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Motorhome Retirement May Update: 72(T) Explained

GrayBeard Retirement profile picture
GrayBeard Retirement


  • We had positive cash flow in May.
  • The 72(T) is an IRS-allowed method to withdraw from an IRA before 59-1/2 without the 10% early withdrawal tax.
  • The portfolio is performing slightly better than the S&P 500 in 2020 through May.


Followers of my articles are aware that we planned to retire in July of this year at the age of 54. Our original intent was to not use any of our tax-deferred retirement accounts until we were 59-1/2. However, we had to change the plan due to uncertainty of the future of the Affordable Care Act. A federal judge ruled the law unconstitutional in December 2018. To plan for the potential disappearance of the healthcare exchange and associated benefits, we need to get access to some of our IRA funds. We created a 72(T) withdrawal plan from one of our IRAs in January of this year. An additional benefit of this was that it allowed us to retire in March of this year instead of July.

With this series of monthly update articles, I hope to inform readers about aspects of early retirement as we live ours. These articles will include:

  • Monthly cash flow summary
  • Status update of the IRA account from which we are withdrawing funds via a 72(T) SEPP exception
  • My stock watch list with target prices
  • Dividends received
  • Dividend increases announced by any holdings
  • A brief overview of what we have been doing

We retired on a Friday to start our “Motorhome Retirement” and the United States went into social distancing and all the related COVID-19 stay-at-home and business closures the following Monday. We had great timing (sarcasm) - instead of heading out across the country, we did our “shelter-in-place” or “stay-at-home” or whatever else you want to call it at a lake campground near Dallas, TX. Like most others, our activities were limited to daily walks, weekly trips for groceries and TV watching.

What we’re doing now

States began opening in early May, so after two months at the same campground in Texas, we finally hit

This article was written by

GrayBeard Retirement profile picture
Income for retirement

Analyst’s Disclosure: I am/we are long ALL TICKERS MENTIONED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (89)

unclephool profile picture
In addition to the 72(t) option you present here, there is another portion of 72(t)--often called the "Rule of 55"-- that allows penalty-free withdrawals from your 401/403 (but not IRA!) in or after the year you turn 55. [1] This gets you out of the SEPP challenges.
As always, there are rules to this such as 1) It can only be from the 401k from the employer you separated from at 55, and 2) it cannot be used to roll into an IRA [2]. But it does not require the SEPP calculations and risks stemming from that.

I am intentionally waiting until the year I turn 55 to separate and retire so that I could have access to these funds, even though I do not plan to use them.

[1] This rule comes from Internal Revenue Code 72(t)(2)(A)(v), which states that the 10% additional tax for early distributions does not apply to any distributions that are “made to an employee after separation from service after attainment of age 55.”
[2] Reference: IRS Code §72(t)(2)(A)(v)
Make sure your plan actually allows the withdrawals and if so, do they make you take out the whole amount. The other issue might be the limited choice you have with a 401k vs. an IRA. On the plus side, 401k money is better protected from lawsuits/creditors etc.
GrayBeard Retirement profile picture
@unclephool Thanks for reading and commenting. We plan to use that exception for one or both of our IRA's as we turn 55 this year and we retired this year. I wrote about it here...


unclephool profile picture
Thanks for the reminder @GrayBeard Retirement
I went back for a look and see that I commented on that article too. Thanks so much for allowing us a little peek under your retirement planning tent. Good luck in your RV adventures.
@GrayBeard Retirement Thanks for the interesting article. Like you, I retired at the end of February (at 58), so the pandemic was an interesting "welcome to retirement" wakeup call. Fortunately we are fine financially, and my wife is still working (for another couple of years) so we aren't really drawing from our portfolio at this time.

As I looked at your portfolio allocation, I noticed a fairly significant allocation (~13%) to intermediate and long bonds (in light of ultra low interest rates) and a very low allocation to preferred stocks (0.6%). Any thoughts on rationale for the low allocation to preferred stocks? Personally I have a substantial allocation to preferred stocks (around 40% of portfolio income - many of which were bought in April when prices were pretty low and yields were quite high) and a relatively low allocation to bonds (around 5% of portfolio income). I try to focus on cumulative preferred stocks where either the underlying stock is a pretty strong company or it is an income-oriented security (like a REIT or MLP) that has a huge incentive to continue paying the preferred dividend so it can pay the common dividend/distribution. So far all of my preferreds have paid, even if they cut their common dividend. What are your thoughts on preferred stocks?

Good luck with your RV retirement.
GrayBeard Retirement profile picture
@5992321 Thanks for reading and commenting. Those bonds are held to be a negative correlation to the market.

