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How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 1:19 pm
by Planner01
How do people retire early without tapping into retirement funds?

It occurred to me that although I have been planning on retiring at 60, which is almost 2 decades away, that maybe I should stop putting so much money away in investments that “trap” my money until I am 60. What if I later decide to retire early at 55?

Aside from working towards paying off the mortgage early, I do have a pension and I am currently maxing our the 401k, HSA, Roth (backdoor) IRA, and starting to add money towards the max on the mega backdoor 401k too. Although this last one I know can be taken out after 5 years.

Maybe I should start another investment fund to supplement the 5-year gap? What other ways to people plan for early retirement?

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 1:23 pm
by delamer
You need to familiarize yourself with IRS Rule 72(t): https://www.investopedia.com/terms/r/rule72t.asp

Your money isn’t trapped.

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 1:42 pm
by Planner01
delamer wrote:
Tue Aug 13, 2019 1:23 pm
You need to familiarize yourself with IRS Rule 72(t): https://www.investopedia.com/terms/r/rule72t.asp

Your money isn’t trapped.
Ha!!! Never knew this was possible 🤔😊

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 1:43 pm
by 02nz
Also check this out for an explanation of various ways of getting your money out before age 59.5: https://www.madfientist.com/how-to-acce ... nds-early/

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 2:39 pm
by packerguy
You can also pull money out of a 401k at age 55.

The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to pull money out of his 401(k) or 403(b) plan without penalty. This applies to workers who leave their jobs anytime during or after the year of their 55th birthdays.

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 2:45 pm
by Wiggums
My DW says, you can never have too much in savings...

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 2:51 pm
by Watty

Re: How to plan for a possible early retirement?

Posted: Tue Aug 13, 2019 6:28 pm
by David Jay
packerguy wrote:
Tue Aug 13, 2019 2:39 pm
You can also pull money out of a 401k at age 55.

The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to pull money out of his 401(k) or 403(b) plan without penalty. This applies to workers who leave their jobs anytime during or after the year of their 55th birthdays.
BIG CAUTION - your employer’s plan description must allow for partial withdrawals prior to age 59.5, many plans do not allow for partial withdrawals before 59.5 to take advantage of this IRS provision.