Author Topic: Investment Account?  (Read 2033 times)


  • 5 O'Clock Shadow
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Investment Account?
« on: December 17, 2014, 07:18:03 AM »
Hello MMM Community,

I recently graduated college and imp starting my first career job.  If I want to become FIRE what type of account do I put my investment $ in so that I can start to withdraw before 59.5 with no penalty. I donít want to put all my investment $ into my 401k because if I retire early I will have to take a withdrawal penalty. What are your recommendations MMM community? Thank you!


  • Handlebar Stache
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Re: Investment Account?
« Reply #1 on: December 17, 2014, 07:25:45 AM »
For a majority of wage earners the 401(k), Roth IRA, and IRA will be your most valuable tools when planning to retire early.  Read through the following articles and learn how to best utilize them.  If done right you don't pay any withdrawal fees and it's also possible to never pay income taxes on it.

Welcome to the forums.


  • Magnum Stache
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Re: Investment Account?
« Reply #2 on: December 17, 2014, 12:57:47 PM »
mmvolfan your fears about the early withdrawal penalty are unfounded because there are two main ways to avoid such penalties. One of them is mentioned in the articles Cromacster listed - the Roth conversion pipeline. For this to work, you will have to have money available from another source for five years - whether its long term capital gains, interest income, drawing down on cash savings, etc.

The other is a 72t, or otherwise known as a SEPP. Using one of three formulas, you can withdraw a certain amount from a traditional IRA every year without penalty (of course, you still have to pay tax). However, once you start a 72t, it is very rigid. You must withdraw the amount the formula gives you, no more no less. Also, you must take at least 5 payments (five years of 72t withdrawals) or reach age 59.5 to not have to pay penalties on all previous 72t distributions.

I would look into both of these in great detail, and then reassess your hesitancy to max out your 401k.