Health & Fitness
Money-Saving Tips for the Early Retirees
Early retirees may be able to tap their retirement plans early without paying government penalties for early withdrawal.
Typically, you would face a 10% penalty if you make an early distribution from a 401(k) or other Qualified Retirement Plan (QRP) before you turn 59 1/2. But the government allows various exceptions -- including one specifically for people older than 55.
If you leave your job after you turn 55, you can tap your QRP without paying the penalty. The government also waives the penalty for people who cite economic hardship when they withdraw from a QRP.
So, if you left your job after age 59, you can tap that QRP to help fund your early retirment without paying the penalty. Yonger than 55? The economic hardship exemption may apply if you're unemployed or under-employed.
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The age exemption is even lower for public safety employees. Police, firefighters, and medics can leave their jobs after age 50 and tap the QRP without penalty.
These retirment exemptions do not apply to IRA. So if you have a QRP and you qualify for the early-retirment exemption, you may not want to roll over that QRP to an IRA -- at least not until after you turn 59 1/2 when the exemptions are moot.