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ER Planning Questions
Old 05-28-2007, 04:38 PM   #1
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ER Planning Questions

Hello everyone,

I am new and wish to thank all of you for this valuable info; nothing like wisdom coming straight from those with the experience!

I'm 46 and my ER goal is 55. I've been thinking about retirement for several years now and have learned a lot but still have questions. I'd greatly appreciate any feedback.

1.) The 401(k) early withdrawal, before 59.5, rule: I've heard of this but what are the details? Is there a gov. web site that spells out the rule(s)? Or is it simply: "you must take the same amount for 5 yrs straight until age 59"?

2.) During retirement, are investment gains in my Roth 401(k) considered
taxable income? Or do they accumulate tax-free as they do now (pre-retirement)?

3.) Early retirement with part-time work would be great. Does anyone have sources on how to find part-time work other teenager jobs? I'm a software developer and love it, however, I'd love to work just 2-3 days. I could contract out writing software, but have no resources for finding those opportunities.

4.) For health insurance, I found Medi-Share® is the Biblical Healthcare Solution to the rising cost of health insurance., which is not insurance but in essence pays any bills. Any thoughts or experience on these types of coverages?

Thanks in advance!
Bob
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Old 05-28-2007, 04:51 PM   #2
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Quote:
Originally Posted by joyfulbob View Post
Hello everyone,

I am new and wish to thank all of you for this valuable info; nothing like wisdom coming straight from those with the experience!

I'm 46 and my ER goal is 55. I've been thinking about retirement for several years now and have learned a lot but still have questions. I'd greatly appreciate any feedback.

1.) The 401(k) early withdrawal, before 59.5, rule: I've heard of this but what are the details? Is there a gov. web site that spells out the rule(s)? Or is it simply: "you must take the same amount for 5 yrs straight until age 59"?

2.) During retirement, are investment gains in my Roth 401(k) considered
taxable income? Or do they accumulate tax-free as they do now (pre-retirement)?

3.) Early retirement with part-time work would be great. Does anyone have sources on how to find part-time work other teenager jobs? I'm a software developer and love it, however, I'd love to work just 2-3 days. I could contract out writing software, but have no resources for finding those opportunities.

4.) For health insurance, I found Medi-Share® is the Biblical Healthcare Solution to the rising cost of health insurance., which is not insurance but in essence pays any bills. Any thoughts or experience on these types of coverages?

Thanks in advance!
Bob

"No. Medi-Share is not insurance. Medi-Share is a program where Christians share each others medical expenses. Christian Care Ministry and the Medi-Share program are not registered or licensed by any insurance entity, nor are they required to be. CCM does not collect premiums, make promise of payment, or guarantee that your medical bills will be paid. Sharing of medical bills is completely voluntary."

'Nuff said... Welcome, joyfulbob; a moderator will be along shortly to assist you...
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Old 05-28-2007, 05:12 PM   #3
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Looks like there enough footnotes that this sharing thing is having quite few problems with states about being regulated as insurance...

Wonder what the higher ups in this organization are getting paid...

Just did a google search

Media Watch

- 18 percent for overhead and staff costs.
- No pre-existing conditions allowed
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Old 05-28-2007, 06:42 PM   #4
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Joyfulbob, there are situations (like a timely retirement) where you can draw money penalty-free from a 401k starting at age 55. See IRS pub 575. You can use rule 72(t) to withdraw money from an IRA penalty-free before age 59.5 See Retire Early: Can I withdraw money from my IRA before age 59 ?
for a good intro to the subject.

Coach
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Old 05-28-2007, 07:28 PM   #5
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1.) The 401(k) early withdrawal, before 59.5, rule: I've heard of this but what are the details? Is there a gov. web site that spells out the rule(s)? Or is it simply: "you must take the same amount for 5 yrs straight until age 59"?

This is the 72T rule. I would Google it and see what you find. Applies to traditional IRAs. Good news. Don't need it for 401k if you leave the company at 55 or older. Can withdraw 401k then without penalty.
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ER Planning Questions
Old 05-28-2007, 08:09 PM   #6
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ER Planning Questions

When I posed the question to my employer about taking a penalty free distribution if I were to retire from the company at age 55. Our HR guy said that they would only issue a single payment for the full balance upon leaving. I have heard that other employers will space the payments out over time.
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Old 05-28-2007, 08:31 PM   #7
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Quote:
Originally Posted by joyfulbob View Post
I'm 46 and my ER goal is 55. I've been thinking about retirement for several years now and have learned a lot but still have questions. I'd greatly appreciate any feedback.

