Hello,There is a solid chance that I will have my retirement goal amount in my 401K well before I turn 59-1/2 (I'm currently 40). However, at this point, I've done almost no investing outside of retirement vehicles. So, how do you bridge the gap between having goal amount in your 401K in your early 50s and being able to use it at 59-1/2. I'm beginning to invest more in non retirement accounts, but I don't think I can invest the amount required in 12 - 15 years to support myself for 5 - 7 years.Also, what about health insurance costs if you aren't working?Thanks,Darrin
http://www.required-minimum-distribution.com/72t-distributio...The IRS permits early retirees to access their retirement funds prior to age 50 1/2 without penalty as long as they take distributions under a plan of substantially equally periodic payments (rule 72t). Once started, these payments must continue for the longer of 5 years of their attainment of age 59 1/2. Therefore, once a 72t distribution plan is started, these become required mandatory distributions subject to the early withdrawal penalty if ceased.
There is a solid chance that I will have my retirement goal amount in my 401K well before I turn 59-1/2 (I'm currently 40). However, at this point, I've done almost no investing outside of retirement vehicles. So, how do you bridge the gap between having goal amount in your 401K in your early 50s and being able to use it at 59-1/2.How early in your 50s?In addition to the 72(t)/SEPP withdrawals mentioned, you are also allowed to take penalty-free withdrawals from your 401(k) if you leave your employer's service in or after the year you turn 55 - meaning you can access the money sometime when you are 54, depending on when your birthday is. You have to leave the money in the 401(k) (cannot roll it to an IRA) in order to take advantage of this option. Also, your employer's plan may have specifics on how to take the withdrawals (for instance, you may not be able to take withdrawals more ofter than quarterly).This option is generally more flexible than the 72(t) withdrawals, since you aren't required to continue taking them for a minimum of 5 years, or until you turn 59 1/2, whichever is later.Also, what about health insurance costs if you aren't working?The costs themselves should be factored into your goal for retirement. The costs are likely to be expensive. As far as getting the insurance itself, here are some options:- Does your employer provide retiree health benefits? If so, check into the eligibility requirements for those - it's often something like 'years of service + age > xx' with a minimum for either age or years of service.- COBRA (up to 18 months)- Spouse/Domestic Partner benefits- Part-time work for an employer that offers benefits to part-time employees- Private insurance offered through a group you are affiliated with- Private Insurance as an individual- your state's High Risk insurance coverage (not all states have this - if yours doesn't, and you have no other options, you may want to consider moving to a state that offers this)- Potentially, healthcare pools being put in place with the Federal healthcare law- Move to another country that will accept you into their health insurance plan- Going without (cheap unless you have need of insurance)AJ
You can probably set up your 72t to pay your basic living expenses. Then you have the income from your taxable investments to pay for some extras in good times or to cover unexpected emergencies that might come up.On health insurance, if you know any farmers, they are good ones to ask, because they all have this problem and often cannot get group insurance. Health savings accounts are one method. You can also try getting quotes from major insurers in your area. Those with no significant medical history can often get inexpensive coverage--especially if they will accept high deductible/high copay plans.But this is an aspect addressed by the Obama health care bill. Previously companies would often not accept you or would give outrageous bids if you had any long term health issues such as high blood pressure. And the trend was toward overweight, smoking, underweight, anything considered non ideal. That made health insurance hard to get or if they raised your rates hard to replace.If the Obama plan survives the court tests, all of this is changing. They are required to offer coverage with no exclusions for preexisting conditions. That should change things a bit, but at this point it is not clear what will happen to insurance rates.But rest assured unless something is done rates will rise. And be aware rates increase with age too especially after age 60.You are asking the right questions. I'd suggest you be aware and investigate before you decide.
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