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I have roughly 90% of my stock assets in my IRA, which I started years ago by rolling over the 401(k) from a previous employer. I still have many years left before I turn 59.5, but am somewhat on the doorstep of (ok fine, maybe partway up the stairs and down the hall from) retirement, and am looking for ways to tap into the IRA without getting slaughtered in taxes. I have looked at the 72(t) (or SEPP) option for IRAs, and it looks like a good option. Does anyone have any experience with these, good or bad? I would be starting out using either the Amortization Method or Annuity Method - any insight on which would be better, and why?

Sorry, I decided to wait until the year I turned 55, and draw money from my 401(k) after I separated from service during that year, rather than doing SEPP withdrawals, so I don't have any practical experience with this. I will say that if I were doing SEPPs, I would probably use the amortization method, rather than the annuity method because the amortization method generally has lower payouts, lessening the risk of depleting the funds completely. Obviously, the minimum distribution method would have the least risk of depleting the funds completely, but will also subject you to larger potential swings in the withdrawal, since it has to be recalculated each year.

I have played around with the calculators fairly extensively, and my current plan (which is definitely subject to change) is to retire once the balance in my IRA hits $500k past the amount needed based on the calculation to provide my target income. I would then roll this $500k surplus to another IRA, and continue investing it aggressively as I have been - individual stock investing and options.

To take advantage of the lower tax rates through 2025, you may want to start converting some of your 'surplus' IRA money into a Roth IRA - even while you are still working.

I am also planning on taking a lump sum each year, including the first year that I retire. If I retire in the middle of the year, I would be able to use the proceeds from the lump sum to pay off all my debt besides my mortgage (which is a fairly low monthly payment). If there were to be a major stock market crash, I could switch over to the Minimum Distribution Method, and live comfortably on that.

If you are going to retire in the middle of the year, you need to be sure you have your IRA accounts separated into the 'SEPP' IRA and the 'investing/growth' IRA before Dec 31 of the prior year, so that you can point to a specific value as of the end of the tax year for your 'SEPP' IRA account. That way, the valuation coincides with the end of the tax year, and will help show the IRS that you are, indeed, taking SEPP withdrawals. Be sure to document all of your assumptions on rates, term length, etc.

To help manage your annual withdrawal amounts, you might want to look at target maturity bond ETFs. These are ETFs that invest in bonds set to mature during a certain timeframe. Until the maturity timeframe, the ETF distributes the interest received, generally on a monthly basis. As the bonds start maturing, the ETF collects the principal and holds the proceeds in Treasury/money market type instruments until all bonds have reached their maturity date and (hopefully) paid. At that point, the ETF will disburse the principal to the shareholders. Here is a list of the iShares target maturity ETFs https://www.ishares.com/us/products/etf-product-list#!type=i...

Be sure to have enough taxes withheld from your annual withdrawal to meet a safe harbor, or plan to make quarterly estimated tax payments, so that you don't get hit with underpayment penalties and interest.

AJ
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