Planning Phase: 401k vs Taxable Balances

[ace8]

A backdoor Roth is a conversion, not a contribution. There is a 5 year wait on getting to conversions in a Roth, as I mentioned in post 4. Still a good option, but don't ignore the difference in rules for withdrawing conversions vs. contributions.

Devil is in the details.

I have the opposite problem of OP. I am about 60/40 split in brokerage/tIRA with no Roth.

I currently plan Roth conversions to top 15% bracket starting at ER (~56) and reducing conversions by RMDs at 70 and ending when RMDs exceed 15% bracket. My budget will be funded with RMD and brokerage withdrawals. My projections show about 33/33/34 brokerage/tIRA/Roth at 70. I hope to influence this some with AA withing the account types.

As other posters have noted, your brokerage balance needed has a lower limit set by your need to fund your post work budget before retirement assets become available to take over.

If you need 5 years at 100K then ~500K. It is more of a actual value verses a percentage of assets.

72t can be be used to increase your brokerage balance v. tIRA. 72t unfortunately are not a very flexible tool.

 

[RunningBum]

Devil is in the details.

I have the opposite problem of OP. I am about 60/40 split in brokerage/tIRA with no Roth.

I currently plan Roth conversions to top 15% bracket starting at ER (~56) and reducing conversions by RMDs at 70 and ending when RMDs exceed 15% bracket. My budget will be funded with RMD and brokerage withdrawals. My projections show about 33/33/34 brokerage/tIRA/Roth at 70. I hope to influence this some with AA withing the account types.

As other posters have noted, your brokerage balance needed has a lower limit set by your need to fund your post work budget before retirement assets become available to take over.

If you need 5 years at 100K then ~500K. It is more of a actual value verses a percentage of assets.

72t can be be used to increase your brokerage balance v. tIRA. 72t unfortunately are not a very flexible tool.

All I was doing was to correct your implication that a backdoor Roth is a contribution. It's not. There's no devil in that fact, and the withdrawal rules are different for conversions. That's all.

 

[EvrClrx311]

Wow, lots of great advice here. I'm glad I asked. I saw some good questions... hopefully these details will help:

- Taxes... I just made the 33% bracket last year
- Income excludes me from ROTH contributions
- Accounts
- - Rollover IRA - $205,000
- - ROTH IRA - $11,400 (approximately $6,500 of that was contributions)
- - 401K - $133,000 (current employer)

Both IRAs are from a previous job, the ROTH IRA was a ROTH 401K from a previous employer that I contributed toward when my income was a bit less. All with Vanguard, I feel comfortable with the AA (value stock indexes with a 70/30 US vs. International mix).

The 401K at my current employer is the one growing fast, because of contributions of around $52,000 a year. Of which I contribute $18,000 but it's not required to get the company contribution of $34,000.

My thought was to continue maxing the 401k until around 45, taking advantage of the unique ability to boost my 401K... this assuming I stay with my current company for the next 10 years (that's the plan, I'm content here).

As I said in the OP, I'm just starting to consider what else to grow. To date, it's been primarily my 401K. I rent right now, but am looking out for house purchase if/when something aligns. I'll likely own a home in the next two years. That said, I don't really see myself living where I currently do for the long run - so home ownership would simply be financial and not a road map for retirement living (unless I start to view the equity as important to build, and transfer). Where I live, Northern Virginia, homes are very over priced. So when I move I'll be going down in cost there. Around age 50 I want to move to another state.

I'm divorced with two kids (8 and 6)... so them reaching 18 has a lot to do with my timeline to move and possibly retire - for now I'm lucky to live where I do and make what I do, but they are the only things tying me to the area. Important to me to be as involved in their lives as possible. My income is significantly higher than my spending, but a chunk of that is going to child support. I live on about $70,000 a year. So I assume, on this path, in 10 years I'll feel like I have more money than I know what to do with. That's likely when I could really pile onto a taxable account growth. Doesn't hurt to get started on that now as well... looking forward to any more advice you all have for me. Sounds like tax diversity is key.

Thanks in advance!

 

[ace8]

- Income excludes me from ROTH contributions
- Accounts
- - Rollover IRA - $205,000
- - 401K - $133,000 (current employer)

I had suspected you might have contribution exclusion issues with a Roth. That is why I had suggested a backdoor Roth. Here is Vanguards marketing on backdoor Roths.

