Author Topic: If IRA withdrawals must begin after turning 65(?), how can one retire at 30?  (Read 1961 times)

Nomadfinance

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Okay,

New to this MMM lifestyle. My initial question with the retire early concept is this:

If IRA withdrawals must begin after turning 65 or so, how does one go about retiring at (x)? How are you supposed to live off the 4% when you can't draw on your IRA?

Thanks fellow Mustachians!

-Damon

pbkmaine

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dandarc

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1.  You can withdraw from your IRA at any time - just you may have to pay a penalty
2.  There are several ways to do so before 59.5 without incurring a penalty

http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/
Link to my journal, so I can find it quickly - http://forum.mrmoneymustache.com/journals/dandarc's-journal/

Frankies Girl

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Traditional IRA/401k accounts require distributions to begin by age 70 1/2. You can start them earlier. You may begin them with no penalty at age 59 1/2. Distributions from Traditional IRAs prior to age 59 are subject to a 10% penalty, in addition to applicable federal and state taxes. Under certain circumstances, you may be able to avoid the penalty on early withdrawals. Common exceptions include:

    First-time home purchase
    Qualified education expenses
    Death or disability
    Unreimbursed medical expenses
    Health insurance, if you're unemployed


You are not using these accounts for early retirement funding, however. You should also be funding things like Roth IRAs, taxable accounts, HSAs, in addition to 401k/traditional IRAs. Roth IRA contributions can be withdrawn penalty free any time. Taxable accounts proceeds (both the contributions and the growth/LTCG/dividends can be withdrawn any time as long as you pay the taxes (if any owed - i.e. you are above a 15% taxable bracket).

And no one says you can't touch the traditional IRA/401k - just that you have to pay 10% on whatever you withdraw if you take it out before you're 59. But the common thought is to use traditional IRA/401k accounts as your "old person" money; these accounts are the ones you just leave alone in early retirement and let grow. You use Roth/taxable/HSA in early retirement for expenses.

http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/
http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/
http://www.madfientist.com/how-to-access-retirement-funds-early/
I frequently have no idea what I'm talking about. Like now.

FIREd as of: March 6th, 2015!

Nomadfinance

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Okay, I think I understand! Thanks for the clarification. Much Appreciated!

bacchi

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If IRA withdrawals must begin after turning 65 or so, how does one go about retiring at (x)? How are you supposed to live off the 4% when you can't draw on your IRA?

https://www.youtube.com/watch?v=PwvGIyL2GiU

PizzaSteve

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Okay, I think I understand! Thanks for the clarification. Much Appreciated!
Also, if you save additional money outside of retirement accounts, one can spend those funds first to get to the mantatory withdrawal period. For example, one might have $100k in taxible accounts and $500k in retirement.  The person spends down the $100k first.
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