While I enjoyed your article and your finanical analysis of your situation. Am a little concerned about your expenses item under your analysis. Although your reported amount of monthly expences appear appropriate for your limited income, to me it looks like they are significantly lower than I would have expected. Am wondering if you have captured all of your expenses and fully accounted for them an a monthly basis.
GrayBeard Retirement profile picture
@garcia392 Thanks for reading and commenting. Well, for ease of tracking, I took the took the take home pay from Mrs. GrayBeard's check as income instead of the gross amount. Taxes and health insurance were taken out of the check. So income and expenses could both be higher but the net cash would be the same. Other than that, the expenses are accurate. They will go up in the future as we begin to move about.
Thanks for your clarification of your analysis. My main concern is that your apparent accounting method is on a cash basis. My feelings are that you should should move somewhat beyond strickly a cash basis and consider an accounting allowance for such items as RV maintenance and repair eventhough these type of expenses apparnetly have yet to have a significant occurance and/or affect. Granted this allowance will have to be a guess-estimate on your part as you apparently have yet to experience these types cash outlays in a significant way.
GrayBeard Retirement profile picture
@garcia392 I guess my thought was to show expenses on a cash basis so folks could see the magnitude of variability of monthly cash outlays. If anyone is considering doing something similar, they should understand that aspect. Using an accrual basis calms the waters so to speak, while actual cash outlays are very choppy. I think is closer to reality of what happens and as a bonus, it gives me a little more to write about each month to keep it interesting.

For budgeting though, I agree, an accrual basis may be more appropriate.

Best of success to you.

Great update and hopefully now you are on the way thru our great state of Co. You have done a fantastic job of planning and being able to retire at the age you did. Like your stock picks and certainly hope they all begin going higher. Been an interesting few months but now that you are able to head to the Black Hills from there take time and drive to Devils Tower and then head West to Yellowstone as it’s a great sightseeing trip. Enjoy , travel safe and thanks for the great update.
GrayBeard Retirement profile picture
@woodland Thanks for reading and commenting. We are looking forward to our travels. Will be in Colorado sometime in July.

Nice article, here's an additional thought on using a 72(t). As you pointed out if you make an error it will cost you 10% on all of your withdrawals, obviously if you run into trouble and need to take more out than the calculated payment you are busted as well and will pay the 10% on all previous withdrawals.

To mitigate this risk, consider opening up two IRA's with two separate 72(t)'s -- a large one and a small one. If you need to draw more than the plans allow, bust the small plan only and you can significantly minimize the penalty amount.
GrayBeard Retirement profile picture
@Leisure Enthusiast Thanks for reading and commenting. That is what we’re prepared to do as plan ‘B’. We have two other IRA’s that we can tap if more funds are needed. Hopefully we won’t need them until much later.

I thought that all of your IRA accounts had to be summed together for the 72-T rule amount each year is this not the case? I retired at 52 a year ago and still have not touched any protected money at this point but thinking about the covid 100K withdraw rule to see if I can do that one any pay taxes over the 3 years with no 10% early tax.
You may have completely separate SEPP - 72(t) plans. Those plans are independent of each other. Some people even set up ladders. I believe you can also have multiple accounts under 1 SEPP plan and those probably need to be summed together. 72tnet.com is the bible for all things 72(t).
MyPrivilegeIsShowing profile picture
@GrayBeard Retirement Have you considered cash-secured puts as a way to generate income. You have $JNJ on your list to consider at $134. You can sell the $135 put for Sept 18, 2020 (97 days from now) and it last traded for $6.20. So you generate $620 by putting up $13,500. You make 4.5% return in a little over 3 months. Annualized, that's almost an 18% return. If $JNJ trades for $135 or lower in September, you own the shares; If it trade for over $135, the put expires, you don't own it and can sell another put. I'd be happy owning JNJ for $135 (actually, the price would be just under $129 when you factor in the put premium). I bought a few shares at $118 during the recent crash--wish I had been braver
PS. I enjoy the vicarious travel by reading your posts and look forward to doing some when I retire
GrayBeard Retirement profile picture
@MyPrivilegeIsShowing Thanks for reading and commenting. Not sure I have the risk tolerance for selling cash covered puts. It is something that sounds interesting, but I think I would have trouble sleeping if I do that.
Keep it Country profile picture
Good article. Thank you. Based on the buy price targets on the watchlist it appears you are saying stocks are way overvalued yet still 55% allocated to equities. Impressive aggressiveness for a retiree.
GrayBeard Retirement profile picture
@PJ10 Thanks for reading and commenting. I do think the market is overvalued and some of my price targets may seem unrealistic. I only show here the accounts we are currently using to fund early retirement. Our overall equity exposure as of this morning's tracking spreadsheet update is 45% but that does not include or 401k's that are all cash nor the funds we have set aside to eventually purchase a house when our Motorhome days are over. Rough numbers we are 37%-38% common stocks overall. I do not know if you consider that aggressive but it is less than the 55% from the perspective of funding this adventure.

