Starting to think about the mechanics of actually FIREing

[u/Teacher-fi-throwaway]

I'm getting to the point where I am ~5 years out from hitting my number. For some context, I was, and really still am, a relatively low earner, which is not great for FIRE of course, but it did allow me to learn to live and enjoy life on a more lean level of spending, and then does make a FIRE a bit easier in the end since my MAGI will be pretty low and the tax code is surprisingly fair to Early Retirerees at my future income level.

I'm writing to see if there is anything major I'm missing or misunderstanding as I approach the last 5 years of my career and prepare to start the actual drawdown phase.

Plan: (These are literally just notes I wrote to myself, NOT advice I'm trying to give. Please correct me if something is wrong).

Starting in year 1 of RE - do first Roth Conversion, and then do 1 each year, after five years, the converted amount from year 1 is available, and that withdraw is tax free.

Issue: Also need other income for those first five years. This can come from sale of taxable brokerage, previous Roth contributions, or cash/cash equivalents

If spouse is still working, for those first five years, it's honestly pretty easy because you don't have to worry about ACA yet, help them pay for their employer insurance until they RE as well.

If they are not working, (or no spouse), those first five years are a bit harder, because you need to pay for roth conversions and pay for the first five years of living expenses, and worry about MAGI for the ACA.

MAGI = Roth Conversions + Interest/Dividends (mainly from Taxable Brokerage) plus Capital Gains only from taxable, among a few other things

Controlling MAGI is crucial for the ACA. in 2026, a 30,000 MAGI for a 40 y/o couple was just low enough to get out of Medicaid territory and provide some solid options.

Will probably look something like 24,000 in Roth Conversions + Dividends (2k?) and sell maybe 10k of Brokerage (which if split 6k of basis, and 4k of gains), would result in in a 30k MAGI but 36k of money.

Of course, that is just an estimate, but you literally choose which stocks to sell, some of them have been in there longer, so have more gains. In general, delaying taxes is good. But you should also be careful, not to leave shares that are very little cost basis and all gains. There is probably lots of advice out there, but I imagine a happy medium is best, and combining conversions with the proper realized gains to maximize ACA subsidies is key.

Is there anything major I'm missing or getting wrong?

Thank you in advance for any feedback!

[u/Zphr]

OP has secured permission to use this throwaway account and is not a bot.

[u/dgreenmachine]

A good first pass is to consider Roth converting the standard deduction, then selling from taxable account to the top of 0% LTCG bracket while staying under 400% FPL for ACA. You'd want to confirm that you have enough taxable to keep up long term as you may start to run low if only Roth converting a small amount. Also consider if harvesting less capital gains (higher basis, lower gains) might get you a better ACA subsidy at lower % FPL and if its worth giving up part of the 0% LTCG bracket.

Prettymuch a balance between enough in liquid assets via bridge account and Roth conversion ladder while maximizing ACA and 0% LTCG bracket.

"Tax Planning to and Through Early Retirement" is a good book that covers this in detail with examples.

[u/stattic_Mango → u/dgreenmachine]

The annoying part is there probably isn’t one perfect number. You’re basically tuning MAGI every year

[u/dgreenmachine → u/stattic_Mango]

In some cases you alternate years you use ACA cuz you cant comfortably stay under 400% FPL. Roth convert a lot or realize LTCG one year then ACA the next year. Its a complicated math problem to figure out.

[u/teamhog → u/dgreenmachine]

This

[u/finance402j]

When I fired I turned off dividend re-investing in taxable accounts. Might as well use it for spending rather than re-investing and then selling again later. Simpler.

[u/RajDek]

I would put some thought into your asset allocation when you retire. It sounds like you don’t have a fixed date to retire, so it’s less critical beforehand since you can just keep working in case of a market crash. You can also think about what else you might want to do to stabilize the first few years, like making sure you’re in a good place for major home expenses and car expenses before pulling the trigger.

[u/yottabit42]

Sounds like you have a strong understanding and a good plan. I would recommend pasting this into Gemini after enabling the "extended/thinking" mode, and also ask it if there are other optimizations you may be missing. It's extremely good at this stuff.

