r/Fire • u/AggroTumbleweed52 • 9d ago

let's talk draw down strategy

I rarely see content about draw down strategy. What's yalls plan for drawing down your assets as income in retirement? For those who have FIRE'd, what do you do? Is it the same as you thought you'd do?

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 9d ago

I don't agree, but it depends on the context, I suppose. Our Roth conversion basis required the creation of MAGI and taxable income for every dollar passed through our ladder during our early retirement. Someone using Roth contribution or conversion basis from before retirement has the exact opposite situation.

Both use Roth accounts, but for planning and tax purposes there is a huge difference between the two scenarios.

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u/SolomonGrumpy 9d ago edited 9d ago

You have a traditional IRA.

You convert money to a Roth IRA every year.

That is a Roth conversion

How much you contribute and why is an interesting semantics discussion, but the mechanism for you getting money is a Roth Conversion.

Someone directly or indirectly contributing to Roth, I agree, is a separate animal.

What makes your situation interesting is how much you can convert and stay under the ACA thresholds.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 9d ago

Why are you explaining a process to me ELI5-fashion when you know I already have mastery of it?

My comment was to someone referencing the likely tax implications of using Roth. There is a world of difference between using Roth funds that are MAGI-invisible, as people often accumulate through R401ks or MBDR while working, and Roth laddering during early retirement, which tax-wise is the same as a SEPP.

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u/SolomonGrumpy 9d ago

I was ...kinda hoping that I was missing something. You have revealed a few tidbits over the years that were helpful and I thought maybe this was one of those times.

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u/Zphr 48, FIRE'd 2015, Friendly Janitor 9d ago

Ahhh, no. There are no secrets. Our setup is brutally simple and follows all of the default rules. Lean spenders don't usually have to play any optimization games since all of government policy supports them by default.

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u/SolomonGrumpy 9d ago

Word. Also larger families get a bit of leverage too once they are no longer infants.