Keep it Country profile picture
@GrayBeard Retirement Thanks for response. Okay, I thought the 55% was overall allocation. It does look like most of the target buy prices are below the late March bottom. I picked up some UPS in high 80's and MSFT in high 130's which is above your buy prices of 84 and 120. Enjoy the adventure.
Long Time Running profile picture
A few of your stocks, I also have. CNI is the company I worked for 30 years, I have seen stock appreciate from around 3.00 in 1996 to about 90.00 today, before compounding dividends.

I also own RY, BNS, TD, DEO, BIP, DIS among others.
GrayBeard Retirement profile picture
@Long Time Running Thanks for reading and comment. Sounds like you have some good choices.

Just curious why PFE isn’t on your “price target” list? Seems like a BUY having a 4.5% dividend right now.
GrayBeard Retirement profile picture
@TFN6591 Thanks for reading and commenting. We are pretty heavy in healthcare right now with JNJ and ABBV as our top two holdings.

Thank you for the article. Very informative.
I see that you have a position in MINT within your portfolio. I am thinking about initiating a position in it to park some cash from CD's that were recently called or matured.
MINT looks to return approximately 2% and the monthly distribution feature is appealing.
If I may ask, what are your thoughts on MINT ?
Thank You and enjoy your retirement.
GrayBeard Retirement profile picture
@benelli05 Thanks for reading and commenting. MINT is corporate bonds. It is not a substitute for cash. In March it dropped about 5%. It has come back quite a bit but not all the way. The most recent dividend was $0.12 which is about a 1.4% forward yield. It is one of the best managed short duration bond funds but make sure you understand what you are buying.

Biological profile picture
Living in a RV. Does it attract ANY state tax as you move around states? That, in itself, may save enough in taxes to pay for the thing. Cheers. Enjoy.
Donggle profile picture
Interesting question, is your state PO box your residence? Drivers license?
GrayBeard Retirement profile picture
@Biological Thanks for reading and commenting. Income tax is paid in the domicile state. Right now we are domiciled in Texas. We plan to change that to Florida. Either way, not state income taxes.

GrayBeard Retirement profile picture
@Donggle There are companies that will provide you a box in your domicile state. They collect the mail and send it on to us when we ask and will even scan it for us if we ask (and pay for it). The most popular domicile states are Florida, Texas and South Dakota.

Thanks for the update. Before reading it i was wandering how you were doing with the RV thing in the midst of the lockdowns. I hope that you are right that the national parks will open up mid June, but I have not specifically heard that this for sure will be the case. Sadly our RV has sat idle in the driveway as most everything around us is shut down, though we've been tempted to just drive out into nature and boondock on solar and water tanks for awhile ... we still may, though we haven't yet.
GrayBeard Retirement profile picture
@Cashflow Curator Thanks for reading and commenting. A lot of folks are buying and renting RV's right now to be able to get out without the use of planes and hotels. I guess it depends on the State. Some are more RV friendly right now than others.

My original plan for this summer was to take the RV north from Southern California to Seattle, with stops along the way. Then in Seattle hop on a cruise ship to Alaska. I had it all booked, then CV madness hit, so my timing was nearly as good as yours. Don't think I'll be making that trip now, even without the cruise ... unless I want to visit the autonomous zone in Seattle and ask if they have RV hookups, LOL. What states are you finding among the most RV friendly right now? You mention Texas in the article, and that could work but it would be very hot and humid. Looking for some alternatives to my original plans. Thanks.
kcs777 profile picture
You had a great plan! Went on the Alaska cruise out of seattle last year and it was amazing. Have you heard of the Selkirk Loop? I have run into people on the Inchelium-Gifford Ferry from Belgium and separately Sweden who fly to Seattle, rent motorcycles, and do an even larger gigantic loop across Northwest US and Canada. Canadian border issues might preclude that right this second but look into the possibilities.
kyle191 profile picture
Thank you for posting your early retirement plans. I retired 2 years ago at age 52. We chose to live overseas for several reasons....mainly great and affordable healthcare.

I know you talk about risk and keep it in the front of your decisions. But I was curious why there are no Close End Funds in your income portfolio?

