Author Topic: Use of 401k plans for early retirees  (Read 1894 times)

Grande

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Use of 401k plans for early retirees
« on: April 17, 2014, 09:07:14 AM »
I am curious if there are any early retirees who can comment on how they invested and later withdrew from their 401k/403b. There is a early withdraw penalty of 10% for those who withdraw earlier than age 59.5. I have read there is something in the rules that lets go of the 10% penalty for those age 55 or older who retire or are fired. My thinking is I may not be able to tap my 401k if I retire before 55 and if this is the case should I forego some contributions for taxable accounts.

Thoughts?

Roland of Gilead

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Re: Use of 401k plans for early retirees
« Reply #1 on: April 17, 2014, 09:10:10 AM »
I am curious if there are any early retirees who can comment on how they invested and later withdrew from their 401k/403b. There is a early withdraw penalty of 10% for those who withdraw earlier than age 59.5. I have read there is something in the rules that lets go of the 10% penalty for those age 55 or older who retire or are fired. My thinking is I may not be able to tap my 401k if I retire before 55 and if this is the case should I forego some contributions for taxable accounts.

Thoughts?

Pipeline

Convert $20,000 a year of the 401K into a Roth each year tax free (for a married couple with no other earned income) and then after year five you can start taking out those $20,000 contributions tax and penalty free (leave in any earnings).

Brilliant.

catccc

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Re: Use of 401k plans for early retirees
« Reply #2 on: April 17, 2014, 09:12:49 AM »
Also, substantially equal periodic payments can get you around the penalty.  IRS rule 72t, I believe.

Grande

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Re: Use of 401k plans for early retirees
« Reply #3 on: April 17, 2014, 09:17:26 AM »
Roland,

That was a quick and confident response. I appreciate and will look into. Thanks