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Tag Archives: early 401k withdrawals

Retirement Smarts: What Everyone Should Know Before They Reach Their Golden Years

smart retirement moves

Most people make at least one financial mistake when they retire. In fact, it’s not uncommon to completely botch your finances once you stop working. Here are the most common mistakes, and how to avoid making them when it’s your time. Early Withdrawals One of the biggest mistakes retirees make is that they make withdrawals too early. The IRS imposes a 10 percent early withdrawal penalty on all withdrawals from retirement accounts prior to age 591/2. This is in addition to the normal income tax due on such withdrawals. According to Money Looms, even loans from 401(k) plans can be subject to the 10 percent penalty if you fail to repay them on schedule. So, to protect yourself, don’t make early withdrawals. And, if you do want to retire early, you will need to find a retirement advisor who specializes in IRS rule 72(t) withdrawals. These are special withdrawals that allow you to skirt the 10 percent penalty. But, the calculations and rules can be complex, and penalties are stiff if you mess up (which is why it pays to work with an advisor when you do this). For most people, it’s best to wait until your 60th birthday before ...

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