I'm 34, on track to FI at 51 (conservatively). Right now, about 60% of our retirement savings is in Traditional IRAs and 401(k)s, 35% is in Roth IRAs, and about 5% in a traditional investment. Most of the balance in the Roth IRAs is gains. In other words, not a lot of our retirement savings will be traditionally available if I decide I want to ER at 51. Unless...
I do a SEPP. If I have $600k in my traditional IRA at that point, the amount of the SEPP (according to
this calculator) would be $20-25k, depending on the interest rate used. When I've done a back-of-the-envelope calculation of our retirement expenses, that $20-25k would be just about what I'd expect our spending to be. It's also, conveniently, in that sweet spot of income where individual exemptions and standard deductions wipe out almost all federal income tax liability.
Here's how I'm envisioning it working:
Age 51-60: Live off SEPP, and if needed, a little from Roth contributions and traditional investments.
Age 60+: Use Roth IRAs for living expenses, convert "max without tax" of traditional IRA to Roth each year.
Age 65(give or take): Social Security kicks in and we live high on the hog. Right?
So, assuming our spending is about the same amount as the SEPP, would we even need a Roth ladder to bridge the gap until 59.5? Am I missing something?