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.
Laters,
-d.
Linear Mode
