Bridge Years: Funding Life Before 59½

Most FIRE plans have a gap between quitting and age 59½. Without a plan, that gap can force panic selling or surprise tax bills. A bridge lets you live on cash you can reach easily, keeps your taxes steady, and helps you stay eligible for ACA health subsidies.

Spend from the easiest buckets first: (1) 6-12 months of cash in HYSA or short-term Treasuries, (2) taxable brokerage using long-term gains when possible, (3) penalty-free 457(b) plans if you have them, (4) your Roth IRA contributions (these are always withdrawal-friendly), then (5) a Roth conversion ladder to unlock old 401(k)/IRA money. Multiple buckets help smooth taxes and avoid selling stocks at bad times.

Once a year, move a slice of pre-tax 401(k)/IRA money into a Roth IRA. Keep the conversion small enough to stay in your target tax bracket (many aim for the 12% bracket to protect ACA help). Each conversion is available after five tax years. Think of it as a conveyor belt: convert in Year 1, spend that batch in Year 6, and keep adding a new batch every year. Track each batch in a simple spreadsheet so you know when it “matures.”

ACA subsidies drop fast if your income jumps. Model your income each fall before you convert so you do not lose credits. Use the 0% long-term capital gains bracket when possible. Tax brackets are scheduled to shrink after 2025, so revisit your plan yearly and set a specific conversion dollar target each November.

Hold 1-2 years of spending in cash or short-term Treasuries so a market drop does not force you to sell stocks. Refill the buffer in good markets by trimming gains. If the buffer shrinks below 9 months, pause optional spending until you top it back up.