401K or IRA, or does it matter?

[Big_Hitter]

You can take SEPPs from an IRA starting at 55 if you wanted too.

with much less flexibility than a distribution after age 55 can be from a 401k plan

 

[gauss]

You can take SEPPs from an IRA starting at 55 if you wanted too.

or starting at any age -- if I am not mistaken.
(FWIW: SEPP = 'Section 72(t)' withdrawal plan).

-gauss

 

[free2020]

or starting at any age -- if I am not mistaken.
(FWIW: SEPP = 'Section 72(t)' withdrawal plan).

-gauss

That’s correct. Only that it has to continue to the longer of 59.5 or 5 years. This is yet another way to manage the eventual RMD @ 70.5. I did SEPP at age 54. Everyone ‘s situation is different but if your situation is like mine, where the tax deferred savings are a significant proportion of net worth, SEPP is a valuable option. I’m not ER’ed but the SEPP paved the road to ER, planning for that before the clock strikes year 2020.

 

[gauss]

That’s correct. Only that it has to continue to the longer of 59.5 or 5 years. This is yet another way to manage the eventual RMD @ 70.5. I did SEPP at age 54. Everyone ‘s situation is different but if your situation is like mine, where the tax deferred savings are a significant proportion of net worth, SEPP is a valuable option. I’m not ER’ed but the SEPP paved the road to ER, planning for that before the clock strikes year 2020.

Thanks free2020,
Indeed at one point I considered SEPP/72(t) plans to get me to 59 1/2 (I ER'd in my mid-late 40's).

I decided instead to use Roth withdrawals as/if needed. I rolled over a large amount of after-tax 401k contributions (many plans do not have this option) to our Roth 401ks that should make any non-qualified Roth distributions before age 59 1/2 penalty free (ie they will be from contributions and conversions - not earnings which comes out last - see pt 3 IRS form 8606 for details).

-gauss

 

[free2020]

Thanks free2020,
Indeed at one point I considered SEPP/72(t) plans to get me to 59 1/2 (I ER'd in my mid-late 40's).

I decided instead to use Roth withdrawals as/if needed. I rolled over a large amount of after-tax 401k contributions (many plans do not have this option) to our Roth 401ks that should make any non-qualified Roth distributions before age 59 1/2 penalty free (ie they will be from contributions and conversions - not earnings which comes out last - see pt 3 IRS form 8606 for details).

-gauss

You did great with your Roth 401K. Unfortunately 401K Roth was not offered at my long tenure employer. I wised up to Roth a bit late and that is a regret. But, as I posted earlier in this thread, opportunistically converted tIRA to Roth right after the GFC and I have not touched a penny to date, thanks to the SEPP from a large tIRA. The market has also been generous to my Roth. As I look out ahead, my general plan is to deplete the tIRA substantially by 70-1/2, dip into the ROTH minimally until the out years.

Tax deferred is good but tax free compounding is magical. From the discussion on this and other threads, not sure if that is fully appreciated by everyone. Like you, I feel like shouting ROTH out from the rooftop. I especially tell this to all 20 something ‘s I come across. Imagine having $55 K in Roth by age 30!

 

[gauss]

Actually I never really had a Roth 401k at my employer (well maybe a tiny one to start the 5 year clock running).

I had a traditional 401k that allowed for after-tax contributions. DW did too. That was the key enabler to all this. It was this after-tax enabled 401k account combined with Roth IRAs (and traditional IRAs) that allows the magic to happen (aka the complexity and inefficiencies in the tax code that we benefited from).

-gauss