I had hoped not to the see a Rollover IRA. That complicates things and introduces the IRA Aggregation Rule. If you can move the Rollover IRA into the 401k, that would clean this up. You'll have to make sure the 401k offers as good as of investments as the Rollover IRA. There is a Kitces article that discusses the details.

Something I did that you might want to consider is to create a spreadsheet that shows cash flow over time. This allows me to track projected asset by investment type tIRA401k/Brokerage/Roth and also cash flows in and out of these accounts including things like home purchase or sales. You want to even out and control taxable cash flows over time, that is why tax diversification becomes a key part of your strategy.

At your income level and rough timeline you outlined, you are likely best off to maximize your tIRA/401k contributions now and start Roth conversions at ER .. similar to my plan, outlined in previous post. You will need to make sure you have enough brokerage savings to fund yourself between ER and when you start to take tIRA distributions. This could start at 59.5 or earlier with 72t.

It is ideal if you can have access to Roth money during this ER Roth conversion time. An issue with a large brokerage balance is the divs reduce your efficiency at Roth conversions.

You have pretty significant International exposure. Are you planning to retire overseas? You did not mention bond exposure in your AA. You should research that on this board. There are some good posts that suggest you have some bond exposure to reduce portfolio volatility. Also, kids rarely become fully independent at 18. They may factor into your budget longer than you expect.

 

[EvrClrx311]

Appreciate that outline, I'll look at the vanguard material. I edited the post above to correct a mistake I made on the international vs US ratio -- I had it backwards. If I understand you, it's beneficial to put my IRA into my 401k balance if possible? What's the reason for that? I don't have any bonds at the moment, but will start moving that way in my 40s. My annual contribution being about 15% the value of the combined accounts makes me feel more at ease with any downturn (even if the market dropped 40%, it would feel like my account dropped 25% overall that year). As the movement of the markets begin to account for a larger percentage of the momentum (up and down) I'll feel more comfortable changing the AA towards a bond mix. At least that's now my mind sits at the moment. Taking advantage of the longer term growth in equities for these accounts that have many years to go.

 

[ace8]

If I understand you, it's beneficial to put my IRA into my 401k balance if possible? What's the reason for that?

Read the linked Kitces article that talks about the IRA Aggregation Rule. TL/DR All IRA accounts are counted as one and Backdoor conversions are prorated for before and after tax by %. If you can move the tIRA (assuming the tIRA to be pre tax) to the 401K, then you can open a non deductible tIRA and immediately convert to a Roth without a tax implication. Those amounts done more 5 years before your ER can provide money for your gap years, between ER and IRA distros.

I don't have any bonds at the moment, but will start moving that way in my 40s...

I thought similar in my 30s. I also worked in tech was over weighted to tech. 2008 made me physically ill. Thank god I managed to hang on and not sell and things more or less recovered. My AA and thinking is much different now.


You seem sharp and open minded. Study AA and bonds topics. Some posters have made some pretty compelling arguments that 90/10 (or more) isbetter than 100/0, even for your situation.

 

[Gotadimple]

About that Rollover IRA. Hold onto it for now. Certainly it's nice to be able to roll it into your 401K - but - you are just adding to that tax torpedo you face at age 70.5 years.

For future planning you have already identified how you will be growing the 401K and that you can't add to a Roth, but as others have said you can do a backdoor.

* Consider future income streams: I'll assume you have no pensions available, and even if you did when you retire at age 50, most companies won't begin a pension payment until you are in your late 50's or early 60's. So, today, that leaves you with 100% of your assets in tax deferred.
* Continue to max out the 401K until the point you have identified as 'end of deposits'. Certainly if you are still working continue contributions at a rate guaranteed to earn the minimum employer match.
* When you begin lower 401K contributions, you lose part of your tax shelter. At this point consider back door Roth (taxable events), BUT MOST OF ALL, begin setting other savings aside in a taxable Brokerage account.
* When you stop working at age 50, begin increased Roth conversions with the goal to eliminate the rollover IRA by age 65 (or earlier).
* Hopefully, you will have enough money to see you from age 50 (retirement) to 59.5 in your taxable account. Then at age 59.5 you can consider the tax consequences of beginning rollovers from your 401K to the Roth, while drawing what you need from the 401K to help fund your annual expenses. Pay taxes for rollovers with money from the taxable account. Tax planning is critical!!!
* The goal when you retire at age 50 is to re-position funds from the tax-deferred (401K) to taxable as long as you have the ability to pay the taxes. You want to lower that 401K so it is not the majority of your assets, but a minority by the time you are 70.5 years old. At that time RMD's (required distributions) plus Social Security will create taxable events that you need to fund from your taxable account. Save the money in the Roth for later withdrawals.
* At age 63, look at your income stream. Medicare kicks in at age 65 and they will do a lookback at your income. Check Medicare.gov for income limits for part B coverage. Today if it is over $85,000 for a single person your Medicare Part B premium gets surcharged at 40% for income between $85,001 and $107,000. I repeat: Tax Planning is Critical !!!
* Finally as you start to work with multiple accounts you need to consider asset location between your taxable brokerage account, your tax-deferred account (401K/IRA), and your tax-free account (Roth).

