Yeah, it is a balancing act and there are a lot of moving parts, some completely predictable and some not so much. I plan to use a similar bucket approach for the spend down. There is not a whole lot I can do at this point to minimize the federal haircut on the pre-tax savings. But I've also seen too many people in their 70s and older that actually have too much money for their age and lifestyle because they relied on RMD's as a spend down strategy. Don't fall into that trap unless you are legacy planning. My retirement aspirations are to spend, donate and spend, and the last check written out of my account should be for my funeral. And if my spreadsheet calculations are correct, that check will bounce.
I'm looking into trust fund options, which have added protections for the beneficiary (e.g., can be protected in lawsuit or divorce), and structured in ways that I can define how the money is withdrawn, and the amounts, etc. and restricts the use of the money to the beneficiary only (so no spouse access). No tax benefit for me however.
I may just take more out each year than I need to live, and put that excess into a taxable investment account in my name, and have it transferable on death (TOD; which I already have in place today). It avoids probate court, but not taxes. If I take out more per year, I can also delay taking social security for a higher amount at full retirement age or older (not a great plan IMO as I'll lose the tax deferred growth).
Roth conversions after I retire and before RMDs are another option once I retire, I have a small Roth IRA I created to get the 5-year rule behind me; since I'll be taxed on the 401k withdrawal anyway, putting it in a Roth IRA means any withdrawal is tax free for me, and my beneficiaries.
I found this on Roth conversions to consider,
"A Roth IRA conversion can be especially advantageous during your initial years of retirement, when RMDs haven't yet kicked in and you're most likely to be in a lower tax bracket vis-à-vis your working years. But if you're already receiving retirement benefits, be aware that the converted funds could increase your taxable income, causing taxes on your Social Security benefits and Medicare costs to rise."
The gift amount that is tax free is laughable at $18K (2024), but I will use that as well.
Simply put, the government has restricted our ability to create and transfer generational wealth; the more you have, the more the government will take.
I'm sure I'm missing options and other strategies, but when it comes to taxes the government it exhaustively covered, until you get to much higher wealth levels where you have more options.
