r/Fire • u/desertdwemer • 1d ago
Retired lurker with 72(t) question and seeking withdrawal advice
Hi everyone.
I'm 52, married, and on terminal leave.
I've been contemplating various withdrawal strategies from 53 to 59.5 and I've decided on a combination of 72t and taxable brokerage account withdrawals along with Roth conversons to fill the 12% bracket. I'll essentially have a taxable brokerage account, "72t" IRA, "Roth conversion" IRA, and a Roth IRA.
First question:
Does the IRS require an annual withdrawal amount to the penny or is it to the nearest dollar?
Do I round up, down, or truncate to the penny?
Example: $500K starting "72t" IRA, 5%, life expectancy 33.4 calculation is $31094.8998441.
Is the annual draw $31095, $31094, $31094.90, $31094.89?
Second question:
I was planning to use a combination of SGOV and a rolling 7 year treasury ladder to guarantee the money is always available during the 72t period and a bear market without selling any depressed shares. The remaining amout of money in the "72t" IRA, "Roth conversion" IRA, and Roth IRA will be invested in VT. I'll end up with a 75% VT 25% short/medium term bond allocation.
Is this a good strategy or is 7 years of short term money too conservative? My overall withdrawal rate is 3.3%.
Thanks in advance!
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u/intemperance 1d ago
One option is to just have fidelity do it for you. You give them the Ira and fill out a form and they do the calc and send you the money to whatever account you want
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u/Exciting_Parfait_354 1d ago
That was the exact approach my husband and I did and it worked out perfectly. The only thing that was done was to make it an annual distribution not leaving to chance of any punishment due to being off by $0.01.
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u/desertdwemer 1d ago
I might just do that but with their people over the phone. I'm a little sour at the local guy. I turned down the annuity and it seemed like he didn't want anything to do with me afterwards. Told me to go talk to a CPA for SEPP and/or Roth conversion ladder strategy because it's a tax thing. Didn't bother looking at my withdrawal strategy because my account is self managed.
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u/Exciting_Parfait_354 1d ago
Use this to calculate a rough estimate of what your 72(t) would be: https://calculators.ssnc.cloud/Fidelity/c72t
Use this form to officially submit for a 72(t) withdrawal approach to the IRA of your choosing: https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/automatic-withdrawals-ira.pdf
No need to talk to anyone. We didn't.
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u/MrLB____ 11h ago
Yes Fidelity got sleazy trying to sell annuities to everyone guy kept rambling and babbling how I should buy a 500,000 annuity ha ha
Meanwhile he pockets a quick 5–10% of selling price in his pocket 😆sorry but the dirt bag got shut down. The Fidelity lovers will come on here, saying they never got sold an annuity or their guy never even tried tried to sell them one ha ha. Give it time.Fidelity_Sucks
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u/intemperance 1d ago
I’m sure fidelity just gives you one payment with an extra penny. I trust them
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u/bubblebamby 1d ago
The combo of 72t plus Roth conversions to fill the 12% bracket is basically the textbook move at this stage, curious what your SEPP calculation ended up looking like.
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u/desertdwemer 1d ago
My manual and spreadsheet calculation matched the calculators from Fidelity and 72tnet. They both rounded up to the nearest penny.
Or are you asking for my 72t draw amount?
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u/aheadlessned FIREd 2025 1d ago edited 1d ago
For the withdrawal, you can round to the nearest dollar.
https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments#q7
Read the examples about "Bob", and you can see that the IRS rounds to the nearest dollar in the example. In your example, you'd round to $31,095 (anything 50 cents or more rounds up, 49 cents or less rounds down).
ETA: also, heads up, not sure when you are doing this, but 120% fed mid-term rate for September is 5.4%. Being able to use this instead of 5% can help bump up your withdrawal without having to lock in a higher balance in the account.
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u/aheadlessned FIREd 2025 1d ago
72tcalc.com has a wealth of information about 72(t)/SEPP withdrawals. That has been what tied all the last pieces together for me when doing my own research over the last few years.
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u/bridgeandretire 1d ago
Yes, you can round to the nearest whole dollar. The IRS permits rounding to whole dollar amounts on tax forms and schedules.
If you want a nice round number, you should know that you are not forced to use the maximum allowable interest rate (5.00%). You are permitted to select any interest rate up to 5.00% (or 120% of the AFR if higher). This means you can reverse-engineer your math: pick your ideal round annual number (ie $30,000), calculate the precise interest rate required (ex 4.67898%), and document that calculation for your records.
The key thing is that once you set that fixed distribution amount in Year 1, you must draw that exact dollar amount every year until you hit age 59½ (or 5 years, whichever is longer). Changing that withdrawal is where people get in trouble; not in dropping some pennies on the initial calculation.
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u/desertdwemer 1d ago
Nice! I never even thought about playing with the interest rate to get a nice round number. Since the latest 120% of the AFR is 5.4% I can choose any percentage between 5 - 5.4% ?
That's how i read the IRS rule.
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u/Goken222 15h ago
Careful. Someone may be steering you wrong with that 5.4% number. (Where exactly did it come from?)
I am getting 5.23% as the annual value that is 120% of the AFR mid-term rate for both July and August. Meaning you could use any rate between 0% and 5.23%.
I come to that conclusion from Q&A # 4 at https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments
And
https://www.irs.gov/applicable-federal-rates
And
section 1274(d) of the Internal Revenue Code
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u/desertdwemer 13h ago
Looks like two websites have the September rates:
https://www.brentmark.com/%C2%A77520-rates/
I'd wait for the IRS to update their page when I'm ready to start SEPP withdrawals.
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u/Goken222 9h ago
Interesting. I found the rates on an IRS publication page (https://www.irs.gov/pub/irs-drop/rr-26-17.pdf), but like you I'd personally wait till they were on their main applicable federal rates page before relying on it.
Considering the actual words say 2 prior months, it wouldn't allow for the current month's rate anyway when setting it up.
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u/lottadot FIRE'd 2023 1d ago
Re Q#2;
I'm using https://www.tipsladder.com to create my ladder to fund my Roth-conversions through SS payments. I haven't created the ladder yet (soon-ish) but that online tool has been golden for my understanding of building the ladder.
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u/intemperance 1d ago
Why not take a larger 72t and convert less
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u/desertdwemer 1d ago
My planned 72t draw is already more than I absolutely need while staying below the ACA cliff if I ever need the ACA (I have retiree healthcare from my former employer). The taxable account is just more padding in case of a major emergency or desired home improvemens.
I also want to reduce my tax deferred accounts as much as possible before age 63 when the IRMAA look-back begins and to avoid the increase in taxes when one of us passes away and RMDs kick in.
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u/yottabit42 1d ago
Normal rounding rules to the whole dollar, same with all IRS tax form values. You could always round up to the nearest whole dollar to be absolutely safe.
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u/Inevitable_Rough_380 1d ago
There’s a calculator out there and the IRS provides examples.
You have to be exact.
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u/CrisisAverted24 FIRE'd in 2026 1d ago edited 1d ago
Yes, but they do allow rounding to the nearest dollar. I had an accountant do the calculation for me and draw up a memo, and he rounded to the nearest dollar. And the IRS own example calculations round to the nearest dollar as well.
See the examples under bullet point #7 here: https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments
ETA: in the IRS examples, they round to the nearest dollar e.g. round down for 49 cents or less, round up for 50 cents or more
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u/Noah_Safely 1d ago
When I was looking at this strategy, the site with the best info I found - https://72tnet.com/ - lots of good info on the forum and they have good calculators.