That means no interest paying investments in your Brokerage account, but do include dividend paying investments ( stocks, mutual funds, stock index funds) there. This lets you take advantage of lower taxes on dividends and long-term capital gains.

Put stocks and bonds in your 401K as everything you draw from it is taxable. For now your bond allocation is small, put it in the 401K. If you choose to draw on your tax-free (Roth) account last, put mostly stocks here, to get the most from undisturbed growth.

When you retire, you'll want to change your asset allocation and you can do this as you do conversions from your Rollover IRA and 401K to your Roth, adjusting the Allocation and the Location of investments to best take advantage of reducing your tax burden.

It's a lot to think about but you have a good long-term plan. HTH,

- Rita

 

[ace8]

A couple of big advantages with Roths. Growth is tax free. In a large brokerage account even if equity invested, it will generate ~1.5% in divs per year creating additional tax. In a Roth, withdrawals under age 59 is allowed for contributions.

All I was doing was to correct your implication that a backdoor Roth is a contribution. It's not.

I never made the implication you are suggesting. I said simply withdrawals are allowed for contributions.

Devil is in the details.

There's no devil in that fact, and the withdrawal rules are different for conversions. That's all.

The "details" I am talking about are the details of the OPs situation, OPs plan and associated rules. Specifically, if the money we are discussing will be available when the OP needs it.

Speaking of details, here is a Kitces article on "details" about Roth rules and linking the Treasury codes.

Sure seems like an awful lot of details! I suppose devil is a matter of perspective

 

[RunningBum]

I never made the implication you are suggesting. I said simply withdrawals are allowed for contributions.

Sure looked like it:

Sounds like you should be looking at backdoor Roths. You did not mention if your tax differed is all 401K or you have tIRA also. Assuming no tIRA and an ability to fund the cash flow implications, backdoor Roths could be a great option for you.

A couple of big advantages with Roths. Growth is tax free. In a large brokerage account even if equity invested, it will generate ~1.5% in divs per year creating additional tax. In a Roth, withdrawals under age 59 is allowed for contributions. Thus funding your gap years.

You only mention funding a Roth via backdoor, which is a conversion. You only talk about withdrawal rules for contributions. If it's not an (incorrect) implication, then it's a disorganized and incomplete thought. Why talk about withdrawals for contributions when it's clear there are no contributions? Why not talk about withdrawal rules for conversions, which you did bring up? For someone talking about details, this is an important one to miss.

 

[bw5972]

Why don’t you start spending down tax-deferred as soon as you can withdraw it. That has no preferential tax treatment in retirement whereas the taxable has advantages.

If I start drawing from the IRA at 59, won’t I be creating taxes? Right now I'm looking at virtually no federal taxes for the next 7 years. What am I missing?

 

[ace8]

Sure looked like it:

Sorry you are having trouble

A couple of big advantages with Roths.
1. Growth is tax free [...]
2. Withdrawals under age 59 is allowed for contributions.

Seems simple to me

 

[RunningBum]

Sorry you are having trouble

A couple of big advantages with Roths.
1. Growth is tax free [...]
2. Withdrawals under age 59 is allowed for contributions.

Seems simple to me

I like pie. That has every bit as much to do with the OP's situation as withdrawals on contributions.

I'm done with this exchange.

 

[karen1972]

To Karen1972 - What do you mean by this statement?
"The biggest thing to me was taxes and outlining how each would be taxed and how to get those taxes minimized at every stage. That includes what you invest that taxable money in, since you don't want to be adding to your tax bill while working either via large dividends/cap gains."
We are in a high tax bracket and have been adding more $$ to after tax accounts. We do max out our 401ks and the cash outside of this is currently sitting in CD's.
I know this is not the best place. So curious how you are trying to minimize your taxes on your after tax accounts. Thanks!

