Author Topic: How access funds in retirement accounts before age 59 1/2?  (Read 7095 times)

skotzko

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How access funds in retirement accounts before age 59 1/2?
« on: June 29, 2013, 11:39:08 AM »
First off, I'm new to these forums, so hello everyone.

To the main point: for the purposes of early retirement (following a 4% withdrawal plan) how can you even access funds in retirement accounts for the purposes of stock dividends, etc? Aren't you barred or penalized for withdrawing from a retirement account before the age of 59.5?

Thanks in advance.

footenote

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #1 on: June 29, 2013, 11:52:46 AM »
You aren't barred, but you will pay taxes and penalty. Read up on SEPPs:
http://www.investopedia.com/terms/s/sepp.asp

This is a frequent topic of conversation here. You can use the search box to find posts on it. Many of us who have retired early have some combination of income-producing investments and money we saved and invested post-tax. Also search the blog and forums on Roth IRAs and Roth laddering. Welcome!

Jamesqf

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #2 on: June 29, 2013, 11:53:24 AM »
Simple answer: you don't.  That is, if you are in a position to retire early, you almost certainly have money in taxable accounts (or Roth IRA) as well as untaxed 401k/IRAs.  You live off the taxable accounts until 59 1/2, letting the untaxed accounts grow.

Undecided

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #3 on: June 29, 2013, 05:09:35 PM »
Simple answer: you don't.  That is, if you are in a position to retire early, you almost certainly have money in taxable accounts (or Roth IRA) as well as untaxed 401k/IRAs.  You live off the taxable accounts until 59 1/2, letting the untaxed accounts grow.

That's one simple answer, that may apply in some cases, but certainly not the only one regularly described here. Hopefully the OP will read the link about SEPP withdrawals; briefly, you can start taking regular payments out of an IRA at any age without penalty, but the amounts will be subject to complying with a formula based on applicable life expectancy and interest rates, and can't be changed (without penalty). You can convert a 401(k) to an IRA to make those withdrawals. You can also withdraw contributions to a Roth account without penalty or taxes (subject to a waiting period for amounts converted from a traditional pre-tax retirement account).

Freeyourchains2

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #4 on: July 01, 2013, 07:44:25 AM »
There are ways to retire without investing into a 401k/IRA/taxable account. See ways on how to also retire extremely early without an absolute need for an 401k/IRA age restrictive government/ceo's profitting funds, with Financial independent investors here at:
http://www.dividendmantra.com/
http://www.earlyretirementextreme.com/

and in the Book, "Stop working, start living...How to retire by age 35...without winning the lottery".

http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840


Undecided

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #6 on: July 01, 2013, 09:08:43 AM »
There are ways to retire without investing into a 401k/IRA/taxable account. See ways on how to also retire extremely early without an absolute need for an 401k/IRA age restrictive government/ceo's profitting funds, with Financial independent investors here at:
http://www.dividendmantra.com/
http://www.earlyretirementextreme.com/

and in the Book, "Stop working, start living...How to retire by age 35...without winning the lottery".

http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840

"Answers" that repeat your uninformed opinion and aren't actually responsive to the question make you seem like a troll.

Freeyourchains2

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #7 on: July 01, 2013, 10:57:38 AM »
There are ways to retire without investing into a 401k/IRA/taxable account. See ways on how to also retire extremely early without an absolute need for an 401k/IRA age restrictive government/ceo's profitting funds, with Financial independent investors here at:
http://www.dividendmantra.com/
http://www.earlyretirementextreme.com/

and in the Book, "Stop working, start living...How to retire by age 35...without winning the lottery".

http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840

"Answers" that repeat your uninformed opinion and aren't actually responsive to the question make you seem like a troll.

These are just options, and not "uninformed opinions", and they are helpful to responding to the question. So stop trolling me.

Undecided

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #8 on: July 01, 2013, 11:16:30 AM »
There are ways to retire without investing into a 401k/IRA/taxable account. See ways on how to also retire extremely early without an absolute need for an 401k/IRA age restrictive government/ceo's profitting funds, with Financial independent investors here at:
http://www.dividendmantra.com/
http://www.earlyretirementextreme.com/

and in the Book, "Stop working, start living...How to retire by age 35...without winning the lottery".

http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840

"Answers" that repeat your uninformed opinion and aren't actually responsive to the question make you seem like a troll.

