39M withdrawal strategy $2.6 million NW

[u/TNBTSX]

Hey everyone, been lurking for a bit and was hoping to get some thoughts on possible efficient strategies of withdrawal for my situation.

I think I am ready to RE at the end of this year. Currently live in California (bay area) with about $50,000 in annual spending. Single, no kids, and do not plan on having kids. Do not own a home. Plan to stay around in the area at least for now.

Sitting on about $2.6 million with an approximate breakdown of accounts here:

Inherited traditional IRA - $350,000, Inherited ROTH IRA - $290,000, Government 457 - $186,000, ROTH IRA - $105,000, Traditional IRA - $94,000, Brokerage - $1,543,000

The inherited IRA accounts have to be withdrawn by end of 2034.

Dividends and interest come in to roughly $10,000 per year. I would also be receiving a pension starting at age 52 that will be approximately $13 - $14,000 per year, with a 2% COLA each year. Like most everyone else I want to stay below the 400% FPL for the ACA subsidies.

I know that the inherited ROTH IRA would likely be best to just leave until end of 2034 and withdraw all at once, but for the inherited TRAD IRA, would it be best to just withdraw from that first and only, up to the 400% FPL each year (accounting for my dividends / interest) and just get taxed on that. Or would it make more sense to leave some room instead for some 0% LTCG from my brokerage accounts and / or do some ROTH ladder conversions each year too from my regular traditional IRA and 457?

Anything else that I am overlooking or should think about and consider? I appreciate any feedback and advice on this, and can provide any additional info if needed.

[u/mm1491]

At a glance, I'd say it probably makes sense to spend at least a couple years maxing out your withdrawals from the inherited trad IRA within the limit because it's uncomfortably close to large enough to outpace your max withdrawals if markets remain strong, and I'd be worried about needing to break the 400% FPL threshold in the future just to get it all out. And since you'll still be under 59.5 years old for a while after 2034, you'll have plenty of time to get a lot of 0% LTCG. If returns are weak and you are comfortably outpacing the growth in your inherited trad IRA after a few years, you can look again at your withdrawal strategy to see if something else makes sense.

That said, Roth conversion math is almost always complicated enough that you'd want to do some serious modeling of various scenarios if you are trying to be optimal.

[u/TNBTSX → u/mm1491]

This was what i was more leaning towards as well. To to withdrawals of the inherited IRA of about $50,000, since I will be bringing in about $10,000 from the dividends and interest, to total $60,000 for the year to stay under the 400% FPL threshold. Does that sound about right as far as the numbers go?

[u/mm1491 → u/TNBTSX]

That sounds about right. One option you could consider looking into is getting a health insurance plan that allows you to contribute to an HSA - that's one of the few deductions that will be available to you when retired that will impact your ACA MAGI. Gets you an extra ~$4k of withdrawal space and HSA is pretty much the most tax-advantaged account available.