What’s the Rule of 72(t) and Rule of 55?

Navigating early retirement can be challenging, especially when it comes to accessing retirement funds without facing penalties. Two key provisions that can help individuals retire early and avoid the 10% penalty on withdrawals before age 59.5 are the Rule of 72(t) and the Rule of 55.

Understanding the Rule of 72(t) for IRA Withdrawals

The Rule of 72(t) applies to IRAs and offers a way to access your retirement savings early. This rule requires the account holder to make substantial and equal payments for at least five years or until they reach age 59.5, whichever is longer. The payment amount is determined by a specific formula, ensuring consistency over the withdrawal period. This method can be a viable option for those who need to tap into their IRA before the standard retirement age.

What is the Rule of 55? A Key to Early 401k Withdrawals

In contrast, the Rule of 55 is specific to 401k plans and allows individuals to start withdrawing funds as early as age 55 without incurring the 10% penalty. This rule provides more flexibility for those who have left their job and want to access their 401k funds sooner, making it a valuable tool for early retirees.

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Casey Smith
President, Wiser Wealth Management

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