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Retiring Early and Your Retirement Accounts
Retiring early requires a significant amount of planning and savings. The Social Security Administration suggests that Americans should plan to live 90 years — and plan to save enough to support themselves at 70-100% of the income they make now during this time. That means if you retired at 55, you would need enough savings to support yourself for at least 35 more years.
This can be tricky — especially if a significant amount of your retirement savings is locked up in qualified retirement accounts, such as 401(k)s and Individual Retirement Accounts (IRAs). Currently, the federal government imposes a 10% penalty if you choose to take withdrawals from your 401k or IRA before you have reached 59.5 years old. In addition to the penalty, you also will have to pay income taxes on the withdrawals.
However, if you want to begin dipping into your nest egg before reaching 60, there are some options available that will allow you to do so without paying the 10% early withdrawal penalty.
If you want to retire early, it is important to understand the effect state and federal tax laws will have on any early withdrawals you make from your retirement accounts. For more information on planning an early retirement and maximizing the benefits from your qualified retirement plans, speak with an attorney in your area.
Preparing to Meet with Your Estate Planning Attorney
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