A Six-Step Plan for Tax-Free Multi-Millionaire Retirement in Your 40s

I'm Tyler, a former financial advisor and portfolio manager. Now I make financial content for free so that you don't have to pay for it.

1. Calculate Your Combined Income

Assume you and your partner make about $200,000 together, with a post-tax income of $150,000. This foundational assumption is crucial for planning purposes.

2. Contribute to Your Roth 401ks

Put $23,500 each into your Roth 401ks. If you have access to a low-cost growth fund, invest there. With over a 20-year time horizon, this can be beneficial for growth. Don't hesitate to use target date retirement funds if you prefer a bit more safety.

3. Manage Living Expenses

This leaves you with about $104,000 for living expenses and savings. This amount should feel comfortable and manageable.

4. Invest in a Taxable Brokerage Account

For true financial flexibility, I'd invest another $10,000 to $15,000 a year in a taxable brokerage account. Use low-cost index funds like Fidelity's FXAIX or Schwab's SWPPX for these investments.

5. Projected Growth

With an average annual real growth of 6% to 7%, by age 65, your Roths could be worth about $2.9 million, and the taxable brokerage account around $632,000. That’s a combined $3.5 million, with about 80% of it being 100% tax-free after age 59½.

6. Withdrawal Strategy

Finally, I would draw down 6% per year during retirement, which translates to about $230,000 annually. This strategy allows you to fund your lifestyle directly from your investments while preserving your principal for your loved ones.

Conclusion

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