I haven't put a lot of thought into it, but I believe a lot of people who have ER'd and do the 4% rule do it as one chunk in the beginning of the year into a cash management account of some sort, something they can write checks from and/or has a debit card.
I'm don't think your 4% rule interpretation is correct. I believe the 4% is actually 4% of the current balance, not the original balance. For example, on step 1, if the account is at 123,878 when you withdraw, you actually sell 4% of that, which would be 4,955 (or as close as you can get in whole shares). In good years you'll pull out more, in bad years you'll pull out less.
Edit: I'm totally wrong.