PHASE 2· /bridge
Phase 2 of 3 · At and just after retirement · 72(t) · Roth Ladders · ACA · Withdrawal Sequence
Retirement is the riskiest part of the journey. You need a plan that will cover the years between leaving work, reaching 59½, and making it to Social Security and/or pensions.
Many people saving for FIRE have the same problem: they’ve saved a lot of money, but it feels locked up in retirement accounts. Many people have accumulated a large pre-tax account, some Roth savings, and not quite enough taxable to last until 59½. Tapping the 401(k) early can mean a 10% penalty on top of ordinary income tax. Doing nothing means watching the taxable account drain while a six-figure IRA sits untouched.
The IRS does provide two solutions: 72(t) SEPP distributions and Roth conversion ladders, and they work very differently. Which one fits depends on your account balances, your MAGI target, your ACA situation, and how much flexibility you need year-to-year. Getting this wrong in year one is expensive. Getting it right means the IRS penalty is a non-issue for the rest of your retirement.
This phase also covers the decisions that happen in the final months before you leave work: readiness, withdrawal order, what to do when markets drop early, and how to avoid leaving money on the table when you hand in your badge.
| 72(t) SEPP | ROTH CONVERSION LADDER |
|---|---|
| Fixed annual distributions | Flexible — convert what you need each year |
| Locks you in for 5 years or age 59½ | 5-year seasoning before each conversion is accessible |
| Good when taxable is nearly depleted | Good when you have 5+ years of taxable runway |
| Simpler ACA MAGI management | Conversion amount affects MAGI directly |
BEFORE YOU LEAVE WORK
Confirm You’re Actually Ready
The readiness question is more than just a number. It’s about your withdrawal sequence, healthcare plan, and whether you’ve got a plan to fund your early retirement and manage through market declines.
Withdrawal Order of Operations (Coming Soon)
THE CORE DECISION
72(t) vs. Roth Conversion Ladders
Penalty-free access before 59½ is the central mechanics problem of early retirement. The 72(t) and Roth conversion ladder both solve it, but they behave very differently when you factor in ACA subsidies, MAGI management, and what happens in a down market.
CASE STUDY SERIES
Ben & Leslie: A Retirement Story
Ben and Leslie are a couple in Indiana figuring out early retirement in real time: the withdrawal sequence, the 72(t) decision, the ACA cliff, and figuring if they have enough money to get them to 59 1/2 beyond. The series walks through every major bridge-phase decision with actual numbers.
The Middle Class Trap: How Early Retirees Run Out of Accessible Money Before 59½
Three Ways to Access Retirement Accounts Before 59½ (Without the 10% Penalty)
Roth Conversion Ladder vs. 72(t): A Year-by-Year Early Retirement Example
How Early Retirees Optimize ACA Subsidies With Roth Conversions
Why Retirement Projections Are Often Wrong
All Models are Wrong, but Some are Useful
Already Retired?
Phase 3 covers the ongoing work: managing withdrawals, MAGI, and taxes year after year once you’re on the other side.