A tactic to access retirement money before 59½. Convert Traditional → Roth each year after retiring; after a 5-year wait, the converted amount can be withdrawn penalty-free.
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Related terms
A dividend taxed at long-term capital gains rates (0%, 15%, or 20%) instead of ordinary income. Must meet holding-period requirements — most U.S. stock fund dividends qualify.
An investment account with no tax advantages but no withdrawal restrictions. Essential bridge for early retirees who need to fund expenses before 59½.
If your 401(k) plan allows after-tax contributions and in-service conversions, you can stuff up to ~$46K/year extra into Roth accounts. The holy grail for high-income FIRE seekers.
IRS rule letting you tap pre-tax retirement accounts before 59½ without the 10% penalty — provided you take "substantially equal periodic payments" for 5 years or until age 59½, whichever is longer.
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