You can retire early using a 72(t) payment to take early withdrawals but it is tricky and you must be willing to follow the advice of a competent accountant so you do not end up with early withdrawal fees for taking money out of a tax-deferred account sooner than age 59 1/2. There are exceptions to the early penalty withdrawal rules such as education, disability, first-time home buyers, and death. If you are ready to retire early you need to plan to take out withdrawals for a period of five years. If you start at 58, you will need to continue withdrawing until age 63. An exception would be if you leave your company early, perhaps with a layoff. You can withdraw from an employer plan after age 55 with no penalty, as long as you do not roll it to an IRA and then withdraw.
- Any tax-deferred retirement accounts that take withdrawals before the age of 59 1/2 are considered early withdrawals and incur a 10% penalty tax.
- There are expections to the withdrawal penalty that can apply such as death, first-time buyer on a home, disability or educational benefit.
- If you are 55 or older and take a “seperation from service” you do not have to pay a penalty from your employer sponsored plan, but if you roll it all into an IRA and then do a withdrawal you will.
“Substantially equal periodic payments are one option available to those who really need to tap their IRAs early.”