Author Topic: How To Live Off 401(k) Income Before Age 59 1/2  (Read 467 times)

freezefry

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How To Live Off 401(k) Income Before Age 59 1/2
« on: January 04, 2020, 01:39:49 PM »
I understand the general idea behind retiring early: aggressively saving until the income produced by your investment portfolio covers your cost of living.

But I don't yet understand how to execute this strategy in real life.

MMM retired when he was 30 after working for years in desk jobs, so presumably he saved the bulk of his money in a retirement account vehicle, like a 401(k).

However, the 401(k) doesn't allow withdrawals before age 59.5, unless you want to pay a hefty penalty.

Once your nest egg is large enough to produce the income required to live off of, how do you actually get the income out of these retirement accounts to then cover living expenses with?

Is there a way to avoid the penalty associated with early (younger than 59.5) withdrawals?

seattlecyclone

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TheHardenedInvestor

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Re: How To Live Off 401(k) Income Before Age 59 1/2
« Reply #2 on: January 04, 2020, 01:43:23 PM »
There are a couple options, but by far the most popular method that you can google more about is a Roth conversion ladder. It works by converting money from a 401k to a Traditional IRA to a Roth IRA, and withdrawing the principal amount after five years without any penalties.