a quick trip to Charlotte to visit my friends The Groovy’s?  Or a hop up to Minneapolis to crash a North Stars meet up whilst still getting paid?!  The possibilities were endless…  If I stopped flying for work (hard multi-leg/multi-day trips that pay well) and started flying for fun (short little hops with long overnights that pay crappy), I could lower my income (and thus my tax bracket) and be free to begin my Roth conversion ladder at the lower taxed rate.  But with no options for in-service rollovers, that can no longer happen.

How big of a deal is this??  PRETTY FUCKING BIG.

As I see it, I currently have 2 options:

  1. Stay and lose early access to funds, therefore keeping me at work indefinitely


2. Quit, gain access to the money, and lose access to all those glorious benefits (most importantly my kick-ass healthcare at $13/month), causing my expenses to go up drastically.

There are far too many things I would be giving up just to access the money, especially since the work part isn’t necessary…

So I won’t.

I now have to figure out a different map for my financial future.  FI will be mine, but I won’t really have access to the money which, in turn, still makes me dependent.  I have decided to keep pushing forward and see what new ideas come to me (if you have any be sure to share them in the comments!).  I am still maxing my taxable accounts and throwing the rest in my brokerage account (maybe that’s the plus to not being able to do after-tax contributions?).  I am continuing to keep my overall lifestyle costs down (despite upcoming trips that I am so excited for!!) and have added additional income with my rental place now rented out.  Heck, I am even tinkering with the idea of buying a unique seasonal property that would keep me grounded for half of the year and free as a bird the other half ensuring a super low COL…  So many ideas already!!

EDIT: Another little nugget I learned is that once I stop working more, the most I can contribute to my 401k is 50% of each paycheck. Perhaps this is known to others but it was not known to me! That means, in the future, if I want to contribute the full 18k (or whatever it is in the following years) I have to make double that amount – currently 36k in income.  Thankfully, half would be tax deductible and push me to the lower tax bracket.  At that rate, it may make more sense to do a Roth 401k since I would be in the lowest tax bracket…right??   Man, I could be a great commercial for NBC’s “The More You Know” campaign (that line was so good I had to steal it from my own comment below.)!!

One thing is for sure, my life and my lifestyle have never been traditional, why would my journey to FI be any different?  Perhaps these roadblocks are not blocks at all.  They are just another opportunity to make this path my own.

Until next time…

55 thoughts on “Early Retirement: Roadblocks & Contemplations

  1. Anonymous

    For whatever reason, at my work we can only contribute up to 25% of our paycheck to a 401k. Its a bummer when you first start out, even if you put in 25%, you might not make enough to reach the IRS cap for 401ks!


  2. “i have no mad passion for anything.” i love this honesty. i was good and passionate about being a bon vivant.

    i agree with many of the above comments. 401k at least to get the match, max roth. the HSA i was never so hot on above a certain limit you might need in a year or two of where you might get near the deductible. to me (many will disagree) it’s another ruse to keep your hard earned cheddar in a restricted account. gotta get that after tax piece up there and gaining some momentum. i took my extra money from overtime and bought individual stocks in a taxable account and a couple took off over the past couple of years. good luck.


    1. Hi Freddy – thanks for stopping by!

      I thought I might keep my head down and keep on keepin on with my previous plan but then I looked at some of my bookmarked links and came across this gem:


      According to these calculations, and based on my current conundrum, it seems I may have too much in my 401k as it is!! That being said, I will continue to contribute to the match (I can’t pass up free money!) then start socking the rest away in my after tax. I still love my HSA, especially since we have Vanguard as an option for the investment side, plus it’s just a drop in the bucket in terms of investment per year. I have no doubts that I will need it at some point!

      As for the stocks, I have a few winners (TMobile by far is my fav) and a real stand out loser (WTF CHIPOTLE?!), but overall I am happy with the set it and forget type investing that is VTSAX. It is in my mind to also look at VBTLX to smooth the ride that seems soon to be bumpy.

      In the end, none of this is a problem, right? The fact that I have money to even worry about is a true pleasure. Even when I was down and out 4 years ago, I never thought I wouldn’t be able to get back up. I just can’t believe it’s happened so fast and for that I am so grateful and proud!

      Again, thanks for stopping by and taking the time to comment. It’s always nice to see a new face around here!


  3. Interesting stuff Miss Mazuma. Like your situation, I think in-service rollovers are pretty rare.

    Instead, I would recommend building up your taxable portfolio (while still investing in your 401k).

    Eventually you’ll have enough income from that taxable portfolio you can start reducing hours.

