Q&A: Early Retirement Doesn’t Equal “Done”—It’s a Pivot

In This Article

Below is an email transcript from a BiggerPockets Money listener who sent me a message about their personal financial situation and wanted my insights. We’ve used AI to edit the email’s content to be more readable in an article format and remove sensitive personal information from the sender to protect their privacy.

Subject Line: Request & 72(t) Guidance From a FIRE Couple

Hi Scott & Mindy:

I’m a huge fan of the BiggerPockets Money podcast and listen religiously. I especially love the episodes featuring personal stories and case studies—they make it easy to relate and compare my own numbers to real-world examples.

I have a two-part request:

1. Would you consider doing a case study on our financial journey? My spouse and I recently achieved financial independence at ages 40 and 41 and are navigating this exciting phase—less about planning for it and more about figuring out what’s next.
2. Could you dive deeper into the 72(t) option you mentioned in the “middle-class trap” episode? We strongly identify with that concept and are wrestling with some of its limitations.

Here’s our situation:

• Ages: 40 and 41
• No kids
• Worked in corporate America for nearly 20 years, diligently saving and maxing out 401(k)s
• Retired 6 months ago
• Current net worth: $2.7M (includes home equity, with plans to sell our primary home and rent something cheaper in a lower-cost area—currently near a major East Coast city)
• Breakdown: $1.4M in 401(k)s, $1.1M in home equity (two properties, planning to sell both), $0.2M in cash/high-yield savings
• Annual expenses: $100k (including housing costs). Our original plan was to:
• Live off cash for two to three years
• Sell our rental property (it’s not profitable enough to keep) and use the proceeds for another two to three years.
• Sell our primary home in about five years, relocate to a warmer, less expensive area, and live off that cash for nine to 10 years, likely renting instead of owning
• Eventually, tap into our 401(k)s, hoping that in 14 to 15 years, the $1.4M grows to $5M-6M

Our big question: Are we missing another option to cash flow our lifestyle without relying so heavily on selling our primary home? We’ve explored ideas like 401(k) loans (not possible since we’re no longer employed), refinancing our home (challenging without income), or tapping home equity via a HELOC (also tough without income). We briefly considered 72(t) after hearing it on the show, but aren’t sure if it’s practical or provides enough cash flow if we use just one or two accounts instead of liquidating everything.

If you feature us, please keep us anonymous—our friends and family don’t know we’ve hit FIRE, which is a whole other story we’d be happy to explore!

Thanks for any insights or direction you can offer. Best,

[Anonymous]

Scott’s Reaction:

Howdy!

First off, thank you for being a loyal listener of the BiggerPockets Money podcast—we’re thrilled to hear how much you enjoy the case studies! Your story is a fantastic example of personal financial success—congratulations on approaching nearly $3M in personal net worth!

Your Current Plan: Solid But Heavily Relies on Liquidating Assets

Your strategy—living off cash for a few years, then selling the rental, then the primary home—is straightforward and leverages your assets to create a cash runway until your 401(k)s are accessible at 59½ (or earlier, with some creativity).

While downsizing and relocating to a lower-cost geography is a legitimate and powerful way to use home equity, I believe that you will sleep much better at night if your portfolio generates a surplus of spendable liquidity that can finance your lifestyle and then some.

I believe that the central issue in your situation is the fact that while the math of FIRE (4%) rule theoretically allows you to spend $108,000 per year with $2.7M in net worth, the reality is that you will have to liquidate assets in order to achieve that spend. In my experience, only clear outliers will actually feel FIRE’d if their plan is dependent on drawdown and not on spending a minority of the cash flows generated by their financial portfolios.

This is why you are exploring Rule 72(t). That, and the fact that you have a huge pile of wealth in these accounts, potentially far more than you need. At a 7% annual return, that $1.4M in

401(k)s could indeed grow to $5M-6M (in 2024 inflation-adjusted dollars) in 15 years, giving you a hefty cushion later in life.

Option 1: Dive Into Rule 72(t) With Eyes Wide Open

You mentioned 72(t)—Substantially Equal Periodic Payments (SEPP)—and it’s worth a closer look. This IRS rule lets you withdraw from your 401(k)s before 59½ without the 10% penalty, as long as you take consistent payments for at least five years or until you hit 59½, whichever is longer. For you, at 40/41, that’s a 19-year commitment, but it’s flexible in how you set it up.