I stuck to more growth investments in my taxable accounts, avoided funds that had a lot of turn over or threw off too many end of year cap gains, munis, things like that where they just didn't throw off lots of taxable income each year. I own ATT now and enjoy the 5.8% dividend, but it wasn't part of my portfolio while working.. I was too close to the 33% bracket/3.8% Medicare added tax... no thanks.

 

[RunningBum]

I think this is the kind of thing Karen is talking about: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement
It's a very good summary of which type of investments best belong in which accounts for most people.

 

[JackJester]

About that Rollover IRA. Hold onto it for now. Certainly it's nice to be able to roll it into your 401K - but - you are just adding to that tax torpedo you face at age 70.5 years.

For future planning you have already identified how you will be growing the 401K and that you can't add to a Roth, but as others have said you can do a backdoor.

* Consider future income streams: I'll assume you have no pensions available, and even if you did when you retire at age 50, most companies won't begin a pension payment until you are in your late 50's or early 60's. So, today, that leaves you with 100% of your assets in tax deferred.
* Continue to max out the 401K until the point you have identified as 'end of deposits'. Certainly if you are still working continue contributions at a rate guaranteed to earn the minimum employer match.
* When you begin lower 401K contributions, you lose part of your tax shelter. At this point consider back door Roth (taxable events), BUT MOST OF ALL, begin setting other savings aside in a taxable Brokerage account.
* When you stop working at age 50, begin increased Roth conversions with the goal to eliminate the rollover IRA by age 65 (or earlier).
* Hopefully, you will have enough money to see you from age 50 (retirement) to 59.5 in your taxable account. Then at age 59.5 you can consider the tax consequences of beginning rollovers from your 401K to the Roth, while drawing what you need from the 401K to help fund your annual expenses. Pay taxes for rollovers with money from the taxable account. Tax planning is critical!!!
* The goal when you retire at age 50 is to re-position funds from the tax-deferred (401K) to taxable as long as you have the ability to pay the taxes. You want to lower that 401K so it is not the majority of your assets, but a minority by the time you are 70.5 years old. At that time RMD's (required distributions) plus Social Security will create taxable events that you need to fund from your taxable account. Save the money in the Roth for later withdrawals.
* At age 63, look at your income stream. Medicare kicks in at age 65 and they will do a lookback at your income. Check Medicare.gov for income limits for part B coverage. Today if it is over $85,000 for a single person your Medicare Part B premium gets surcharged at 40% for income between $85,001 and $107,000. I repeat: Tax Planning is Critical !!!
* Finally as you start to work with multiple accounts you need to consider asset location between your taxable brokerage account, your tax-deferred account (401K/IRA), and your tax-free account (Roth).

That means no interest paying investments in your Brokerage account, but do include dividend paying investments ( stocks, mutual funds, stock index funds) there. This lets you take advantage of lower taxes on dividends and long-term capital gains.

Put stocks and bonds in your 401K as everything you draw from it is taxable. For now your bond allocation is small, put it in the 401K. If you choose to draw on your tax-free (Roth) account last, put mostly stocks here, to get the most from undisturbed growth.

When you retire, you'll want to change your asset allocation and you can do this as you do conversions from your Rollover IRA and 401K to your Roth, adjusting the Allocation and the Location of investments to best take advantage of reducing your tax burden.

It's a lot to think about but you have a good long-term plan. HTH,

- Rita

Thank You Rita. This one of the single best summary posts I heave read on this forum. I have pasted it into my planning spreadsheet. I have a lot to think about regarding taxes and planning Roth conversions to address RMDs.

 

[Montecfo]

As many have stated, there is really no ratio. I'm FI (But still working) and I'm 3-1 tax deferred to taxable.

I think a significant issue on your strategy is your tax rate. If you are in a top bracket I would tend to keep filling the traditional 401k. If you can do Roth 401k, would consider that to the extent not in a top bracket. As your income grows you should be able to supplement your taxable and you have a lot of time to do so.

You just need a strategy to fund those pre 59.5 years as several have said.

These is a lot of detailed advice and ideas here. But it seems you are doing well to this point. So far so good.

