When 90% of your savings (1.5M) are in a 401(k) at age 55 (no 10% penalty), what is the best way to get it out?
Slow -- qualify for ACA subsidies until Medicare but face RMDs at age 70 1/2 and have limited financial flexibility
Medium -- lose ACA subsidies and other benefits of lower income but stay in 12% tax bracket (about $100K/year for married couple with $24K standard deduction) -- probably the best option -- get travel insurance and spend at least 6 months per year outside US.
Fast -- pay higher income tax rates now to push all the $ into a Roth ASAP and create a source for lifetime tax free growth and income. This shrinks the stash but creates more flexibility, including the ability to return to Oregon sooner (where state income tax is 9%) after relocating to Washington (to avoid state income tax while draining the 401k). Note: Oregon does not tax social security payments.
These are the new tax brackets for 2018:
Rate Individuals Married Filing Jointly
12% $9,526 to $38,700 $19,051 to $77,400
22% 38,701 to $82,500 $77,401 to $165,000
24% $82,501 to $157,500 $165,001 to $315,000
32% $157,501 to $200,000 $315,001 to $400,000