    Worked for me!


    1. Yep. I think that’s the plan. I’m not sure what I was thinking all this time. Oh well, I’m still young and god willing I have plenty of time to figure it out!! 😅


  4. Array

    I would stop putting anything in tax deferred beyond any match.

    Put everything else in a taxable brokerage account.

    Your long term employment benefits far far far far far outweigh the roth ladder. Which may or may not even still be around depending on how far out you want to “retire”.


    1. Yup – such great benefits quitting would be stupid. As for the money going forward, I will start putting more into brokerage but it is so hard to give up that tax shelter!! Or maybe I will switch back to my Roth 401k…I don’t know. I am still hoping that I can sway someone in HR to change their mind. 😉


      1. TJ

        I’m not sure the Roth 401k would help you because you’d be subject to the same rules of not doing an in service rollover to a Roth IRA.


  5. Pingback: Second Thoughts – Tax Free Retirement – Open Mouths Get Fed

  6. Hey what about overnights in LA for brewery tours??? Huh??? There’s gotta be a way to figure this out. Maybe we can have a pow wow at 3 Weavers and discuss?

    But I will say this is a huge advantage to running your own plan… I get to do all these things!!


    1. Yes, of course!! Oh – and I need to bend your ear about setting this blog up as a company so I can start writing things off…preferably before FInCon? 🙂

      You definitely have a huge advantage. Maybe if I set up my own company and start making some real money I can forgo my work 401k and do my own? Is that an option?! I have so many questions and so few answers. Being an adult is sooooo hard!!


  7. Man oh man. You guys are living my original plan!! I have come to terms with the in service rollover not being an option and will focus on my taxable accounts instead. Freedom will be mine!!! 😅


  8. My employer allows after tax 401K contributions. From my understanding they can be backdoored into a Roth but there will be a tax hit. We can contribute up to $30K/year post tax. This is great for people who have phased out of Roth eligibility.


    1. WHAT?! Your employer is the unicorn in this equation! Wow – what a great opportunity. Of course, again, in my situation, it wouldn’t work because I still wouldn’t have access to any of it until I quit but hot damn could that be good for others!! Sweet!


      1. I misspoke. I can contribute $27K/year after tax. We get a company match up to the federal max which means $27K pre-tax + contribution, then another $27K after tax. I have not taken advantage of the after tax contribution because I did not think it made sense until now. The rules on the website still say pro rata taxation, but it looks like that has changed and now all after-tax contributions can be rolled over to a Roth tax free. Alas, I am likely leaving my employer in about a month so it’s a moot point for me.


    2. fetchingfinancialfreedom

      Only a tax hit on the growth of contributions, and even then, only if you’re putting growth + original contributions into a Roth IRA (and if you rollover soon after the contribution, there would be minimal taxation anyway). 🙂

      Husband’s company allows after-tax contributions, and every few months or so we’ve been doing the in-service rollover into both a Roth IRA (for original contribution) and a Traditional IRA (for growth). Only annoying thing is that we have to call each time, but the 401k provider does these in-service rollovers all the time and it takes, like, 5-10 minutes.


  9. Keep your head down and on-to-plan. You’ll get there!
    It’s less about the wizardry of saving than just plain saving (oh, and keeping expenses low’ish.) For my time and energy, I’m choosing to focus on how to make more money and leave the barefoot Roth and Grand Cayman loopholes to the Mad Fientists of the world. Cheers!


    1. Just plain saving… Boo! I wanted the easy way out!! Haha – I guess I will just keep doing what I am doing and not worry about it. Surely there will be better ways I can learn. Surely Mad Fientist will come up with something to save my ass!!

      Liked by 1 person

  10. What awesome benefits! I can’t lie, there’s no way I could do your job (total clash with my skillset/personality type) but I can dream 😀

    Sorry that I’m outside of the US and can offer no concrete input to your actual question though!


    1. If I think about it, there is no way I could do my job either. I have realized it is best if I treat it like a long distance hike. When I wake up first thing, I can do anything via a schedule if it happens before my mind wakes up. Hike at 3am, no problem. Set an alarm at 3am to go to work, no problem. If I wait until 3pm – there is no fucking way I could go!! My mind overpowers any momentum at that point. Then all the negatives have time to seep in…turbulence, delays, medicals, evacuations. #NoThanks


    1. So true!! And to be clear, I have to chose from the trips they have put together but there is always something appealing. And if not, I’ll just stay home! To me, any extra time with my pup is time well spent. 🙂

      Liked by 1 person

  11. Oh that sucks! Would it be hard for you to get reemployed there if you quite for say a year (or less)? Is it an option to quit, empty out your 401k into an IRA and then apply for the job again?


