Gap years, account by account
The early retirement bridge
Most retirement calculators treat your savings as one pile. The bridge years are exactly where that assumption breaks: a 401(k), a rollover IRA, a Roth and a brokerage account cost wildly different amounts to spend from before 59½, and the cheapest order is not obvious. This model keeps them apart, charges the 10% only where it actually applies, and runs the schedule out past your required beginning date.
Your situation
Timing
Balances today
Splitting the workplace plan from the IRA is the point of this tool — a rollover changes which exceptions you keep.
Annual spending, today's dollars
Social Security
Assumptions
A route waives the 10% only on the account type it legally reaches. Selecting one here does not confirm you qualify — check that on the pre-59½ access navigator, which works account by account and cites its sources.
Verdict
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Where the money sits, year by year
Stacked balances at each year end. Watch the taxable and cash layers drain first, then the plan — and watch the Roth layer survive longest, because it is the only money with no forced distribution behind it.
The schedule
Highlighted rows mark an age milestone; red rows are years the plan could not raise the cash. All figures are nominal dollars of that year.
| Age | Need | Cash | Taxable | Plan | IRA | Roth | Tax | Penalty | RMD | Year-end total |
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What changed in this model, and why it matters
An earlier version of this page pooled all tax-deferred money into one bucket and waived the penalty on the whole bucket whenever you selected a pre-59½ route. That is only right in the narrow case where every dollar of tax-deferred money happens to sit in the one qualifying account. For anyone who has ever rolled a 401(k) into an IRA — which is most people who have changed jobs — it produced a bridge that looked several tens of thousands of dollars cheaper than reality.
The rebuild fixes four things, and each one moves the numbers in a direction that is worse for the optimistic case:
1. The plan and the IRA are different accounts
The separation-from-service exception in IRC 72(t)(2)(A)(v) — what everyone calls the Rule of 55 — reaches the workplace plan of the employer you left. It does not follow the money into a rollover IRA. A governmental 457(b) is looser still: distributions after separation escape the 10% at any age. A 72(t) SEPP, by contrast, attaches to the specific account you set it up on. The model now applies each route to the accounts it can actually reach and charges the full 10% everywhere else.
If you are weighing a rollover, this is the trade in one sentence: the IRA gives you a wider investment menu and no mandatory 20% withholding, and it costs you the Rule of 55 on that money permanently.
2. Roth money comes out in layers, not as one balance
Treasury regulation 1.408A-6 sets the order: contribution basis first, then conversions oldest cohort first, then earnings. Each layer behaves differently. Contributions are yours tax and penalty free at any age. Conversion amounts are never taxed again, but each conversion carries its own five-year clock, and withdrawing inside that window before 59½ triggers the 10%. Earnings are the expensive layer — ordinary income tax plus the penalty unless the distribution is qualified.
The practical consequence is that a Roth is often the cheapest bridge account for its first few layers and one of the most expensive once you reach earnings. A single blended balance hides that entirely.
3. Required minimum distributions are withdrawn, not just flagged
Under SECURE 2.0 the required beginning age is 73 for those born 1951 through 1959 and 75 for those born in 1960 or later. From that age, the prior year-end tax-deferred balance divided by the Uniform Lifetime Table factor has to come out — 26.5 at age 73, 24.6 at 75, 20.2 at 80, and falling steadily after that. The old model printed an event label and left the balance untouched, which made late-life balances look far larger than they can be.
Now the distribution is taken, taxed at your ordinary rate, and whatever is left after covering that year's spending is reinvested into the taxable account at full basis. That last detail matters: RMD money is not lost, it just stops being tax-deferred, and it starts generating taxable gains from then on.
4. Brokerage withdrawals are taxed on the gain, not the whole draw
Selling $50,000 of a brokerage position where half is cost basis is not a $50,000 taxable event. Only the gain fraction is taxed, at capital-gains rates rather than ordinary rates. The model tracks basis, consumes it pro rata as you sell, and leaves growth as unrealised gain. For a bridge funded largely from taxable money, this is usually the difference between a plan that works and one that does not.
How to read the result
The verdict answers a narrow question: on these assumptions, does the money reach your planning horizon without a year where the accounts could not raise the cash. It is a single deterministic path at a fixed return, not a probability. A plan that survives at 5.5% every year can still fail if the first five years come in negative, which is the sequence-of-returns problem the drawdown calculator is built to show.
The more useful output is usually the penalty line. If it is large, the fix is rarely "save more" — it is normally either a different withdrawal order, a 72(t) on the right account, or delaying retirement by the year or two that gets you to a cheaper route. Run the same inputs with a different account sequence and the difference is the price of the ordering decision on its own.
Sources
- IRC 72(t)(2) — exceptions to the 10% additional tax, including separation from service at 55 and substantially equal periodic payments.
- IRC 72(t)(9) — governmental 457(b) plans are outside the 10% additional tax.
- Treas. Reg. 1.408A-6, Q&A-8 — Roth IRA distribution ordering: contributions, conversions, earnings.
- IRS Publication 590-B, Appendix B, Table III — Uniform Lifetime Table distribution periods.
- SECURE 2.0 Act — required beginning age of 73 or 75 by birth year.
- 20 CFR 404.410 — early-claiming reduction of 5/9 of 1% per month for the first 36 months and 5/12 of 1% beyond.
- Social Security Administration — delayed retirement credit of 8% per year for those born in 1943 or later, ending at age 70.