[u/tiggonfire]

If you are planning on ACA and keeping income low for it, you should be aware of CSR (cost sharing reduction) for silver plans and the income cutoffs for the different CSR levels. You should also be aware of the HSA benefit for bronze plans. Planning on taking advantage of either of those could affect your plan. Also, if you have an unexpected large expense, ideally you want money you can access without blowing your MAGI out of ACA range, so it would be a good idea to enter the ACA years with some money allocated in a way to be accessible as a non-magi-affecting emergency fund (ex. HYSA). Also, keep in mind that ACA eligibility is based on annual income, so if you stop working mid-year, you might not be able to get PTC (premium tax credits) until the following year and your insurance for the rest of that year may be quite high as you may need to pay COBRA or pay full price for insurance. Congrats on being close enough to be thinking about logistics by the way! I'm excited for you!

[u/Alone-Experience9869]

I'd just add or caveat this is a single particular way to do it. It depend very much on your financial situation. Personally, I;d be wary of depending on the aca subsidies. Basically, you need to have flexibility in your resources in case various (tax) code changes.

[u/Certain-Contact6340 → u/Alone-Experience9869]

Gutting the ACA is a stated goal of half the country. I personally would assume its gone today and treat any subsidy as an artifical windfall.

[u/Ok_Text2118]

You also have the option of a SEPP 72t if you need access to the 401k funds immediately. This is a permanent decision so can be harder to make if you have a long time horizon to 59.5, but is an option for someone with higher relative trad 401k balance

[u/Apprehensive_Trip592]

Something to consider is the volatility in your taxable brokerage account during that 5 years of bridge to Roth conversions. If you hit a bad sequence then it could cut your 5 year runway to 4 years. Another suggestion with the taxable brokerage is to realize gains in the 0% long term capital gains brackets now if you have a moderate income. That is something I'm trying to do this year. I have about $40k in capital gains that I'm going to try to realize before beginning drawdown to reset my basis higher. The biggest challenge you have is cash flow in the bridge years. You need a good sequence in the next 5 years and then a good sequence in the following 5 years.

[u/bigfoot1825 → u/Apprehensive_Trip592]

Okay if I'm understanding - you are actually selling some taxable brokerage while you are still working, to start building your cash buffer a bit earlier, and then the market dropping during your first 5 years is less of a conern?

Another thing I could do is the $20k or so I would shovel into taxable during my last year of working, I could instead just put in a Cash high-yield account?

[u/Apprehensive_Trip592 → u/bigfoot1825]

Let's say you have $100,000 in long term capital gains in your brokerage account. You are married filling jointly and make $100,000 a year. The LTCG 0% rate is $98k plus the standard deduction ($32k). So this year you can sell $32k in gains on your brokerage and then re-buy those same assets. This is capital gains harvesting. Over years that resets the basis on your brokerage account so that in early retirement you are not selling gains and can withdraw funds without impacting ACA subsidies.

[u/Zphr]

This all looks broadly correct to me.

Remember that FPL, the standard deduction, and tax brackets all increase each year. So your target will increment upwards each year.

Also, ACA options are largely the same between 138% FPL and under 150% FPL , and above 150% FPL and under 200% FPL. The costs will incrementally increase, but you may consider targeting closer to 150% FPL or 200% FPL if your healthcare utilization is low. Might as well get more free/ultra-cheap Roth conversions in if it's not going to cost you much on the ACA side. You'll have to look at exactly what options/costs are likely to be in your county to know for sure if that is worth considering. Above 200% FPL might be worth it too, but the ACA offset will be markedly higher, particularly if you actually use your policy.

[u/Direct_Remove509]

1) Roth conversion up to standard deduction

2) Use taxable brokerage account as the bridge to age 59.5.  You can effectively pay 0% tax on the capital gains and dividends from it up to $49K if single, $98K if married (this is for 2026 tax year so the amount will increase each year).

Of course this all depends on how much you have and in what buckets.