1.) The 401(k) early withdrawal, before 59.5, rule: I've heard of this but what are the details? Is there a gov. web site that spells out the rule(s)? Or is it simply: "you must take the same amount for 5 yrs straight until age 59"?
As WilliamG said, you are describing a "Rule 72T", but if you retire when you are 55, you do not have to do a rule 72T ! I am not a CPA, I am not a lawyer or some kind of tax expert so no one ever believes when I tell them this. So go to the IRS web site and look up Tax Topic 558. The important part says
The following additional exceptions (to additonal taxes) apply only to distributions from a qualified retirement plan other than an IRA:
  1. Distributions made to you after you separated from service with your employer, if the separation separated from service with your employer, if the separation occurred in or after the year you reached
    age 55
Now to "translate" !
  • Distribution means withdrawal
  • a qualified retirement plan other than an IRA means 401k (either regular of Roth style)
  • separated from service with your employer means Early Retirement !
  • if the separation occurred in or after the year you reached age 55 means exactly what it says !
Quote:
2.) During retirement, are investment gains in my Roth 401(k) considered taxable income? Or do they accumulate tax-free as they do now (pre-retirement)?
Gains from either Roth IRA or Roth 401K are always, always, ALWAYS, tax exempt !

How do I know all this ? RESEARCH and I am only 53 !
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Old 05-28-2007, 08:39 PM   #8
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Joyfulbob, there are situations (like a timely retirement) where you can draw money penalty-free from a 401k starting at age 55. See IRS pub 575.
Yes, but read page 28, after the highlighted heading Additional exceptions for qualified retirement plans
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Old 05-28-2007, 08:44 PM   #9
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Originally Posted by smileydog View Post
When I posed the question to my employer about taking a penalty free distribution if I were to retire from the company at age 55. Our HR guy said that they would only issue a single payment for the full balance upon leaving.
Have your "HR guy" find that in writing in your 401K plan rules ! Depending who is actually "running" your 401K (mine is run by Fidelity and there is not such limitation), this may or may not be the case.

Read what I just posted about penalty free distribution from 401K when you retire at 55 or older.
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Old 05-29-2007, 07:01 AM   #10
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3.) Early retirement with part-time work would be great. Does anyone have sources on how to find part-time work other teenager jobs? I'm a software developer and love it, however, I'd love to work just 2-3 days. I could contract out writing software, but have no resources for finding those opportunities.

----

Do a google search for "jobs for seniors" and you'll get lots of websites dedicated to the subject. Also try AARP and CoolWorks.com - Summer Jobs and Seasonal Jobs in Great Places (for fun job ideas).

Karen
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Old 05-29-2007, 08:42 AM   #11
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Joyfulbob...

Have you considered asking your current employer if you could contract part time for them after retirement.

My experience shows that an employer would prefer to contract a former employee than someone without the same level of experience.
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re:ER Planning Questions
Old 05-29-2007, 09:45 AM   #12
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re:ER Planning Questions

software jobs can be found on elance.com. people who need software and other type jobs done post their requirements. You then search and find one you can do. You put in a proposal and money requirements. Then the job poster selects someone to do the job. I've never used it myself, but have several friends who have.
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Old 05-29-2007, 01:18 PM   #13
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Originally Posted by kaudrey View Post
3.) Early retirement with part-time work would be great. Does anyone have sources on how to find part-time work other teenager jobs? I'm a software developer and love it, however, I'd love to work just 2-3 days. I could contract out writing software, but have no resources for finding those opportunities.
----
Do a google search for "jobs for seniors" and you'll get lots of websites dedicated to the subject. Also try AARP and CoolWorks.com - Summer Jobs and Seasonal Jobs in Great Places (for fun job ideas).

Karen
Go to monster.com and check to see whether the posted openings there are suited to your skills. Maybe post your resume to assess whether part-time offsite work is acceptable to any of them. Maybe try a contract in your spare time to assess whether this would work for you when you need it.

Failing that, call a local IT headhunter.
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Old 05-30-2007, 10:34 AM   #14
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Have your "HR guy" find that in writing in your 401K plan rules ! Depending who is actually "running" your 401K (mine is run by Fidelity and there is not such limitation), this may or may not be the case.
OldWizard,

Are you saying that Fidelity 401K supports this penalty free distribution if you quit at 55? That would be great!

Can you point me a link on the Fidelity website describing this? Thanks in advance.
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Old 05-30-2007, 12:44 PM   #15
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I'm using the same tactic to RE the end of June. Coming to this forum and learning to ask the right questions allowed me to retire 3 years earlier than planned.

We had a Megacorp (Healthcare) merger and the 403b plan changed. Before I could not withdraw from the 403 until 59 1/2. Under the merged plan it dropped to 55. As I am 57 can you see the dust marks where I'm picken um up and layem um down to get out the door

Life is sweeeeeeet
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Old 06-04-2007, 12:00 AM   #16
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OldWizard,

Are you saying that Fidelity 401K supports this penalty free distribution if you quit at 55? That would be great!

Can you point me a link on the Fidelity website describing this? Thanks in advance.
  1. Every 401K plan is unique. They all have their own quirks. For example, it may say that when you die, your beneficiary must withdraw all funds within X days. It may not allow partial withdrawals at all. Get a copy of your company's 401K rules. Read it ! HR "droids" usually don't know/understand the details, so contact the company running the 401K with specific questions.
  2. The "exemption from additional tax" is in the IRS regs. Go to the IRS web site and find Tax Topic 558.
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