Using the IRS’ amortization method (one of three calculation options), even with a low interest rate (say, 2.5%), your $1.4M could generate roughly $35K per year if you tap the whole balance. Or, you could consider private lending, debt funds, or other alternatives with a chunk of that 401(k) balance, say $400K, at an 8% preferred interest rate, generating $30K per year and allowing you to continue reinvesting dividends in what I imagine is likely to be a heavy-stocks 401(k) balance.

Alternatively, you could just start withdrawing from the 401(k) using Rule 72(t) at the 4% rule. Note, however, that there are numerous historical cases where the principal balance declines significantly in these scenarios over a 30-year period.

While you could always resume working and adding back into the 401(k), I’d personally be reluctant to go the whole way toward making a hard commit to a 4% withdrawal rate for the next 19 years.

Option 2: Rethink the Rental Property

You’re planning to sell your rental because it’s “not making enough money to keep.” Before you do, let’s crunch it. 

What’s the cash flow today? If it’s break-even or slightly positive, could you tweak it—raise rent, cut expenses—to generate $500-$1,000/month? Even modest income stretches your cash reserves and delays the need to sell. If it’s a loser, though, ditch it sooner than later—FIRE is about efficiency, not clinging to underperformers.

Alternatively, could you 1031 exchange it into a higher-performing property in your future low-cost area? It’s a way to defer taxes and reposition equity into something that cash flows better, aligning with your eventual move. Just weigh the management hassle—rental ownership isn’t for everyone post-FIRE.

Last, you know how much I love a paid-off rental property—properly maintained and at a reasonable cap rate, it’s like an inflation-adjusted income for life, even if it is never truly 100% passive.

Option 3: Unlock Home Equity Without Selling

You’ve hit walls with traditional loans—no income makes HELOCs or refinances tricky. But don’t give up on your $1.1M in equity yet. 

Two ideas:

• Turn your primary into a short-term rental: Related, many HCOL areas have strict short-term rental laws. Is it possible that in your area, these are heavily regulated, and tough to scale—perfectly benefitting your situation? If you want to travel a ton for the next five years and your city allows you to rent out your primary residence as an STR up to 25% of the year, that could materially defray expenses in the first year or two of this journey.
• House hacking lite: Before selling, could you rent out a portion of your primary home (a basement, spare rooms) for a year or two? In a high-cost area near a major city, this could pull in $1,000-$2,000/month, buying you time and padding your cash.

These aren’t slam dunks, but they’re creative ways to tap equity without a full sale.

Option 4: Lean Into Cash Flow Investments

With $200k in cash, you’ve got a war chest. High-yield savings at 4%-5% yields

$8K-$10K/year—nice, but not enough. 

Could you deploy some into dividend stocks, REITs, or a small syndication deal (or, again, something like a debt fund)? A conservative 6%-7% return on $200K is $12K-$14K annually, stretching your runway without touching directly owned and operated real estate or continuing to dump it into 401(k)s. Riskier? Sure. But it’s likely a lot less risky in 2025 (if you do your homework) than it was in 2021.

Note that you can also do this with the home equity, should you choose to sell it in five years.

My Take: Mix and Match for Flexibility

Here’s what I’d rule out if I were in your shoes:

1. Figure out what approach to distributing 1%-2% of your 401(k) you are most comfortable with. You can always start small, with one smaller account, and layer in more across other accounts over time (note that you can set up 72(t) distributions from each IRA, but you can’t do more than one per account).
2. Rule out either paying off the rental or 1031 exchanging it to something that cash flows.
3. Turn the house into an asset in the near term. Yes, it’s work. But, if it turns $500K in home equity into $30K-$40K in income in the next year at 25% of the time, isn’t it worth it? How hard are you guys working now to generate the income required to build a portfolio like this at 40?
4. Park $100K of your cash in a higher-yield option (REITs, dividends) for $6K-$7K/year.

If this is in the ballpark of reasonable, that brings in $60K-$65K/year without selling your home, leaving $35K-$40K to cover from cash reserves. You’d burn through $200K in five to six years—right on track for your move to a sunnier/warmer spot—while keeping your home equity and half your 401(k) growing.

Adjust the mix based on your risk tolerance and how hands-on you want to be.

Note For the FIRE Community

This couple’s story highlights a key FIRE lesson: Early retirement doesn’t mean “done.” It’s a pivot—from earning to optimizing. Whether it’s mastering 72(t), rethinking real estate, or dipping into cash flow plays, the goal is flexibility.

Run your numbers, stress-test your plan, and don’t be afraid to tweak as you go.

This is also just one guy’s initial thoughts. Plans get better, and major flaws are spotted when we crowdsource feedback. Please provide your thoughts in the comments to help this couple out!