Around 1.4 million split roughly seventy thirty in favour of the 401k, no Roth conversions started, and no pension. I understand the theory of every option and what I want is which one people picked and what they found annoying about it after a few years. Assume I can hold spending near four percent and that I have five years of expenses I could reach if I had to.
Before any of the clever strategies, call your plan administrator and ask two things: whether the plan allows partial withdrawals after separation, and whether it forces a lump sum or rollover. A surprising number of plans only offer take it all or leave it alone, and if yours is one of those then the rule that lets people who leave service in or after the year they turn 55 take from that employer's plan without the extra early distribution tax is useless to you in practice. That single phone call reorders the whole decision, and almost every guide skips it.
I assumed partial withdrawals were universal. Calling tomorrow, and I suspect I already know the answer given how our plan behaves.
If it is lump sum only, roll to an IRA and plan around conversions and the taxable account instead, because the separation rule does not follow the money into an IRA.
One thing nobody mentions is what happens if you retire early and then want to go back for a year. I did, at 54, and the annoying part was not tax, it was that I had already started a payment arrangement and had to be careful not to break it. Whatever you pick, ask what it costs to reverse before you start it, and take the answer to an accountant who has done this for other people rather than to a forum.
I used substantially equal periodic payments for a while and I would not choose it again at 52 with your balances. It works, it removes the penalty, and it also locks you into a payment schedule that you break at real cost, which is exactly the flexibility you are retiring to get. It made sense when it was the only door available to me. With a taxable account holding several years of spending, you have better doors.
The route that worked for us was much duller than the internet suggests. We spent the taxable account first, converted a slice of the tax deferred money to Roth each year in the low income years that created, and by the time the conversions were seasoned enough to touch we were close enough to the normal age that it barely mattered. Two practical notes: the seasoning period on each conversion is its own clock, and your conversion size interacts with what you pay for health cover in those years, so do the two calculations together rather than separately.
Doing the conversion sizing and the health cover calculation in the same spreadsheet rather than in different months is a good catch.
@cookie_domain_al · 6mo ago
Mild disagreement with all the ladder enthusiasm. Most people at your balance and your spending never need the exotic machinery, because five years of taxable spending plus the basis in that account covers the bridge on its own, and the strategies exist mainly for people who saved everything inside tax deferred accounts. Run the simple version first, and only add complexity where the simple version actually fails. Complexity has a cost you pay every April for thirty years.
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