On occasion, I have ambitious clients who have saved well their entire lives. Some want to retire at 55 or even earlier – I think that’s great! But wait… they cannot take from their retirement accounts without tax penalty until they are age 59 1/2. There ensues the panic. How are they going to have money to live when they retire early? 

I am addressing how to ensure you have spendable assets in your early retirement years before you reach age 59 1/2.


1. Check your 401(k) plan rules 

 Quite often, employers set a rule in the 401(k) plan that sets “retirement” at age 55. This allows retirement participants to take money from their 401(k) without penalty after age 55.  

So, if this rule applies to you, you DO NOT want to rollover your entire 401(k) to a Rollover IRA until you reach 59 1/2. Ensure you leave enough in your 401(k) to live off of until then. Also, invest it very conservatively, so you know the funds you need will be there.  

2. Use the 72(t) Rule 

 This route isn’t as desirable because there are a lot of rules to follow. However, it can work! Follow the instructions straight from the IRS website. It comes down to taking regular, equal payments until you turn 59 1/2 or for 5 years – whichever is LONGER. If you follow the rules exactly, you can live off your retirement accounts without penalty. 

3. Live off non-retirement accounts 

If you are planning on retiring early, TELL YOUR FINANCIAL ADVISOR ASAP! They need to be aware, so they can give you the best advice. If you want to retire early, you should likely fund a non-retirement brokerage account. Brokerage accounts do not have any age limit rules or penalties associated with them, so you have flexibility to spend them exactly how and when you want. However, you need to start funding it before you retire to ensure it is large enough for you to live on. 

4. Draw from the principal of your Roth IRA 

As long as your Roth IRA has been funded for 5 years, you can take your contributions from the account penalty free. You cannot, however, take any dollars from the growth of the account without tax and penalty until you turn 59 1/2. This also takes a bit of record keeping, but it can be worth it. I list this option last, because I generally do like saving Roth IRAs for last!  


I am so excited for those of you planning to retire young and live life to the fullest. Plan ahead though! You don’t want to find yourself with millions of dollars in a retirement account that you can’t access without penalty. Talk to your advisor now and come up with a plan!