CEF are a major source of my income. They cover the entire spectrum of products, leverage, and risks. The Eaton Vae covered call CEF's are the cornerstone of my income portfolio.

Yes they did decline with the broad market in March and April....but despite their big distributions, they declined very closely to the overall market. So from a risk standpoint, you get 4x the income (9%) of the S&P for 1.03 of the downside risk. Also several of the Eaton funds are tax managed do as long as you don't sell, the distribution is tax free.

I love reading your adventures.
GrayBeard Retirement profile picture
@kyle191 Thanks for reading and commenting. I find that most high yield CEF's use leverage. I am not comfortable with that. Congratulations on your early retirement!

Nice post. I retired just before Christmas at age 57 and am getting ACA insurance on the exchange. I figured that now that the Feds created an entitlement of affordable medical insurance that something similar will replace ACA when all the legal wrangling is done. I didn't see any reason to use Cobra because the plan administration was horrible and it would have cost 3x more. I decided to live on capital gains and dividends until I am 59 1/2 and will pay no Fed taxes as a result; after that I will use my IRAs. A rule of 55 withdrawal is also an option, but my 401k only allows one (withdraw everything or rollover some, withdraw the balance). Congratulations to you, enjoy your new life.
GrayBeard Retirement profile picture
@Fishn4profits Thanks for reading and commenting. We plan on COBRA for the rest of this year. It is actually cheaper for us because of we worked part of the year and our income made the ACA coverage more expensive. Next year we will the option for both and choose whichever is best.

Alternative Investing profile picture
Yes its a tightrope to balance between taking ACA and keeping one's taxable income low enough to get max subsidies from ACA. Otherwise you are forced to make x return on your taxable account investments + income to pay for your healthcare...in a nutshell the system (for ACA) is better with no to low "taxable income" per calendar year from all sources!

Has absolutely zero to do with how much $ one has in their taxable, reg IRA & roth accounts
I really enjoy your posts. I retired at the end of February at age 54. My wife is still working for now so healthcare is covered. I really wish we had a Medicare for All system in this country. It would make everything so much easier. My last job before retirement was with a Swedish company. My coworkers in Sweden couldn't believe what health insurance costs here in the US. They might pay a little bit more in taxes but they get a lot in return.

Thankfully, I sold a lot of stock in the months leading up to retirement and had only about 1/3 of the nest egg exposed when the market tanked. I really got lucky. I have been slowly getting back into the market (S&P 500 index funds) and have set all dividends on the individual stocks that I already owned to reinvest as paid.

Early retirement has been interesting so far with the pandemic but I am loving it nonetheless. All those years of hard work and saving are paying off. Every day is Saturday!
GrayBeard Retirement profile picture
@Greg_Hoff Congratulations on your early retirement! Thanks for reading.
Greg_Maryland profile picture
Nice note, you have a new follower.

A couple of thoughts on your portfolio.

I'm long Brookfield Properties as well and am moving from BPYU to BPYUP (their preferred). While I'm giving up some yield, the pay-out in the preferred is less likely to be cut as their common shares (or units). Note, Brookfield recently cut their distributions 10% on BEP and BIP.

If gold is an inflation hedge, I suggest using options on the ETF GLD to use less cash for the same level of 'insurance'. I have used long dated call options (LEAPS) that are deep in the money and sold short term (4-6 weeks) out of the money calls for non interest paying stocks in my growth portfolio and it has freed up cash that I'm using in my income portfolio.

Tom Armistead on SA has a synthetic portfolio using this approach and he's a great writer.

Best of luck and happy travels.
GrayBeard Retirement profile picture
@Greg_Maryland Thanks for the reading and the follow. I do not see a 10% cut on either BIP or BEP. The stock split involving the BIPC shares might make it appear as though there is a cut, but on a split adjusted basis, there is not. That does not mean that the BPY and BPYU dividend won't get cut and certainly does not change your thesis. I do not like options except for the occasional covered call. It is hard enough for me to be right once, I don't need the extra hurdle of being right on the "when" as well.

Success to you.
nice article, thank you! I comfortably add ups under $95 and it's a good yield down there also. the best news is you can catch it there quite often. #1 concern is their pension outflows.
mango_man profile picture
Enjoyed the article. Had pizza at Minsky's with our family in Kansas City while on our one month camping tour last September. Pretty good for a non-Chicago pizza (I'm prejudiced.) I'm about 10 years older than you and have decided to keep working a bit longer. It provides our health insurance (although I'm Medicare eligible, my wife is not) and the job offers a lot of flexibility in terms of vacation. I've also increased my gold allotment over the past year from 0% to 5%. With yields on money markets, etc. as low as they are, why not? Not sure if I'll go any higher for now, at least not through purchases. The market may change the allotment for me, lol. Your portfolio is similar to mine, I have more REITs and utes and less energy but am mainly concentrated in boring profitable stocks. Also own a lot of preferreds. Still planning how I want to allocate to bonds. Currently, aside from a couple of baby bonds, I'm long TLT, ICSH and am researching additional options.

