Personal Finance

We're in our 40s with a $3.5 million home and $1.5 million mortgage at 2% — do we need a different strategy?

Marc Guberti

Published: January 8, 2025 11:33 am

No matter how much wealth people accumulate, they always look for ways to optimize their finances. A couple in their 40s is no exception to the rule, based on a recent Reddit post in the Chubby FIRE subreddit. 

The couple has a $3.5 million home, a $1.5 million mortgage with a 2% APR for another 8 years, and $1.1 million of rental property. The couple also has $1.35 million invested in tech stocks, $210,000 in a 529 plan, and $200,000 in commercial real estate. 

The wife recently left work, and the husband is contemplating it as well, especially with the job getting more stressful. Are they able to retire, and is that the best path for them? I’ll share my thoughts, but it is always good to speak with a financial advisor if you can.

[keypoints]

Should the Husband Retire?

The couple has done a great job of saving money and setting up their children for good futures. The 529 plan can cover most of their children’s college tuition, but the amount of coverage the 529 plan provides depends on which colleges the students choose to attend.

Furthermore, the couple also seems good with their expenses. They are willing to trim their costs and move into a more affordable area once the children are out of college. 

However, there is a catch. The husband is stressed at work, but he is thinking about the interview process. It sounds like he wants a job that is less stressful and offers similar pay instead of retiring completely. He responded to one Redditor’s comment saying that he wants to work for another 5-8 years. Applying to other companies can help him land a less stressful job that still offers good pay. Getting interviews has been difficult, but it is an endeavor worth pursuing.

Does The Couple Already Have Enough Money?

The husband currently makes $600k-$700k per year. It’s a hard salary to walk away from, but he already has a great portfolio. The couple has millions of dollars on paper, but not all of it is accessible. For instance, the couple has $1.3 million in a 401(k) plan, and half of those funds are in a Roth account. 

The issue with having so much money tucked away into retirement accounts is that you have to pay a 10% penalty fee justto access the cash. The couple does have $1.35 million in RSU tech stocks. 

The couple has $5.5 million in total assets. Using the 4% rule, the couple would withdraw $220,000 per year. That’s enough to cover the couple’s $150,000 in annual expenses. Those costs will also go down when they move to an area with a lower cost of living. 

Not All of the Funds Are Accessible

The only issue is that the $5.5 million isn’t readily accessible. They would have to take out a HELOC to access the equity in their $3.5 million home, which makes up most of their net worth. Furthermore, more than $1 million of their net worth is inaccessible until 59 1/2 years old, assuming they still work for the same employer. However, 401(k) withdrawals are penalty-free for 55-year-olds who no longer work with the employer that set up the plan.

The husband is 46 years old, so he would be eligible for penalty-free 401(k) withdrawals in nine years, assuming he no longer works with the employer. The 45-year-old wife can make penalty-free 401(k) withdrawals in 10 years.

The couple can sell some of their stocks before turning 55 if they want to retire early and live on the withdrawals. Selling the house will also help, which is something the couple wants to do soon after the husband retires.