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View Poll Results: How did/will you pay for expenses before age 59.5 while retired?
I did/will use the 72(t) SEPP option 15 13.27%
I had/have a pension I could tap before 59.5 38 33.63%
I had/have taxable investments to tide me to 59.5 76 67.26%
Other 15 13.27%
Multiple Choice Poll. Voters: 113. You may not vote on this poll

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Old 01-04-2008, 09:34 AM   #21
Recycles dryer sheets
Join Date: Feb 2006
Posts: 82
I will be retiring around age 45, and will have 80% or so of my funds in 401K/IRA's. My current plan is to move the 401K's to IRA's.. Then for the first five years I will live on my taxable accounts. During those 5 years I will be converting living expenses from my IRA to my R-IRA.

On year 6, I can take out as a contribution the year one's conversion:

year 1:
take 40K from taxable, convert 40K (+ inflation hedge 6 years out) from IRA->RIRA

year 2:
take 40K+Inflation from taxable, convert 40K+Inflation from IRA->RIRA

Year 6:
Take 40K+inflation from RIRA (This is tax free since you already paid taxes on it), convert 40K+Inflation from IRA-RIRA (this is where you pay the taxes)

Basically you are using the Roth conversions and the 5 year waiting period to get access to your money. I think it has one HUGE plus over the 72T method. You can stop at anytime, you can take more, take less, take none.

The minus is, you pay taxes 5 years in advance of when you need the money and you need some planning because you can't touch the money for 5 years. This isn't a major minus for me because my "estimated" taxes on current conversion amounts along with my dependants puts my taxes at zero or very very close to it, and I have a plan The one final minus I know if is, state taxes can be different on conversions vs. 72T money.

Anyway, that is how I plan on funding my retirement before 59.5.


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