Busting out the hammer for early retirement

December 8, 2006 at 6:06 pm Leave a comment

We would like to retire early. Somewhere around the age of 55 or 56. Of course, who wouldn’t want to retire early, right? But we’re in a unique position. My husband has a pre-existing condition that brought about the need for a kidney transplant at the age of 25, just a month and a half after our wedding. We figure he’ll require another transplant in the next 10 years or so, and feel it is absolutely crucial that he gets to experience retirement while he is still healthy.

So, we’ve been trying to find ways to make this possible with the retirement options we have available. Mainly 401(k)s, IRAs, and Roth IRAs. It’s actually easier than we thought it would be. The main concern, as with most early retirement hopefuls, is how can we withdraw cash from these retirement accounts without paying penalties? This is what we found.

With a Roth IRA, our contributions can be withdrawn whenever and for whatever we like. As long as we leave the earnings in the account, we won’t have to pay taxes or the 10% early-withdrawal penalty.

With a 401(k), we can become eligible for periodic payments, but only when we leave the company. When we start the withdrawal process, it must continue for 5 years or until we reach the age of 59 1/2, whichever period is longer. If this isn’t possible with your particular plan, you can roll over the 401(k) stash to a IRA and withdraw from that account. This is recommended anytime you leave a company in which you participated in their 401(k) plan. We also learned that if we leave the company at age 55 or older, we can make withdrawals with no penalties.

We recommend “IRAs. 401(k)s & Other Retirement Plans: Taking Your Money Out” by Twila Slesnick if you’d like more in depth information.

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Entry filed under: Retirement.

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