I don’t really understand the point of this. 401K and IRA withdrawals are already subject to federal income tax.
The only thing that makes sense is that Illinois has a state income tax (?) and these withdrawals are NOT subject to state income taxes.
Regardless, rules changes like these are the #1 reason I choose to keep my retirement savings in non-retirement accounts. I am terrified of the rules changes that will surely happen.
I just don’t trust the socialists to keep the rules in constant. I prefer to not have any strings attached to my savings.
I am most weary of Roths. It seems to be only a matter of time before Roth withdrawals are taxable if you have more than $X in total assets. Then the number will drop.
You have a decent strategy. I think also having some rental property (if you can manage it) and a pile of gold and/or silver is not a bad idea either.