Retire Early and Thrive: Unveiling the Art of Financial Pivoting

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</a