Over Age 40 And Thinking About Retiring Early?...This Will Help You Decide

Guys, did you know that you can withdraw money from your 401k, your 403b or your thrift savings plan before age 59 and a half without any penalties? Let me know in the comment section below if you've ever heard of the rule of 55. Now, no matter if you're 30 years old, 40 years old or 50 years old, you're going to want to stick around for the information that I share with you in this video because it can help you prepare and plan for your upcoming financial future. Guys, the fact is that you can actually withdraw your money from your 401k, your 403a, your 403b, your TSP. You can withdraw from any of those types of accounts before reaching the age 59 and a half and not have to pay the penalty, the 10% early withdrawal penalty. And the rule that allows you to do it is the rule of 55. And this rule has been around since about 1988 when the IRS amended a previous ruling from 1968. Now, I'm not the biggest fan of everything the IRS does, but in this instance, I can say that the IRS actually did something that's helpful for a lot of us because this rule of 55 means that you can leave your job early before you reach the 59 and a half age limit and actually enjoy some of the money that you put aside without having to face a Now, before I go further, let me just say this, guys. The rule of 55 is not to be confused with the rule of 72T. The rule of 55 is more flexible than the rule of 72T, which the rule of 72T specifies that you have to take distributions continuously for five years or until you reach age 59 and a half, whichever occurs later. And the rule of 72T deals with SEP plans. And without going too deep in all that, let me just say that the rule of 55 and the rule of 72T are different. Now, let's dig a little deeper into the rule of 55 so you can understand exactly what it is and exactly how it can help you down the road. And before I go further, let me give my full disclaimer, guys. I am not a certified financial planner. I'm just a guy who completely reversed his finances over the course of 20 years, who really enjoys learning about ways to manage money, save more money, invest more money and have more money. And on this channel, I try to pass that information on to you guys. I always suggest you do your own research on everything that I discuss with you in all of my videos. So what is the rule of 55 specifically? The rule of 55 is basically a loophole that allows for early withdrawals from workplace retirement accounts like a 401K, a 403A, a 403B, a TSP if you work for the federal government. And it's an exception to the 10% early withdrawal penalty. See, usually, guys, if you leave work before you're age 59 and a half, you can't touch that 401K or that 403B. You can't touch it without getting a 10% penalty and, of course, paying your taxes as well. But again, the rule of 55 does away with that. No 10% early withdrawal penalty, but of course, you still got to pay taxes. Hey, guys, if you're enjoying this video, do me a favor and hit that like button for me. Also, please consider subscribing to this channel if you're not already a subscriber. Share this video with someone that you know who could use this important information. And also, don't forget to drop that comment. Let me know if you've ever heard of the rule of 55. Now, let's go back to the video. Now, two things have to be true in order for you to activate the rule of 55. The first one is this. Withdrawals have to occur in the year you turn 55 or later. And number two, you had to have left your employer, separated from service, right? Separated from your employer. The other thing to keep in mind is that the rule does not apply to individual retirement accounts, IRAs. So, just to clarify that, guys, let me say that a little bit differently. The rule of 55 applies if you retire, if you quit, or if you lose your job after the calendar year in which you turn age 55. In other words, you have to be employed by this employer where you're pulling the money from. You have to be employed by that employer on your 55th birthday to actually activate the rule of 55. And again, it doesn't apply to individual retirement accounts. Only the 401k, the 403a, the 403b, your thrift savings plan. Now, there's some other considerations I want you to think about when it comes to the rule of 55. The first one is this. Withdrawals under the rule of 55 must come from your current employer, your current employer's 401k, 403b, TSP. And that means if you want to actually utilize the rule of 55, you cannot begin collecting from a different employer's 401k. You can't begin collecting from a different employer's 403b. You have to begin collecting from the employer that you're working at when you reach age 55. And so, if you reach age 55, but you have money in a different employer's 401k, you can pull that money too, but that money will be subject to the 10% early withdrawal penalty. Now, the second thing is this. Remember, you still have to pay taxes on the money that you withdraw. Now, under the rule of 55, public safety workers may be able to make penalty-free withdrawals at the age of 50, five years earlier. So, with that said, guys, there's also a couple of things that I want you to be careful about. You have to be careful about this rule of 55, because you want to be sure that your money lasts. And if you start taking your money out before you reach age 59 and a half, you're going to have less money that's going to be able to stretch for a longer period of time. So, you need to be very careful that you don't run out of money. Just run out at age 55 and start pulling all your money out because you don't want to run out of money. So, activating this rule of 55, if you plan to do it, it needs to be strategically done and very well planned out in order to be the most effective tool that it can be for your retirement, because you want this money to stretch and you don't want to reduce your retirement savings prematurely, too soon, especially if you really don't have to, because it's really four and a half years earlier than most people will actually pull their money at the least. Some people aren't going to touch their money until they're 65, 70 years old, but at 55 years old, you got to be careful because again, you want this money to last your entire life. But hey, the beauty of the rule of 55 is this, guys. If you're looking to retire early, you may be able to access the money you need sooner and you get to determine how much money you want to withdraw without locking you into some type of fixed distributions of your own money, right? The final thing I want to mention, guys, is there's other different types of withdrawals that you can actually do from your 401k, 403b, TSP without having to face this early 10% withdrawal penalty, right? The rule of 55 is just one of them, but there's other ones and they're called hardship withdrawals from your 401k or 403b or from your TSP, right? So the IRS allows others besides the rule of 55 to be activated to allow you to get access to your money sooner without having to pay that penalty. Now, these include things like medical expenses, buying your first home, expenses for education, and up to $5,000 to cover the cost of a birth or an adoption, right? And there's others, right? But the point is, is that the rule of 55 is just one. There's other exceptions to actually having to pay that 10% early withdrawal penalty. Again, check with a professional and do your own research about the rule of 55, right? So on this video, I just want to share this information with you guys and say, hey, if you're thinking about retiring early and not wanting to pay that 10% early withdrawal penalty, you can do it. The rule of 55 is one way that's possible for you to get to your money sooner. Guys, let me know in the comments below if you've ever heard of this rule of 55 before this video, or if you've never heard of it, let me know that too in the comments below. Now, YouTube, for some reason, thinks that this is the best video for you to take a look at next. But if you're like me and you're a huge fan of index funds and ETFs, and you want to know, for example, which ETFs that you should be investing in, I think you should be watching this video right here. Check it out. Until the next video, peace.