The Money Mustache Community
General Discussion => Post-FIRE => Topic started by: Nomadfinance on February 22, 2017, 01:59:57 PM
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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
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http://www.investopedia.com/terms/r/rule72t.asp
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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/ (http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/)
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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 59½ 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 Roth IRA contributions can be withdrawn penalty free any time. Taxable accounts proceeds (both the contributions and the growth/LTCG/dividends can be withdrawn any time as long as you pay the taxes (if any owed - i.e. you are above a 15% taxable bracket).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/
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Okay, I think I understand! Thanks for the clarification. Much Appreciated!
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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
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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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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/ (http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/)
You can withdraw at any time with no penalty under Rule 72. The amount you can withdraw must follow guidelines under rule 72 and once you start, you cannot stop (I think). That piece has to be confirmed but please research rule 72.
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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/ (http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/)
You can withdraw at any time with no penalty under Rule 72. The amount you can withdraw must follow guidelines under rule 72 and once you start, you cannot stop (I think). That piece has to be confirmed but please research rule 72.
Reply fail 7 months later? Read the link - this question comes up so often that the forum has a sticky about it.