Please review and comment on my plan

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L1: Please review and comment on my plan
The details

Born: 7/11/1963
Retirement date: 12/31/2018 (age 55.5)
First SEPP distribution: 01/10/2019
401K plan: Employer fully supports Rule of 55۝, meaning I can take as many distributions for any amount at any time during the year. Balance = $476,000
Old IRA: Balance = $882,000 with $78,000 of yearly income generated. I plan to only take the generated cash. I will not touch the principal.

Pension Cash balance = $36,000
Personal Savings = $300,000 with $26,000 of yearly income generated. I plan to only take the generated cash. I will not touch the principal.
Wife born 8/16/1955 has not dipped into any of her retirement savings or SocSec. We live on my salary. Her varying balances > $800,000

Mortgage pay off 2/4/2021

Including mortgage payment, we need about $75,000 (after taxes) per year to live as we have been living. The need drops significantly (nearly half) after mortgage payoff.

The Plan

I do the SEPP on the old IRA۝ for 5 years, starting on 1/10/2019 and ending on 1/10/2024 (age 60.5). The 5th and final distribution taken 1/10/2023.

I fill in the holes with 401K Rule of 55۝ withdraws as needed

We begin to use my wife’s money, including her SocSec when she reaches Full Retirement Age (100%) in year 3 (her age 66 + 2 months, 11/2021) of SEPP contract.

Current 72T calculator says

72T calc on 882K: 46,749.59 (Amort Method)
Personal Savings: 26,000.00
Total Income: 72,749.59 (before-taxes)

Short fall: $2,250 (not including tax due)


At the end of contract, any time after 01/10/2024, I will begin to take what ever distributions I want (age 60.5).

Does this make sense?

What would you do different?

Thank you for you time and attention.
2018-04-02 15:46, By: Dan, IP: []

L2: Please review and comment on my plan
Quick thoughts :
1. Do projections of taxable income for each year, especially with the new tax law, thru age 70 1/2, and include deferring Social Security benefits to age 70, as well as the timing of respective benefits.
2. Take only the taxable income up to the 12% tax bracket limit of $77,400 which would be $ 101,400 of Gross income before the $ 24,000 Standard Deduction for a Joint return.
3. Take money from the non-retirement accounts before taking any from the 401-K or IRAs.
4. Take distributions from the 401-K at any time in any amount starting in 2019 after “separation from service”.
5. Do NOT set up a SEPP 72-T because this approach should get you to age 59.5, after which there will not be any 10% penalty for early distributions.
6. While you are both alive and married, consider ROTH CONVERSIONS to the extent possible in the 12% tax bracket, because future income and appreciation will never be taxed to you, either of you who survives, or to your heirs.
7. While in the 12% tax bracket, take capital gains, because Qualified Dividends and Long-Term Capital Gains are taxed at a -0-% tax rate. You can repurchase stocks sold at a gain, if you want to, and thereby increase their cost basis at no tax cost.
8. Meet with a qualified, experienced tax accountant or financial planner to project all of this thru age 70 1/2.
2018-04-02 16:06, By: dlzallestaxes, IP: []

L3: Please review and comment on my plan
Thank you.

I understand and it makes sense to me.

We will follow your steps.
2018-04-03 01:22, By: Dan, IP: []