Hello! Soon we’ll be “early” FIRE. As we continue to refine our withdrawal strategy plan, we’re studying the mechanics of the Roth ladder and 72T Seep from you and other authors. Our goal is to draw down our 401k as fast as we can to help alleviate as high of RMDs, without exceeding around 200% FPL to qualify for a good ACA CSR subsidy, and to move the money into our Roth IRAs to then grow tax free. Questions:
1) Am I understanding the technique correctly is we will move the money from our TSP to our Roth IRAs directly? Or will we need to take an extra step and move from TSP to 401k to Roth IRA?
2) If we do the ladder every year all the way to ages 59.5 rather than stop at ages 54.5 (as others write about but we can’t figure out why), would that be advantageous so we continue to draw down the TSP while also then have access to the money we paid in the last 4 years all at once at age 59.5 because we met the age requirement?
3) We are hesitant of the 72T Seep because it’s more rigid and might mean we’re needing to do the mandatory money movement when the economy is down/funds are losing. Of course the advantage is immediate access to the funds. What are the best ways to mitigate against this risk? We’ve thought of moving the amount of money we need to meet about $30k in annual transfer to the Roth IRA from the TSP to a separate 401k and then invest that in safe treasury bond type funds. And then to keep our allocation balanced, keep the remaining TSP funds from both accounts invested more aggressively like our Roth IRAs are. Would this work and what else would help mitigate sequence of returns risk?
4) Do you see any issues with just one of us doing the 72T Seep and the other handling the higher RMDs from the high TSP balance account? That way we have just one account to manage and maybe it allows for more flexibility for the other spouse to also do a 72T Seep later, if desired. I was thinking from a mathematical perspective it doesn’t matter if the balance of one TSP account is higher because it’s about the sum, correct? But am I missing other considerations, early death of a spouse, etc.?
Thanks so much for your excellent blog and forum!