    1. Yup. Super hard. I would lose all my seniority making me lose a ton of pay, 2 weeks of vacation, and schedule flexibility. I’d be working reserve again!! 😩 No way. I think I’ll start working on some side projects that will make up for my income there then just keep doing what I do…low COL or maybe some slow travel. I’m not in any rush to quit or access funds at this moment. I’ll see what the next few years bring. In the meantime, I’ll be talking to HR to see if I can change their minds about the rollovers. 😬


  12. Fly into Glacier National Park. Sleep under Ms. Montana’s raspberry bushes, hike, play at the lake, and make Montana your new home base. Hum…I like the sound of that!


    1. I like the way you think! Oh, and I’ll take some raspberry tea while I’m at it. 😉 But seriously, I would love to come and visit as well as explore Glacier. Bubs and I could use a good road trip!! Working on some things now but it may be a very real possibility next year.


  13. Thanks for the mention! But we are soooo not waiting for your full FI date to meet.

    This won’t apply to you but just as a point of interest for readers — funds from a 401(k) and 403(b) can be taken out with no penalty beginning at age 55, provided you’re at least 55 when you leave the job. This actually was applicable for me but I didn’t opt to do it.


    1. No way!! I’ll be out there way sooner than that. 🙂

      So, in the event I don’t quit for another 15 years, I’ll be able to access my funds then? Yippee!! Something to look forward to.


  14. Kim

    Thank you for putting this out there. It’s amazing figuring out all the little tiny details about how these retirement plans actually work. In a way it feels a bit like “golden handcuffs”. I recently found out that my Solo 401K with Vanguard doesn’t allow me to roll in my rolled-over IRA (from a previous employer’s 401K), so I’m stuck with that pro-rata crap messing up my backdoor Roth IRA strategy. Knowledge is power! Now I always advise entrepreneurs to go with Fidelity for a Solo 401K.


    1. Tell me about it! I’ve been there 16 years and am just getting around to asking these questions…I wonder what else I don’t know!!

      Interesting Vanguard doesn’t allow it but Fidelity does. This is the first glimpse of tarnish on Vanguards golden tiara. 😉


  15. It is so incredible that you could drop to basically no working hours and keep your benefits. What a unique position! My uncle is a pilot and now I want to ask him if he has the option of doing the same now that he is approaching retirement. The in-service rollover thing sucks, but it is pretty common. 401(k) providers want to keep their hooks in your money!

    I have pretty large IRAs (yes, multiple, ugh) and my tax bracket makes the Roth conversion not make sense today. My employer just moved from a SEP-IRA to a 401(k) and I haven’t asked yet about in-service rollovers. Fees there are very low so unlikely I would do it, but now I’m curious…


    1. Pilots have a different union so I’m sure their rules are different. Do ask him what his 401k match is. Most are quite high being they have a definite stop point to their career (65).

      Can you combine your IRAs to simplify? I’m not sure how that works but in my opinion the less accounts I have to keep track of the better!


  16. dividendsdiversify

    I had never heard of in service rollovers. Thanks for the new concept. It would be great for all the reasons you mention plus the fact that company retirement plan fees can be very expensive. I hate the thought of you losing the tax deduction and tax deferred savings, but what about contributing the minimum to the retirement plan to get the company match and saving more in taxable accounts for easier access in FI? Tom


    1. Hey Tom – I was thinking that as well! The tax deduction at this point doesn’t knock me into a lower tax bracket so it would make sense to just start contributing more to my brokerage accounts.

      I also realized, once I stop working more, the most I can contribute to my 401k is 50% of each paycheck. Perhaps this is known to others but it was not known to me! That means, in the future, if I want to contribute the full 18k (or whatever it is in the following years) I have to work double that amount. Man, I could be a great commercial for NBC’s “The More You Know” campaign!!


  17. Yeah unfortunately in service rollovers are pretty uncommon. The 401k providers hate them because they lose assets under management. I fortunately have a relatively large IRA from a prior employer, but I can’t convert it to a ROTH because my income is too high and it doesn’t make sense. So I still need to work through my after-tax investment strategy because I focused for so many years on traditional retirement investment.


    1. That’s what I want – I want them to lose my assets! We have some good options but not a ton. I would love to be more diversified but also have more control for the ladder. Boooo…

      Income being too high is a good problem to have…until it’s not. 😉 I’d be interested to see what you come up with. I am learning so much from everyone else’s strategies…I now need to focus on a plan B for mine!

