Author Topic: Options for accessing 401k/IRA money... if I still want to work?  (Read 1806 times)

prodarwin

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Lets say I don't intend to retire early...  I want to be financially independent enough to be able to pursue some other careers that may not earn nearly as much money though.  My understanding that if I have 401k/IRA money, the only options for withdrawing early are A) 10% penalty and B) 72t distribution - which is not allowed if you still earn an income.

Is the recommended course of action for this to basically plan a 2-stage "retirement", where I should plan on [investments + new-career-earnings] = pre-59.5 and then [investments + 401k + IRA + whatever earnings] = post-59.5? 

If this is the case, is there a calculator that would allow me to put in my target 401k/IRA values and reverse calculate how much I need to contribute in order to receive the company X% match for as long as possible?




Undecided

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Re: Options for accessing 401k/IRA money... if I still want to work?
« Reply #1 on: July 01, 2013, 11:11:03 AM »
Lets say I don't intend to retire early...  I want to be financially independent enough to be able to pursue some other careers that may not earn nearly as much money though.  My understanding that if I have 401k/IRA money, the only options for withdrawing early are A) 10% penalty and B) 72t distribution - which is not allowed if you still earn an income.

Is the recommended course of action for this to basically plan a 2-stage "retirement", where I should plan on [investments + new-career-earnings] = pre-59.5 and then [investments + 401k + IRA + whatever earnings] = post-59.5? 

If this is the case, is there a calculator that would allow me to put in my target 401k/IRA values and reverse calculate how much I need to contribute in order to receive the company X% match for as long as possible?

Why do you say that 72(t) distributions are not allowed if you are still working? You couldn't start distributions from an employer's plan (e.g., a 401(k)) if you hadn't separated from service with that employer, but that's not at all the same thing as not working.

prodarwin

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Re: Options for accessing 401k/IRA money... if I still want to work?
« Reply #2 on: July 01, 2013, 11:21:04 AM »
Hmm.  I googled the rules for a 72(t) for quite a while, perhaps I misread.  My understanding was that if you are employed at all, it violates the 72(t) and you are then penalized the additional 10%.  That certainly makes things a lot simpler, although still somewhat confusing.  So, is there then no reason NOT to max 401k and IRA every year before considering any taxable investments?

Do you have a link to something like "72(t) for dummies"?

Right now most of my focus is to simply increase-savings-rate, but I want to make sure I'm putting it in the right places too.

footenote

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Re: Options for accessing 401k/IRA money... if I still want to work?
« Reply #3 on: July 01, 2013, 11:24:33 AM »
We discussed a 72(t) option with our (very knowledgable) advisor a bit ago. He mentioned nothing about a prohibition on working.

Here's more information (also does not mention prohibition on working): http://www.investopedia.com/terms/r/rule72t.asp