Clever_Username wrote: Sun Sep 14, 2025 11:11 am
Wannaretireearly wrote: Sun Sep 14, 2025 8:15 am
Let’s say taxable accounts can fund early retirement for a few years, than you have a projected shortfall at age 53/54/55. A SEPP at this age, for 5 ish years, seems a good idea (especially if there is no other significant income/tax implications).Have any BH folks thought this way and/or started a SEPP?
Perhaps getting opinions from folks who have actually lived thru the options to withdraw early from 401k/IRA would be helpful
Even if there was some taxable money, what is the harm in doing SEPP for 5 years? Going to have to pay taxes eventually anyway.
My thinking at the moment is that, at some point, I will hit the intersection of “I have enough” and “I have had enough.” At that point, I will, at minimum, take a trial retirement (with the intent of determining if the first is really true and to what situations the second applies). I don’t have a sizable taxable account, nor will I, but I do have a governmental 457(b). That already has several years projected retirement expenses in it, and I anticipate it will have even more when I hit that intersection (especially since I’m still contributing the annual maximum and I hope I’m years off from the second condition).
If trial retirement turns into retirement, then at some point, that account will start to dwindle. The plan then is to set up a SEPP. Just for fun[1], I calculated what I think I could draw annually from my current tax-deferred accounts, using today’s balances, excluding the 457(b). If I did it correctly (PMT is a wonderful function, spreadsheet fans), it tells me if I started a SEPP with today’s balances, I could withdraw about $55k/year. My projected retirement budget anticipates a higher desired amount annually, but then again, I’m still contributing a lot of tax-deferred dollars over the coming years (and that remaining life expectancy will be coming down).
I have also since found out that Fidelity has a way to automate the SEPP setup and withdraw, so that risk goes away too. If my SEPP is setup to require a distribution of $X annually, I think they can just have it withdraw $X on a specified date and put it into a money market account in my taxable account there. I can make that work at that point.
At one point in my life, I thought if I retired at a younger age, I’d have to make do with a Roth pipeline. In the past six months or so, I’ve learned a lot about SEPP and now I think it’s the easier route, although I’m in the situation where I have great tax-advantaged accounts available. If I had “only” a 401(k) and were accumulating many taxable invested dollars, that wouldn’t be the case I think.
Lastly, you don’t have to SEPP all the money. For example, you could roll a specific dollar amount into a single rollover IRA where you’ve calculated in advance that setting up a SEPP on those dollars would provide an adequate baseline, perhaps using (brokerage money, 457(b) distributions, Roth availability money, etc) to cover the rest.
[1] I mean, it is fun, but I already have a spreadsheet with “if I work this many more years contributing this amount, and it grows like this, and then I have this many years trial retirement without touching this pot of money, and it grows like this, what can I SEPP when trial turns into real?” answered for various inputs.
Yep, SEPP seems a misunderstood step child in the retirement world.