Good luck in your travels and investing. I agree with a previous poster, more camping/travel stuff.
GrayBeard Retirement profile picture
@mango_man Minsky's is one of my top three pizza joints that still exist. There is a bowling alley in Wichita, Kansas with top notch pizza and a chain in Texas that is also very good. There was another place in Kansas City when I was growing up that was awesome but it is long gone now. Thanks for reading.
Do you mind sharing the name of the pizza in Texas? I’m always looking for good pizza. Thanks!
I know this has noting to to with investments but a man has to eat.
Thanks for the article!!
GrayBeard Retirement profile picture
@just an average guy Sent you a direct message.
Surprised no utilities.
Some good dips during last few months, enable locking in 4+%. Even with 2-5% yearly Div increases, seems better than a bond.
GrayBeard Retirement profile picture
@Engineer@56 I missed the dip due to the shock of it happening about a week after my retirement day. I am looking at a couple more utilities to put on the watch list but I find most of them overvalued. Thanks for reading and commenting.
Understand - a huge event; Congratulations!

I used to feel this way, too. That is, wait and wait for prices to fall.
However, Chowders SA Blog “Older Folk Portfolio” is worth following.
He has helped me re-think my objective and to re-focus on “making money work for you” to create income vs. chasing a few percent in price change. As long as you remain dedicated to Quality selections (Dave Van Knapp SA articles and CCC lists), as it looks like you have!
You’ll be fine.
Enjoy your retirement and Good luck!
Darren McCammon profile picture
I look forward to following what I hope will be a series of posts that includes as much about your RV retirement adventure (and cash flow strategy), as your investments. This is what will make the series different from other posts, provide learnings not shown elsewhere, and be interesting. Don't be afraid to briefly include tidbits about your travels, pictures of places you go, etc., nor to talk about the costs and cash flow issues you encounter.
Darren McCammon profile picture
P.S. We temporarily retired back in 2006, bought an RV and full-timed it for a year. One of the best years of our life as it turned out.

I have lots of observations/suggestions, here's a few:
- We didn't skimp in any way, but only ended up spending $33k for the year we took off (not including capital cost like buying the RV). This included a cruise, a long weekend at a Spa, going to the movies, a couple flights back to Silicon Valley for things like Christmas, etc. Surprisingly it actually cost us less to live in an RV traveling around the country than it did to live at home.
- Don't ignore the rare county RV parks and other out of the way places to camp. For example the small RV Park on Puget Sound near Joyce, Washington had a 180 degree view of the Sound from your RV. Another one somewhere in Oregon near where they make Tillamook cheese was basically a flat grass area on a beautiful estuary you paid like $10 a day to park on. Since we were fully self contained, it didn't matter that there were no hookups and the place was both empty and gorgeous.
- Chamber of Commerce supported visitor stations are a fantastic resource for what to do and check out in the area. The first thing we would typically due after parking the RV in a new area is to take the tow car to a chamber of commerce visitors center. They are usually staffed by a local retiree who can tell you, this is a great microbrewery where you can hang out at the bar and meet people, here's a nice hike or bike ride you might like, you got to check out.....
- Don't make anything more than a rough schedule of where you want to go and what you want to see. We used a large Atlas marking a dot on each place we wanted to go, then started to connect the dots. No timeline at each dot. We'd see anything within about an hour drive using the tow car, or fun mobile as we called it. Then when we felt we'd done everything there was to do and see in an area, we'd move on to the next dot. Sometimes it was a couple days, sometimes 4 weeks+, we never really knew or cared how long we were going to stay. No timeline is a huge advantage, enjoy it.
- I'm not sure we ever made a campfire. Instead we walked around saying hi to others who had. Invariably someone invited us to join them. We met some great people this way, and enjoyed some wonderful conversations.
GrayBeard Retirement profile picture
@Darren McCammon That's the plan, at least as much as SA will let me. They have allowed me some leeway so far, however they like to keep the focus on investing.
Darren McCammon profile picture
PPS. Observation: You are trying to create a steady, reliable income stream. Focus more on that, the volatility of the income stream rather than the volatility of price changes.
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