New rules liquidating retirement

The first path, Rule 72t withdrawals (also known as Substantially Equal Periodic Payments or SEPP), will be discussed in great detail in a future post.The ten second explanation is that it allows you to withdraw around 3-4% of your tax deferred assets each year following a strict IRS formula.Some of the nicer readers that aren’t trying to prove the impossibility of early retirement phrase things in a Jeopardy friendly format by asking “what is your plan to access traditional IRAs and 401ks before age 59.5 without paying a 10% penalty? Like a smart soldier navigating a booby-trapped route on a battlefield, it all comes down to careful planning and execution (if you want to avoid losing that ten percent).There are two major paths that permit penalty free early withdrawals from 401ks and IRAs.It requires a long term commitment to a rigid withdrawal scheme with severe penalties for messing up withdrawals. It’s the plan I’m following to fund the next twenty five years of my early retirement before reaching age 59.5.In other words, it’s very difficult to deviate from the 72t withdrawal plan before reaching age 59.5, and if you do so by accident, you’ll feel the snap of the trap and lose ten percent of your withdrawals backdated to your very first 72t withdrawal (ouch! By cleverly maxing out our tax deferred savings options, we owed almost nothing in taxes every year in spite of our combined (very very low) six figure income.It feels like we stumbled into a deep pit of tax liability.

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When the animal is out on patrol, a well placed trap can ensnare the unsuspecting creature.You’ll have to cobble together five years of expenses from somewhere.This is where it pays to have some taxable investments on hand to get you through the first five years of early retirement while you’re setting up the Roth IRA Conversion Ladder.Take a look at that table and you might notice two problems.First, there’s no money to provide for living expenses in years one through five.

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