How can you access retirement savings before age 59½ without paying an early withdrawal penalty? Start by checking whether the Rule of 55 applies to you.
The Rule of 55 may allow penalty-free withdrawals from your current employer’s 401(k) if you leave that job during or after the calendar year in which you turn 55. Taxes may still apply, and the rule does not automatically cover 401(k) accounts from previous employers.
If the Rule of 55 does not apply, consider whether a 72(t) substantially equal periodic payment, or SEPP, schedule fits your situation. You may also be able to withdraw original Roth IRA contributions without penalties or taxes, while leaving investment earnings untouched.
Using money from taxable brokerage accounts can provide another source of income without triggering a 401(k) early withdrawal penalty. The key is selecting the right accounts in the right order to minimize taxes and penalties while protecting your long-term retirement plan.
Early-retirement withdrawal rules are complex. Consult a qualified tax or financial professional before moving money or establishing a 72(t) schedule.
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