 

[panhead]

I wanted to pose a question, in an attempt to calibrate my mind towards an appropriate understand of what works best...

Assuming the goal is to FIRE around the age of 50...
Is there an ideal ratio of 401k vs taxable account values?

I've always had a mindset of getting the 401k as high as I possibly could, but does there come a point where it's better to have invested money other places. I'm not really talking about emergency funds, or cash, but the equity (growth) piece.


I'm currently 35, and have a bit of a unique situation with my job in that they set aside $34,000 a year towards my 401k. I've been putting in $18,000 myself. A total of $52,000 a year. By my math my 401k should get to the $1M mark sometime around age 42, and ideally in the $2M range when I'm 50.

I haven't bothered much in the taxable savings department to date, and was wondering if I should start ramping that up? Obviously, the more invested, the better in the long run... but specifically I wanted to know if it might be better to allocate some or all of that $18,000 away from 401k and into something else? I'd get the $34,000 contribution from work regardless of what I put in. Are there any benefits to having invested wealth outside of the 401k if my goal is to FIRE around 50? More specifically, does the 401k trap you in a way? I only vaguely understand the rules about planning scheduled early withdrawals from 401k... I guess I'd be using that if all my eggs were in the 401k basket and I wanted to Retire at 50.

Appreciate any thoughts or insights people have.

What a great employer contribution!
In your position, at 35 years old and in the 33% tax bracket, I would absolutely keep up the 401k contributions at full steam. Some of the comments here recommend making a spreadsheet to predict future cash flow and taxes. These are great ideas, but at 35 it's not worth the effort, too many variables over too long a time period. Keep maxing out your 401k. Your pay could and will likely increase in the future, at that point, look at starting to fund a taxable account. When you get to 45ish, now start to look at current tax laws and taxable vs tax advantaged and determine what you want. Make sure you take into account the ways of getting to the tax advantaged accounts before 59.5, as there are quite a few (55 situation, 72t, roth conversions, etc). I would recommend doing what you are doing and in your shoes I would do this. One of the best things in doing things this way, it's brainless, the money just goes to your 401k via payroll deduction. Simple is nice!

 

[ace8]

Hi OP. Thanks for your questions. They encouraged me to research this topic.

I had originally been thinking along the lines of backdoor Roths as non-deductible IRA contributions rolled into a Roth. This encounters (at least) two problems.

1. IRA contribution is limited to 5,550.
2. IRA rollover are done on a prorated, all IRA combined basis.

You might want to look at strategy known as mega backdoor Roth. This strategy replaces the IRA in the above example with a 401K. It potentially addresses both of the issues listed above.

1. 401K contribution limit is $55,000 is 2018.
2. IRS Notice 2014-54 clarifies that you can effectively split your deductible contributions and earnings to an IRA and non deductible contributions to Roth at disbursement of the 401k.

You will also need to talk to your 401K admin / HR to clarify if the plan you are using has the capability needed to make this work.

An issue to consider, you indicated in your OP, that you already had 52k going into your 401k. That may leave little room for non deductible 401k contributions.

In Service Withdrawals an really good feature for the 401K to have. Otherwise the growth in the non deductible contributions becomes fully taxable at distribution. In Service Withdrawals allow that growth to occur in a Roth and thus become tax free.

Others posters have talked about the 5 year rules in Roths. I have largely ignored this because you are still significant more than 5 years from ER. It is a detail you need to consider with a specific plan.

This is also a potentially good strategy for me. I am looking for ways to shift brokerage dollars to Roth. This is a possibility.

Others have suggested it is not worth creating a cash flow spreadsheet at 35. I created mine at 38 with less assets than you currently have. It suits my personality and provides a measuring stick for my FI plan. I agree it is a personal choice. Based on the questions you are asking, it might be your time for this step.

I would also caution you against making an assumption that earnings only go up over a career. This may be true for some people. Most data I have seen suggests that for most of us earnings peak between your late 30s and 40s. There is a lot of variance with this. So apply your own specifics as best you can.

 

[bingybear]

What a great employer contribution!
In your position, at 35 years old and in the 33% tax bracket, I would absolutely keep up the 401k contributions at full steam. Some of the comments here recommend making a spreadsheet to predict future cash flow and taxes. These are great ideas, but at 35 it's not worth the effort, too many variables over too long a time period. Keep maxing out your 401k. Your pay could and will likely increase in the future, at that point, look at starting to fund a taxable account. When you get to 45ish, now start to look at current tax laws and taxable vs tax advantaged and determine what you want. Make sure you take into account the ways of getting to the tax advantaged accounts before 59.5, as there are quite a few (55 situation, 72t, roth conversions, etc). I would recommend doing what you are doing and in your shoes I would do this. One of the best things in doing things this way, it's brainless, the money just goes to your 401k via payroll deduction. Simple is nice!

