Since they both require you to pay the same taxes, why not make a Roth conversion, rather than a withdrawal to taxable?
What do the dividends on taxable have to do with anything?
The CARES Act distribution has two features that a Roth conversion do not. First, the income tax on a CARES Act distribution is due over three years rather than in a single year. Second, it is reversible, which Roth conversions are not.
I think OP meant that after spending income from their job plus any of their wife's income, they still need $20K from their portfolio, and their first thought was to spend the dividends from taxable (which is easy and makes total sense), but that those dividends are still not enough to cover their spending needs.
I basically FIREd this year. Quit the high paying tech job to do the low income fun job forever more and my wife may continue working but she isn't currently.
I'm debating taking a Coronavirus Related Distribution (I am eligible) from my IRA and moving it to my taxable account.
I'm 33 and I have about 250k in the taxable and around $500k in IRAs/401ks.
Given the fun job I'm probably going to need to withdraw around $20k/year from any accounts which is more than the dividends on the taxable account so I need a withdrawal plan of some sort. Would I be better off doing a CRD now or something like getting SEPPs or a Roth ladder in like 10 years (assuming laws stay the same)?
It really depends on what you think your and your wife's medium to long term plan will be.
First, I'd suggest that if you're planning on being FIREd for a while, most FIREd folks do stop reinvesting dividends in taxable and divert those over and just spending them. That will reduce the $20K you need from your portfolio by some amount, but probably only by $5K or so.
Second, after that you'll need something less than $20K from your $750K portfolio. That's a 2.67% (or less) withdrawal rate, which depending on who you ask is probably safe enough for the long haul even at your young age. Assuming your wife agrees, your budget is sound, and you've covered healthcare and what you'll do all day, then you're in pretty good shape to succeed at FIRE.
At this point at your age and with those account balances, you've got three options: SEPP, Roth conversion ladder, or Just Pay The 10% Penalty Already.
There are complicated ways to make SEPPs work well, but I personally think they're hard to make last when starting at your age. They're required for 5 years or to age 59.5 *whichever is longer*, so in your case if you did a SEPP you'd be looking at doing one for 27 years. 27 years is a *looong* time to lock in a plan like that IMNSHO.
You could Just Pay The 10% Penalty Already - just withdraw from your IRAs before 59.5 and pay income tax and 10% penalty. But I don't see why you would do this when you can do a Roth conversion ladder which seems to me to be strictly better - if you do a Roth conversion, you avoid the 10% penalty, and if you actually need the money before it's seasoned in the Roth, then you pay the 10% penalty that you would have paid anyway, but you get to pay it later and only because you really need to.
That leaves Roth conversion ladder. The simple version is to convert whatever you're going to need to spend five years from now this year, pay the taxes on it this year (probably from taxable), and then withdraw it tax- and penalty-free in five years' time.
Normally a person would be smart to have 5 years' spending available to use while priming the Roth conversion ladder pump, but you probably already have that covered between your $250K in taxable, plus you could also take and spend Roth contributions as well.
The nice thing about a Roth conversion ladder is that if you don't need the money in five years, or don't need all of it, you can just leave it compounding tax-free inside the Roth. In your case, you might find another money-making hobby to fill some of the gap. With an SEPP, you're stuck with taking and paying taxes on those withdrawals whether you need them or not.
Personally I would have done an SEPP myself but preferred the flexibility of the Roth and was willing to save up the 5 years of expenses to prime my ladder to gain that flexibility. So I did that as a condition to my own FIRE (at age 46). Since FIREing I've found a lot of miscellaneous income and have lowered my expenses such that my Roth ladder now has about 22 years of expenses in it.
What I do generally is spend my dividends and miscellaneous income first, and then draw from my taxable as needed to supplement my bank account. I then pick a target AGI each year and Roth convert up to that target AGI in late December, taking into consideration whatever dividends and capital gains I've already had during the year.
I could, as
@cincystache hints at, spend down my taxable at a faster rate and utilize the 0% cap gains bracket more. But since cap gains and Roth conversions both create AGI, you end up having to decide which is better to do each year given the long term picture. Both are nice, but in my case the (admittedly spotty) research and thinking I've done leads me to prefer Roth conversions over 0% LTCG harvesting. First, that's what others in similar situations to mine have done over at another retirement board. Second, that's what
@MDM's spreadsheet recommended when I ran it. Third, at least for now my kids would inherit my taxable account with a step-up in basis, which is functionally equivalent to a 0% LTCG harvest - me doing it now precludes Roth conversions, which help with the tax torpedo as well (see below). [1]
The other nice thing is that my traditional IRA has still grown despite the Roth conversions, so at age 51 I'm starting to look at avoiding the tax torpedo at age 72. I want to be doing Roth conversions to address that problem, so those "pipeline conversions" have also served as "tax torpedo conversions" as well, which is a nice additional benefit.
HTH.
[1] In your case, you'd also have the problem that your taxable account might run out before you make it to age 59.5. If that happened, if you don't do a Roth ladder or spend your Roth contributions, you'd probably be faced with the 10% penalty. What you could model out to see if you like it is spend the taxable down, try to make it to age 50 or something, and then start an SEPP at that stage. An SEPP that is 10 years long or so seems doable to me; 27 years seems way too long. (In my case, even a ~14 year SEPP seemed too long. But that's for each person to decide for themselves.)
