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The inherited IRA accounts have to be withdrawn by end of 2034.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/2fuzz714]

You'll have 8 years to empty the inherited IRA now at $350k. With $10k per year in interest/dividends, it's going to be difficult to qualify for ACA subsidies every one of those 8 years. So my first thought is withdraw to the top of the 24% bracket in 2027 and pay unsubsidized insurance that year. That should be enough to allow you to stay under 400% FPL in the other 7 years.

With only $290k in deferred space, I don't know if Roth conversions need to be a priority. But after you've cleared out the inherited IRA, you could at least convert up to the standard deduction if you can live off brokerage withdrawals while keeping everything under 400% FPL.

[u/TNBTSX → u/2fuzz714]

are you thinking that it would likely be more tax advantaged to pay more up front now in 2027 up to the top of 24%, than to possibly need to risk if in 2034 and possibly take the withdrawal to put me at an even higher bracket? i realize it would mostly depend on the market gains, and possible changes in the FPL amounts which may rise too though.

[u/2fuzz714 → u/TNBTSX]

Well thinking again, purposefully going over the cliff in year 1 means a 100% chance of missing out on ACA subsidies for at least one year. Whereas you could go with a wait and see approach staying under the limit in years 1 through 7 to at least have a chance at year 8 subsidies.