      Liked by 1 person

    2. I like your comment, CMO!

      You, me and everyone has been completely focused on traditional retirement accounts (401k, IRAs) because we’ve been sold on it for years (media, advisors, friends etc). The problem is that we become “illquid millionaires” because we have to wait until 59.5 years old.

      You can’t argue with the traditional ways, but have to always be focusing on your liquid assets if you ever wanted to reach FI or RE.

      Just like personal finance is poorly taught growing up, liquidity is not completely a primary focus for some.

      My humble two cents…

      Liked by 1 person

        1. Church

          I set a personal goal for my NW to be 40/50 – liquid/non-liquid. It’s a high bar, especially when you have the 401k match and home equity are such significant contributors to the non-liquid assets. Life insurance cash value keeps me very liquid, albeit a contentious subject for most.

          Liked by 1 person

          1. Contentious indeed!!

            As for the 40/50 – I like that idea. I need to figure out what is going to work for me going forward. Maybe it’s time for me to read some of the other blogger’s ideas from the Drawdown Strategy chain…


            1. Church

              Haha, it is very contentious. I bring it up because 1) I’m an instigator, and 2) I enjoy the intellectual back and forth because we are bred to hate it.

              After maxing out what you can and being tossed out because of income levels, there are taxable brokerage accounts and….? Real estate? Maybe, but then your money is (again) locked up. High yield savings is a slow death and the Bitcoins of the world is a bit of an unknown death.

              This investing space is where I am most curious and wanting to understand what people are doing – Money after maxing out.

              Pick your poison.


    1. No rationale, really. They just don’t do it. Of course, I won’t be letting this go. I plan to dig a little deeper when I am at headquarters next week. I will report back if I get any feedback!!


      1. Church

        I like your style. Dig deep. The easiest questions are typically the hardest to answer mainly because of laziness.

        Had a similar issue that was easily resolved by asking the easy questions.

        Liked by 1 person

  18. TheRetirementManifesto

    Don’t you hate it when you friends rain on your parade? 😦 Better to know the details of your plan now, rather than find out in 5 years when you were planning the work “downsizing”. While you may not be able to take advantage of some 401(k) games, the “0 work required” fact is AMAZING. Leverage it, keep the cheap health insurance (HUGE!), max your after-tax stuff, and enjoy life, Look forward to chatting with you about it in Dallas, if we’re still friends. 🙂


    1. I’m shocked it didn’t dawn on me to check earlier! Thanks for crushing my dreams, Fritz. Can you call HR and tell them to get their shit together??

      I guess I’ll say hi in Dallas…


  19. apathyends

    Crash a North Stars meetup! Yes please!!

    My employer doesn’t allow the in service rollover either. The first HR person I asked had absolutely no clue what I was talking about, had to bring in the big guns to get the question answered.

    The option to keep “full-time” benefits and rarely work (or only work when you want) is a pretty sweet way to rock FI. You know we are all jealous!


    1. Haha – no need to be jealous. You too can fly the skies and sling peanuts and cokes for a living! I completely lucked into my career. Not luck in terms of getting hired (my awesome personality got me that far 😉 ), but luck in the sense that the flexibility suits me more and more as I age. If not for this career, FI would most likely have been much harder for me to reach. I have no college degree and no mad passion for anything. Who knows where I would have wound up!!

      And, yes, I will be making it up there sooner or later! Billy (Wealth Well Done) has already offered me a ride wherever you guys are. Now, who is buying my beer? 😉


      1. apathyends

        I don’t think I am patient enough to do what you do! Two angry flyers in a row and it might be a literal sling of peanuts 🙂

        First beer is on me if you make your way up here!!!


  20. Jacq

    I work in a typical 9-5 and I don’t think I’ve ever been able to do an in service rollover. I just sock a bunch away in my 401k and work on being patient for the next job change. I can imagine some plan administrators don’t want to deal with the complexity of after tax 401k contributions. With the limitations I’m going to keep socking money away in my Roth so I have access to it later.
    Your benefits sound amazing! It sounds like you’ve got plenty of options to craft your next stage in a way that works best for you.


    1. I am sure the complexity has something to do with it but it’s a major company…you would think we could figure this one out! 🙂 Oh well, I will continue the same path as you. 401k, HSA, and Roth IRA. The rest is in brokerage which will hopefully grow well over time! If not, I will definitely have to get crafty with my options. But, it’s true, the benefits make up for a lot!


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