taxed up wrote:
Soon as I can wrote:
I'm 54 now and have hated my job for several years. At my job, we can early retire at 55, so I plan to do so the minute I see this year's bonus payout in my bank account.
I've fortunately lived frugally all my adult life, and have over $5M net worth with no debt.
Wifey makes more money than I do, and plans to keep working several more years, which helps too.
I am 62 now and retired at 61, but I spent four years getting fully retired. The reason for that was the nature of my consulting business where project commitments were 4-6 years, and the payments on the backend were low (a lot more paid up front when there was a lot more work to do). It took me four years to wind down the work I committed to.
Anyway, like you I have a high net worth. But for four years my net business income was horrific -- down from $240k per year to less than $15k. Because I was not 59-1/2 when I started closing down the business I looked around for ways to get money out of my IRA and fat 401k to help me get by until I could properly retire.
Here is what I can tell anyone in a similar retire-early but need money situation. I did both of the following prior to "retiring".
You can take money out of an IRA without tax penalties using what the IRS calls a 72(t) distribution. The limitations are that you have to amortize the distribution based on IRS life-expectancy tables. You divided the amount in your IRA by your life expectancy. You can take that amount out annually without penalties, but you have that amount out for five consecutive years (the IRS calls this substantially equal payments, so they amount does not have to be identical ever year).
You can take as much money out of a 401k as you please if you are the custodian. There are no penalties because you as the owner can make up your own retirement requirements, like starting distributions at age 40 if you like. You do not have to be retired to take 401k distributions.
Thanks. Good to know about those withdrawals. Fortunately my investments have a mix of liquidity, some of which pay decent dividends and/or I can sell without penalty aside from capital gains tax. I also took advantage of my company's deferred compensation plan, so cash flow from that will start at retirement. On top of that there's my wife's income, so hopefully I won't have to make any early withdrawals from my IRA or 401K. Medical coverage will be either company retiree medical or my wife's company health plan.