Overthinking Withdrawals

[Acastus]

I feel like I have a bit of a mental block that needs to be unstuck. I am FIREd, class of 2018, and need to replenish my cash account. Timing is to complete by end of 2022. This is the 1st time doing this with paper losses, and I would like input on which funds to draw from. Up until now I have spent from taxable monies and converted IRAs to Roth for the bulk of my taxable income.  Ideally, I would replenish to 1 year's expenses, but I am inclined to take less while funds are down for the year. A full year of expenses could be taken from any single type.

Options:
1. 401k - stable fund, essentially a government guaranteed fund that works like a high yield CD. Has increased 3% this year, the only asset with gains.

2. Taxable - total stock, total bond etfs. Down 20% and 15%, respectively. I can sell the bonds at a loss (harvesting).

3. Roth IRA -  invested in total stock, small cap, tech, health, international. All are down, so my inclination is to leave these alone. Health fund is down only 5%, so that is the best of the bunch.

4. t-IRA - Total stock, REIT, 60/40 stock/bond, Short term bond. ST bond fund is down about 8%, others more.

Am I overthinking this? Do I just take the 401k money, since it has gains and the rest have losses?

[ScreamingHeadGuy]

I would sell the bonds in my Taxable account (because they're typically tax-inefficient there) since you can eliminate that position and reap a loss.  The amount to sell would be just enough to hit the $3000 Long-term Capital Gains (loss) limit. 

Then withdraw from the 401k for the amount necessary to top-up your cash balance, and/or however much you can based on the loss you'll be getting from selling those bonds (above).  The formula for the later withdrawal would be something like: X = (standard deduction) + $3000. 

Again, that's just how I would approach this.  But your particular situation might be different, and I will admit I've not thoroughly explored any tax implications this might have (for ACA subsidies, etc.).  Nor have I explored the 2022 tax code - I'm basing it on the 2021 stuff I "remember". 

[seattlecyclone]

You've been going with taxable money previously, and I see no strong reason to change that. The tax deferral from your 401(k)/IRA accounts is a valuable thing. Why withdraw from those when you still have un-sheltered money available? Try to maintain an overall asset allocation across all your accounts. If the taxable sales put you below where you want to be on stocks or bonds or anything else, you can always shift money around in your retirement accounts to compensate.