These are just options, and not "uninformed opinions", and they are helpful to responding to the question. So stop trolling me.

The question was "To the main point: for the purposes of early retirement (following a 4% withdrawal plan) how can you even access funds in retirement accounts for the purposes of stock dividends, etc?" Your response was "There are ways to retire without investing into a 401k/IRA/taxable account." How do you think that's responsive to the question?

brewer12345

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #9 on: July 01, 2013, 12:25:03 PM »
There are ways to retire without investing into a 401k/IRA/taxable account. See ways on how to also retire extremely early without an absolute need for an 401k/IRA age restrictive government/ceo's profitting funds, with Financial independent investors here at:
http://www.dividendmantra.com/
http://www.earlyretirementextreme.com/

and in the Book, "Stop working, start living...How to retire by age 35...without winning the lottery".

http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840

"Answers" that repeat your uninformed opinion and aren't actually responsive to the question make you seem like a troll.

These are just options, and not "uninformed opinions", and they are helpful to responding to the question. So stop trolling me.

Douchy McDouchetard: give it a rest.  Anyone reading this board in any depth has heard your one-note symphony, probably repeatedly.  When you get called on your lack of symphonic complexity, don't act like you are the goddamned philharmonic all in one.

nawhite

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #10 on: July 03, 2013, 10:50:41 AM »
Back on topic, it depends on what you mean by "retirement account."

There are:
Traditional 401k
Roth 401k
(the other variations on 401k like 403b or 459?)
Traditional IRA
Roth IRA
and Taxable investments

All of these other than Taxable investments have incentive fees (usually 10%) on at least some of the money in them to get you to leave your money in until you are at least 59 and 1/2 (though there is a loophole if you get laid off at 55 or something).

Roth IRAs are nice for 2 additional reasons:
1. You can remove your contributions (not earnings or balance transfers from traditional accounts) at any time without penalty (you put in 5k when you're 20, you can take out 5k when you're 21 or 38 or whatever with no taxes or penalties owed)
2. Money that has been transferred from a Traditional IRA to a Roth IRA can be withdrawn tax and penalty free after letting it sit for 5 years. So what some people do is transfer 30k or something per year from a Traditional IRA to a Roth IRA (and pay income taxes on the transfer but no fees). Then 5 years later they have 30k that they can withdraw tax and penalty free.

If you have a traditional 401k plan, you can transfer all of that to a traditional IRA tax and penalty free when you change jobs or quit/retire.

So the 3 step plan is:
Given: Have enough savings in either taxable accounts or Contributions to Roth IRA's to cover living expenses for 5 years, and enough in 401k to cover a 4% (or whatever) withdrawl rate for the rest of your life.

1. When you retire, transfer all of company 401k to a traditional IRA
2. Each year, transfer 1 years living expenses from the traditional IRA to a Roth IRA
3. At the end of 5 years and for each year after that, withdraw money from Roth IRA equal to what you transferred into the Roth in step 2.
Note: Dont forget 5 years of inflation when calculating how much money to transfer in step 2.

There are also SEPP payments to get money out of some of these plans, but they sound like a lot of work for <1% of your savings per year. Look them up if you're interested.

Marmot

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #11 on: July 03, 2013, 11:48:16 AM »
Roth IRAs are nice for 2 additional reasons:
1. You can remove your contributions (not earnings or balance transfers from traditional accounts) at any time without penalty (you put in 5k when you're 20, you can take out 5k when you're 21 or 38 or whatever with no taxes or penalties owed)
2. Money that has been transferred from a Traditional IRA to a Roth IRA can be withdrawn tax and penalty free after letting it sit for 5 years. So what some people do is transfer 30k or something per year from a Traditional IRA to a Roth IRA (and pay income taxes on the transfer but no fees). Then 5 years later they have 30k that they can withdraw tax and penalty free.

Also, there are a few other situations where you can withdraw from Roth, such as first time home buyers can withdraw a few thousand $ if they qualify (last I remember it was around 8k a couple years ago, though not sure if that changed). I think there are certain types of "hardship exemptions" as well.


Crash87

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Re: How access funds in retirement accounts before age 59 1/2?
« Reply #13 on: July 05, 2013, 08:41:16 AM »
To avoid the early withdrawal penalty on your 401k:

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA