Retirement Income Strategies for Early Retirees

Not everyone wants to wait until they qualify for Social Security in order to retire. But if you start taking early distributions from various qualified plans, you could be exposed to a 10 percent penalty that can really hurt the longevity of your savings.

That doesn’t mean those who would retire before age 59.5 must continue to work when they no longer want to. Here are five income strategies that can work for early retirees.

  1. Take an early IRA distribution using 72t guidelines: Section 72t of the IRS code specifies that a person can access IRA funds before reaching age 59.5 as long as they take a series of substantially equal periodic payments that continue for five years or until they reach age 59.5 (whichever is longer). There are specific rules to determining how much the substantially equal distributions can be, and we can help you figure that out.
  2. Purchase an immediate annuity: Non-qualified annuities can offer penalty-free income opportunities. You can design these to begin paying an income immediately that’s guaranteed by an insurance company over your entire life. Another benefit to an immediate annuity is that a portion of the payments—that which is attributed to return of principal—will be tax-free.
  3. Access other long-term savings: If you have sufficient long-term non-qualified (non-retirement) savings, you can use them as a temporary bridge between early retirement and the qualified retirement age of 59.5. Remember, however, that it may not be a good idea to liquidate a significant portion of your holdings to pay off large expenses because that can hurt the future growth of your savings and create a significant tax event. Instead, simply liquidate what you need, when you need it.
  4. Get a Roth IRA: Contributions to a Roth IRA can be withdrawn any time without tax or penalty. Be careful not to withdraw any of the earnings though because earnings taken from a Roth IRA prior to 59 ½ are subject to both income tax and penalty. Withdrawing only contributions is not necessarily a straightforward process, however, so you should meet with us to make sure you qualify before attempting to make the withdrawal.
  5. Work part time: Part-time work can help supplement the added expenses of retiring early. Explore the possibility of switching to part-time work within your current career or getting a different, part-time job.

While many retirement solutions focus on generating income, it’s also important to consider post-retirement expenses. When you control your spending, you may be able to retire early using the resources noted above without depleting too large a chunk of your savings. To develop your comprehensive, early retirement WealthPath, contact Kramer Wealth Managers today.

This information is not intended to be a substitute for specific individualized investment planning advice as individual situations will vary. The information presented here should only be relied upon when coordinated with individual professional advice.

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Adrianna Rocha

Client Relations Representative

240-379-6929 V
240-439-6889 VP
512-379-6909 FAX

Adrianna Rocha joined Kramer Wealth Managers in 2021.

Adrianna is responsible for client experiences and service. As part of the customer service team, she strives to help and provide top-notch service to our clients. As part of her role, she communicates with clients through videophone, schedules client meetings, prepares and processes forms, and gathers information for our advisors.

My clients’ accomplishments are also my own. 

Adrianna Rocha graduated with a Bachelor of Arts in Communication Studies from Gallaudet University in 2017. Before she joined our team, she worked in the customer service industry for nearly a decade. She excels in human-to-human relations and takes pride in not only her own accomplishments, but her clients’ as well. Adrianna enjoys chatting about her slight obsession with dogs, houseplants, essential oils, and food: especially Mexican food! She is also a proud fur-mama to her beautiful Aussie-mixed pup, Ziva.

Adrianna is not registered with FSC Securities Corporation.