Whether you decided to retire early or were forced to because of circumstances beyond your control, you need money to live off of. Much of your assets are tied up in retirement plans like a 401k or IRA. If you decide to withdraw from these plans before you are age 59 1/2, you’ll get hit with a 10% early withdrawal penalty from the IRS in many instances. So how can you make without these annoying penalties?
The best option is to use other assets such as taxable brokerage account, CDs and bonds can be cashed in to help bridge that gap. A home equity lone of credit is a decent option if you have a short time till age 59 1/2. If these are not an option, look for a part time job or self-employment work to earn some income.
If you have a Roth IRA, you can take penalty-free withdrawals of your contributions so long as the account has been open for at least five years. You will incur a penalty if you try to withdraw any earnings.
If you have a 401k and left your job after you turned 55, you can make penalty-free withdrawals as well. This only applies to your current employer’s 401k. Any other 401k plans cannot be touched without penalty unless you first roll them over into your current plan. Not all employers offer this option, so check with your plan first.
Lastly, if you have a fairly substantial IRA, you can choose to annuitize it. You can set up 72t withdrawals and take substantially equal periodic payments (SEPP) based on your life expectancy. If you do, the withdrawals have to continue for at least five year or until you’re 59 1/2, whichever is longer. Seek out a tax professional since the math can get complicated in figuring out your withdrawal amount.
It’s best not to touch your retirement accounts for as long as possible so they continue to grow. You might not always have this luxury though. If you need help in your retirement planning, contact a tax expert at the IRA Financial Group @ 800.472.0646 today!