When we last left Ben and Leslie in Part I of this series, they were staring at a problem that feels unfair in a very specific way. Their taxable brokerage account ran out before they could withdraw from their retirement accounts without penalty.
There are three possible solutions we’re going to explore to get Ben and Leslie back on track to retire:
- Spend Roth contributions (principal)
- Use a 72(t) SEPP plan
- Build a Roth conversion ladder
Option 1: Withdraw Roth Contributions
The simplest option is also the most limited. Contributions to a Roth (not earnings) can be withdrawn at any time, tax and penalty-free. Ben and Leslie have $100,000 of basis.
When we run the numbers, we see this doesn’t quite get them across the finish line. Their shortfall is roughly $60,000 at age 58 and $110,000 at age 59. Roth principal is a nice cushion, but their $100,000 isn’t quite going to cut it.
Option 2: 72(t) SEPP — The IRS-Approved Escape Hatch
If you take a series of “substantially equal periodic payments” (SEPP), the IRS waives the 10% penalty. Thanks to recent rule changes, there is now a 5% interest rate floor for these calculations, which allows for much higher annual withdrawals than in years past.
For Ben and Leslie, they could move $700,000 into a separate IRA to generate fixed $40,000 per year payments. It solves the gap, but it is rigid. You cannot easily pause or adjust these payments without triggering retroactive penalties.
Option 3: The Roth Conversion Ladder
The Roth conversion ladder turns taxable years in early retirement into an advantage. How does the ladder work?
- Convert money from a Traditional IRA to a Roth IRA.
- Pay ordinary income tax on the conversion.
- Wait 5 years.
- Withdraw the converted amount tax and penalty-free.
What This Looks Like in Practice:
If Ben and Leslie start at age 50:
- Ages 50–54: They convert ~$40k/year and live off their brokerage account.
- Age 55: The first conversions from age 50 become fully accessible. They now have a rolling pipeline of tax-free funds.
- Age 59½: Traditional IRA access opens fully, and the “bridge problem” disappears entirely.
Comparing the Three Options
| Strategy | Speed | Flexibility | Complexity |
| Roth Principal | Immediate | High | Very Low |
| 72(t) SEPP | Immediate | Very Low | Moderate |
| Roth Ladder | 5-Year Wait | High | Moderate |
A Note on Strategy
It is worth noting that even if Ben and Leslie had enough in their brokerage account to bridge the gap to 59 ½, they should still likely be executing one of these strategies. As mentioned in Part 1, if they only recognize capital gains from their brokerage account, they are letting their standard deduction go to waste.
Currently, they can recognize about $30,000 of ordinary income completely tax-free. That’s because couples have a standard deduction of $32,200 (for 2026). They can have up to $32,200 of ordinary income and pay zero federal taxes.
By using a 72(t) to fund their lifestyle or Roth conversions to move traditional IRA funds into a tax-free-forever bucket, they can take advantage of a window of opportunity that disappears each year they don’t use it.
In Part 3, we will look at a real year-by-year implementation. Because once you see the full structure, the “trap” starts to look a lot more like a design problem than a dead end.
