After lots of reading, I have the "standard" withdrawal strategy down:
1. Getting ready:
Max 401k, traditional IRA
Fund 5 years of living expenses between after tax accounts and ROTH IRA
2. Retired and accessing it:
Transfer a years worth of expenses from traditional IRA (assumed that 401k was rolled into it) into a ROTH IRA. This amount should be enough to live on while the inflation adjusted amount in the Traditional never really goes down (living on interest basically). Do this forever
3. Living:
For the first 5 years, live on the after tax contributions and gains from a taxable account. After that, live on the amount you transferred 5 years ago into the ROTH.
4. Taxes:
Taxes are paid on the amount you roll over from the ROTH. If you can live on a relatively small amount, you access this money tax free or damn near it.
I realize that another strategy would be to use capital gains in a taxable account to supplement since you can avoid taxes by remaining in a low tax bracket.
This whole strategy allows one to retire earlier by paying little or no taxes on your retirement income.
But here is the rub, what happens when you have a working spouse?
My fiance is on board with the idea of me retiring as early as I want. But she enjoys her job and doesn't intend on joining me.
Given her decent salary (which can be very low for the purposes of messing with the above calculations), all money I withdraw for living in retirement is now taxed at our highest joint rate! I now cannot get tax free capital gains, and rolling over the ROTH would lose a large portion of any rollover (15% or more).
I have been reading and fiddling with numbers but I cannot figure out a good strategy here. Our finances are separate: she would not see funding me staying at home while "our" nest egg in my name grows as a good solution. To retire in domestic bliss, I need to be able to provide my share of the mortgage/rent/bills/etc
My current best idea is dividends and gains in an after tax account for a lower tax rate...
Any ideas on how to break open this puzzle?