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Early retirement account withdrawal recommendations
Old 12-29-2020, 10:25 AM   #1
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Early retirement account withdrawal recommendations

What’s the recommendation for early withdrawals from your retirement accounts?


I’m 55 and retired. I want to withdraw from my retirement accounts for some recent home remodeling. I have IRA, Roth IRA, 401K and Roth 401k accounts to choose from under my name and IRA and Roth IRA accounts under my wife’s name to choose from.
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Old 12-29-2020, 10:36 AM   #2
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72T?
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Old 12-29-2020, 10:37 AM   #3
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My first recommendation is: Don't.

If retired, you might be able to withdraw from the 401K penalty free.

To me Roth accounts are the golden ticket, not something I would spend so early in life.

What happened to your taxable savings ?
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Old 12-29-2020, 10:37 AM   #4
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Originally Posted by Brian View Post
What’s the recommendation for early withdrawals from your retirement accounts?


I’m 55 and retired. I want to withdraw from my retirement accounts for some recent home remodeling. I have IRA, Roth IRA, 401K and Roth 401k accounts to choose from under my name and IRA and Roth IRA accounts under my wife’s name to choose from.
When did you retire? If you retired in the year that you turned 55, you may have access to the 401(k) account that was with the employer that you separated from in that year. (Google "Rule of 55.")

You have penalty-free access to the contributions of your Roth IRA, too.
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Old 12-29-2020, 10:51 AM   #5
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+1 If you left the employ of the company that sponsored the 401k or Roth 401k in the year that you turned 55 then you should be eligible for penalty free withdrawals. If not, then if you have had either the Roth IRA or Roth 401k for 5 years then you can withdraw contributions without penalties and taxes.

Another option might be opening a HELOC to pay for the home remodeling and then putting a sum aside in a separate IRA and setting up a 72t to make the HELOC payments.

But you really should have thought this through before doing the home remodeling.
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Old 12-29-2020, 12:49 PM   #6
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I retired at 53.


The short term income plan was to use sale of company stock (annual $ each year for 5 years) to get me to 59.5 before taking out $ from the retirement accounts.


The home remodel grew substantially from the original plans. All by choice. Just tired of settling for less than we could afford to save for the future. We also helped our son with a house down payment.


We have a equity line of credit which we've used to fund the home remodel beyond our savings. We could pay the equity line off in probably 2 to 3 years using the company stock income.



It just seems wrong to pay interest on the loan when we have retirement savings which are more than adequate (40x annual income) to pay off the loan if early withdrawal penalties and taxes are reasonable.


There are other wish list purchases (cars, vacations, etc.) if we figure out how to access the retirement accounts.
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Old 12-29-2020, 01:02 PM   #7
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So any rule of 55 withdrawals are out of the picture since you retired at 53.

I assume that you have had the Roths for more than 5 years, in which case you could withdraw contributions penalty and tax free.

You knew or should have known that there were constraints on withdrawing these monies without penalty before 59 1/2 when you deferred that income so not much sympathy.

I'm not sure the notion of it seeming "wrong to pay interest on the loan when we have retiremetn savings" makes much sense because you are earning interest on the money that is "stuck" in the retirement accounts... right? And if you took the money out to pay the loan then that interest income would go away, right? So isn't it a wash or close to a wash? Or at least close enough to a wash that it isn't worth fretting about?

Usually I would caution someone doing what you are doing about pissing their retirement savings away, but at 40x spending I don't think I need to... it sounds like you have plenty.
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