I don't completely agree. I would build up some after tax $ and invest in equities (individuals if you like or ETFs) that kick of qualified dividends if anything. (personally I don't do many individual stocks). These dividends will be taxed at a lower rate than your income.

I RE @ 53 with about 55% after tax. When you do roth conversions noted in the quoted text, you can pay the taxes with after tax $. This is more efficient than using more TIRA distributions (72t or otherwise) to pay the taxes.
It is usually considered best to have a mix of taxability (after tax, TIRA and Roth) in retirement.

 

[Scuba]

I think your point about tax diversification is right on. Nice to have flexibility and options. In my case when I ER'd at 56, about 50% of our portfolio was in taxable account, 25% in traditional IRA, and 25% in employer deferred comp plans. Agree with others that the ratio on its own is not important, but a plan for how you'll get the cash flow you need to fund your lifestyle while also minimizing your tax exposure is.

 

[panhead]

I don't completely agree. I would build up some after tax $ and invest in equities (individuals if you like or ETFs) that kick of qualified dividends if anything. (personally I don't do many individual stocks). These dividends will be taxed at a lower rate than your income.

I RE @ 53 with about 55% after tax. When you do roth conversions noted in the quoted text, you can pay the taxes with after tax $. This is more efficient than using more TIRA distributions (72t or otherwise) to pay the taxes.
It is usually considered best to have a mix of taxability (after tax, TIRA and Roth) in retirement.

I'm totally on board with (eventually) targeting taxable investments when you have enough beyond what you can defer, but beyond an emergency fund or saving for a down payment on a house, I would not target taxable right now, but I would maximize my tax deferred space. This is a use it or lose it proposition. Also, if the OP starts to invest in taxable and his income increases significantly, those dividends might be taxed at close to 20% or more depending on AMT. This was my point that s/he should defer everything s/he is able to now and see how the future plays out. In the 33% tax bracket, this is pretty much a no-brainer in my book. Worse thing that happens is that the OP is in the 33% tax bracket in retirement and its a break-even. If OP is in a higher tax bracket than that in retirement, then this discussion is moot as s/he is very wealthy.

Also, all of those (qualified) dividends that are taxed at a lower rate currently are still taxed. At least with deferment, the dividends compound deferred, and are likely withdrawn at a lower rate.

OP, since you see some disagreement, its likely it doesn't matter much either way as you are saving a lot. My point is, it is really easy not to screw this up when it is automated through payroll deductions, and the use it or lose it nature of deferment is well worth it.

Edited to add:
Even for house down payment, I believe there is a one time deal where you can take money from you 401k penalty free for a first time purchase of a home. Note that "first time purchase" doesn't mean that its the only house you've ever purchased, just the first one in a certain amount of years. Google for more info....

 

[jzajzz]

how old are you?

 

[EvrClrx311]

how old are you?

35

 

[NgineER]

If I start drawing from the IRA at 59, won’t I be creating taxes? Right now I'm looking at virtually no federal taxes for the next 7 years. What am I missing?

You are looking at no tax now, but when you draw SS and have RMDs in the future, you’d pay more in taxes. If you draw from the tax deferred now, you’ll spread the income over time and will be able to manage your taxes better.

 

[NgineER]

I think you are in a great situation. Congratulations on that tIRA match! I wish I had it. If you truly plan to Reid’s early, I would defer as much taxes now and you’d most likely find that your taxes are lower in retirement.
There are ways to easily manage your taxes in retirement, and it does not require a huge after tax account. I’m assuming Roth conversions will hand around as the government will always prefer a bird in hand, ie get taxes now vs waiting for a long time to get more in taxes.
Madfientist have some interesting articles on withdrawal strategies that could help you in your decision. Here is one about accessing tIRA money early.
https://www.madfientist.com/how-to-access-retirement-funds-early/
Here is another comparing Roth vs tIRA.
He is catering more to the really early retiree, but the logic is the same, but if you spend more money, you are going to pay more taxes, either now or later.