Apr 23 / Jay Zigmont, PhD, MBA, CFP®

I'm retiring before 59 1/2. How do I access my money?

Early retirement is a goal for many people, but you'll have to figure out how to cover your costs if you're no longer actively working to earn money. This is where retirement investment accounts come in, right? Well, if you're older than 59 and a half, sure. But if you're younger than that, you'll be penalized for withdrawing money from these accounts. Here's what to consider if you're retiring early and intend to rely on your investments to fund your post-work life.

Keep funding retirement accounts

Your retirement accounts, which could include a traditional IRA or an employer-sponsored 401(k), are the cornerstone of your retirement savings, especially if you can get an employer match on that 401(k). These accounts are specifically designed to be used to pay your retirement living expenses. 

For early withdrawals from a 401(k) or traditional IRA, you'll generally be assessed a 10% penalty on money you take out, on top of the ordinary income taxes you'll pay (remember, you funded these accounts with pre-tax dollars, so you have to pay taxes on withdrawals later). You are allowed to take money out of them under certain circumstances, but retiring early generally isn't one of them. Prioritize putting enough money into these types of accounts so your later retirement years are set.

Also fund taxable accounts - and consider a Roth IRA

Taxable brokerage accounts can be used to cover your expenses if you retire early, and to figure out how much you'll need to save in one, decide when you want to retire. For example, if you want to finish working at age 45, you'll need enough to cover your expenses from age 45 to 59 and a half. Using a regular brokerage account will give you the most flexibility for withdrawals; you'll be taxed on your investment gains but since you fund these accounts with post-tax dollars, you won't owe additional taxes. 

A Roth IRA is another great option if you hope to retire early, as you can withdraw your contributions any time without owing taxes, and after you've reached 59 and a half, your investment gains are also tax-free. 

There's a lot to consider if you're planning an early retirement. Reach out to a Childfree Wealth Specialist® to get everything straight and see how you can manage your bills and other expenses on saved and invested money once your working life is over.

Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth®, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.