Fun. I just wrote a calculator for this sort of thing.
http://forum.mrmoneymustache.com/taxes/wrote-a-retirement-calculator-because-i-orp-com-didn't-do-what-i-want/(i-org.com is a much more complete tool, but doesn't model this type of early retirement)
If I tell it you have $840k in a tax-deferred account and nothing else saved and retired now this is what it returns:
Yearly spending <= 55800
age saving spend IRA fIRA Roth fRoth IRA2R rate tax spend
50: 0 -0 840 74 0 0 23 15 18 56
51: 0 0 803 76 25 0 26 25 19 57
52: 0 0 757 78 55 0 30 25 20 57
53: 0 0 702 80 91 0 33 25 22 58
54: 0 0 636 74 134 0 0 15 14 60
55: 0 0 607 46 145 23 0 15 7 62
56: 0 0 606 43 132 26 0 10 6 63
57: 0 0 608 40 114 30 0 10 6 64
58: 0 0 613 37 91 33 0 10 5 65
59: 0 0 622 60 63 11 0 15 4 66
60: 0 0 607 62 56 9 0 15 4 67
61: 0 0 588 65 51 8 0 15 5 69
62: 0 0 565 68 46 7 0 15 5 70
The columns are explained at the bottom here:
https://github.com/wscott/fplanThe numbers are all in thousands of dollars
It decided that you can afford to spend $56k/yr on that money and make it to age 70 when Social Security will cover most of those expenses. This is with investments making 8% and assuming a 2% inflation. The actual numbers are not that important, what we are looking at is the shape of what it is doing.
Basically, you have 5 years where you
have to live off your IRA. It withdraws enough to live
and to does an IRA2Roth conversion. These years pay high taxes because you have a lot of income and are paying a 10% penalty on the withdrawals. Starting at age 55 you can start to spend the
contributions to the Roth account. You are still spending from the IRA, but Roth money means you stay mostly in the 10% tax bracket. Notice that 10% tax + 10% penalty is cheaper than doing a larger Roth conversion in the 25% bracket in those first 5 years.
After you hit 59.5, then you can start spending from the IRA. Interestingly, it doesn't find any benefit from doing any more Roth conversions.
If you had aftertax savings, then that money would be used to cover part of that 5-year gap before the Roth pipeline gets started and you end up spending less money.
If you tried to use 72(t) then you would be able to withdraw like $35k/yr from that IRA max. And you would be stuck at that number. If you change anything in the next 9 years then you need to pay the 10% retroactively. In never seemed like a good idea for me.
-Wayne
Disclaimer: I am just learning this stuff and may be completely wrong. Double check anything I say and others please send feedback if I am saying something bogus.