IRA, HSA, Brokerage: what's the order?

1. You didn't say when you plan to retire. If still working, I would only contribute enough to get 401k matching. Otherwise, put it in an account dedicated for pre59.5 spending. I'd do a brokerage myself.
2. The people who pay the least in taxes for their income have an even income stream. If you are doing early retirement and living off brokerage, roth conversions would be a great 💡 before age 63 when you have to worry about IRMAA rates. I would keep at least 300 k in trad ira that can be pulled out to use up the value of the standard deduction if married (150k if single). This is 15k per year x10, so not the most scientific. But it would be ideal to use boldin or The projection lab to estimate how much you really need to convert. If you income barely exceeds expenses, there is much less need to convert. Most people benefit by converting some (not all, not none). I think you are in a range where you want to convert enough so that you can avoid social security tax in retirement.

I am super confused. If you withdraw from your Traditional IRA before true retirement age, won’t you be facing penalties and taxes both?

I built a contribution waterfall calculator that will precisely give you this let me know if you're interested and I'll provide access.

If you’re 45, the 72(t) distribution would have to continue for longer than 5 years. The rule is the LONGER of 5 years or age 59.5.

Looks like they need $50,000 a year to live on.

First of all, in my opinion people should almost always pull at least the standard deduction amount from traditional vehicles (IRA in your example). So that's $16,100. The decision is where to get the remaining $33,900. They could pull the rest from the brokerage and end up with a $0 tax bill for 3 years. But I think instead, they should pull another $12,400 from the traditional (filling up the 10% bracket) and the other $21,500 from the brokerage. That gives about 5 years of runway on the brokerage.

I'm thinking do a 5-year 72t for the $28,500 for the first 5 years. That puts them at age 50. Then to get to age 60 they can either do a Roth conversion ladder (pulling an additional $21,500 per year from the brokerage for the initial 5 years to do the conversion at the 12% bracket) with a 10-year 72t (for the remaining $28,100 a year), or just do a 10 year 72t for $50,000 a year.

The benefit of doing a 72t for only part of the needed spending is it allows significant flexibility with the remaining portion; you can think of the 72t as your "base", inflexible needs and the rest as variable spending that can be tightened up if the market does poorly. You'll have to make a decision about whether the higher taxes is worth the extra flexibility.

Ladder, age 45-50:

• 72t for $28,500/yr from IRA (to live on)
• conversion for $21,500/yr from IRA (for the ladder)
• $21,500/yr from brokerage (to live on)
• taxes: $4715/yr (probably less due to brokerage basis)

Ladder, age 50-60

• 72t for $28,500/yr from IRA (to live on)
• conversion for $21,500/yr from IRA (for the ladder)
• $21,500/yr from Roth (to live on)
• taxes: $3823/yr

No Ladder, age 45-50

• 72t for $28,500/yr from IRA (to live on)
• $21,500/yr from brokerage (to live on)
• taxes: $1240/yr (probably less due to brokerage basis)

No Ladder, age 50-60

• 72t for $50,000/yr (to live on)
• taxes: $3823/yr

Unless your plan is to keep income low for ACA subsidies or Roth conversions, you really don't need to draw exclusively from the brokerage account first. Really, you never need to draw exclusively from one account until it's depleted then move onto the next account and draw from that until it's depleted, etc. A better strategy is to leverage the tax diversification of the various account types and draw from multiple accounts to control your tax bracket.

You probably want to draw from the HSA a bit all along the way or at least start depleting that tout de suite when you turn 65 because that is a terrible account to inherit.

I second Joe's suggestion to pick up a copy of @Cody Garrett, CFP® and "FI Tax Guy" Sean Mullaney's excellent tax planning book.

Please read tax planning to and through early retirement!!! At 45 in order to take out of IRA you have to do a 72t. Do you have any Roth? If yes contributions can be pulled penalty free after 5 yrs.

while standard is brokerage, ira, Roth you probably want to do Roth conversions and then in 5 yrs pull the contributions. HSA use as you need it but then yes pull as soon as it’s all purpose.

also check out risk parity radio as you’re 4% could be closer to 5%+.