I want to retire early (before age 59 and a half). Can I take monthly income from my retirement plan and NOT pay the 10% penalty to the IRS?
Yes! Theres a little known tax code called 72t that allows you to take income every year for 5 years or until age 59 and a half whichever is longer. The calculation is based on the plan amount, interest rates and your life expectancy. If you use this rule, you will still pay ordinary income tax on your withdrawals but avoid the 10% penalty. This is a great option for people who are retiring early.
Related Questions
- I understand that early retirement is age 55 with 5 years of service, however what if I would like to retire at age 62. Can I do that or can I only retire at ages 55 or 65?
- I want to retire early (before age 59 and a half). Can I take monthly income from my retirement plan and NOT pay the 10% penalty to the IRS?
- I want to retire before age 59. How do I avoid the 10% early distribution penalty on retirement payments from my 401k?
