Go Curry Cracker > Early Retirement

Roth Ladder and 72T Sepp


Hello! In less than a year we’ll be not so early FIRE at ages 48 and 50 with plans not to have an earned income if we can help it.  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 TSP as fast as we can ($800k balance vs about $600k in cash and Roth accounts which we’ll live on mostly) 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 (we think about $400k) 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!

Hi M

This is a big topic with lots of side topics - let me see if I can hit the big points in a 1st reply and we can narrow down from there if need be.


You would first need to rollover/transfer your TSP to an individual IRA. (There is no intermediate 401k - replace 401k with IRA in your original text and you have it right.) (The taxpayer relief act of 2012 apparently enabled TSP participants to do in-plan Roth conversions. A quick google search doesn't come up with anything so it may not have been implemented. )

From there you can do Roth conversions at your leisure.


You can do Roth conversions at any age, no need to stop at an arbitrary point (e.g. age 54.5)

Once you hit 59.5 you have access to all Roth funds, conversions and earnings both, without additional taxes or penalties


For SEPP - You can split your individual IRA into as many pieces as you want... 1, 5, 100... it doesn't matter. Then you can setup the 72t SEPP withdrawals on just one of them.

It is inflexible in that you can't decide to stop the periodic payments until age 59.5, but its only 9 or 10 years - make 'em small enough that it isn't a big deal. Do this on an IRA in the name of whichever spouse is OLDEST so you are making the shortest possible commitment.

You also don't need to start this today - you can start it in a year or 2 once you have a better feel for your retirement spending.


The TSP (or rollover IRA) belongs to only one of you. RMDs are based on that individual's age - so you will both have RMDs starting when you each reach age 72.  On your taxes, withdrawing $1 will be taxed the same regardless of which account it comes from

This was an excellent reply! It has taken me a bit to work through, but it has been a tremendous help to advancing our plan! After refiguring  we may actually need both of our accounts to put into 72T to make it add to enough useable income in the first 5 years.

For question #3 to help reduce sequence of returns risk, this is what I’m thinking… Once I rollover the TSP to Trad IRA I’d be able to have some of the funds in cash, bonds and stock index funds. In any given year I’d decide to withdrawal the mandatory amount  from the cash fund if the markets were down vs the stocks if markets were up. Is this allowed- choosing which funds to withdrawal from within the 72T SEPP Trad IRA in any given year? This isn’t allowed with the TSP- withdrawals are taken proportional across all funds held, which is a major disadvantage (IMO) to keeping funds in the TSP during the withdrawal phase.

Thank you again for your excellent posts and replies!


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