Sell home to fund early retirement?

[Paul1011]

I have not seen the below as a strategy and I am hoping for feedback and advice please.

54 now.  Sell house in 3 years; net about $400K to live off of and slow travel for a couple years until I’m 59 ½.  Figure expenses to be about $60K/yr including travel health insurance and/or subsidized ACA since income will be very low…probably just roth conversions.  At 59 ½ will have 25X annual expenses plus around $350K cash.

Does this sound like a sound strategy?  I have searched, but haven’t found “selling your home to fund your early retirement” as a strategy.  Barely early I guess at 57 lol.

[gocurrycracker]

Hi Paul

I think the best way to think about this is as 2 separate but important questions -

1 - do I want to live in this house?
2 - what about the money?

If the answer to 1 is definitely no, then sell. If not, then see if it makes financial sense to keep it.

For 2, you don't need to wait until age 59.5 to access retirement funds -
- it's only 2 years, can you save enough cash to fund 2 years (combined with renting out primary home?)
- google "rule of 55" - you can possibly access your 401k funds at age 55 with no penalty
- google "SEPP" - you can setup a small separate IRA to withdraw funds from without penalty, it just requires a small bit of math and planning
- pay the 10% penalty for 2 years - costs $1k to get $10k out of the IRA, but maybe cheaper than the tax you avoid now

[Paul1011]

Thank you for the advice.  Definitely plan to sell and move out of San Diego...and California!

[gocurrycracker]

San Diego is really nice.

What is your thinking for moving elsewhere? We have actually considered moving to California but still trying to figure it all out. Thanks!

[Paul1011]

I have read conflicting articles on whether California is a good state to retire in regard to taxes.  As we will be traveling a lot and for at least two years full time, I thought setting up residency in say Nevada while I have no income and am doing Roth conversions would be a good idea...?

Also, Carlsbad (just north of San Diego) is very expensive.  I love it here and the fact I can walk to the beach in a few minutes.  But, I've downsized about as much as I can and we are now in a 2 bed condo that was $600K.  I guess we could sell and travel for awhile and then come back and rent, but housing would always be a huge percentage of our budget.

I have a lot to think through.

[gocurrycracker]

Here is my analysis of taxes for Cali if we were to move in that direction...
https://www.gocurrycracker.com/going-back-to-cali/

tldr: maybe we pay $1,000 in state taxes on $60k annual income (less with tax credits.)

I would be OK with a $1k tax bill.

For Nevada, I see a lot of people moving to Reno these days (nice weather, close to skiing and Tahoe, low income taxes.)