Should I start the Roth conversion ladder and just pay the higher taxes, or work a few more years and build up the personal accounts (then start converting yearly with presumably less of a tax burden)?
Could be neither, potentially, but working longer does mean more $.
When comparing tax now vs tax later, look at the marginal rate. Why pay 24%+ when you can pay 0-12% later?
This applies to both Roth conversions and making/not making contributions to 401k.
If your tax rate is higher now (probably the case) then you should continue to contribute to 401k, then IRA, then personal account.
You can also just make IRA/401k withdrawals and pay the 10% penalty. 10% is less than 24%.
Simplified example:
Year 1 to 5 - spend $25k + $1.2k penalty + $1k tax
15.2k from personal account
12k from 401k (pay $1.2k penalty @ 10% (better than 24% saved on contribution))
10k Roth conversion (pay $1k tax @ 10%)
Taxable income ~$25k (200% FPL for single filer, so good ACA subsidies)
Year 6 to 10 - spend $25k
personal account depleted
10k from Year 1 Roth conversion
17k from 401k (pay 10% penalty, $1.7k, pay 10% tax on amount>12k, $500 - 13% effective tax rate)
Year 11 - age 59.5
SEPP (less risk as 10 years closer to 59.5.)
This could be goosed even higher if you are willing to spend a year or 2 abroad to avoid ACA impact
https://www.gocurrycracker.com/kickstart-your-retirement/Could also do Roth conversions in the US in Year 1-5 at 12% tax rate if getting good ACA subsidies
