Retiring in Your 50s? You Need to Know These 3 Important Retirement Account Rules.

Retiring in your 50s sounds great in theory, but it brings an unexpected challenge: accessing your retirement savings without penalty. Normally, the IRS charges you a 10% penalty for every withdrawal you make before age 59 1/2, unless it's for a qualifying reason, like a large medical or higher education expense.

But there are ways for savvy savers to crack open their nest eggs without extra fees. Here are three you should know about.

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1. You can withdraw Roth IRA contributions penalty-free at any age

You fund Roth IRAs with after-tax dollars, since you pay taxes on your contributions. That means you're able to withdraw those contributions tax- and penalty-free before you're 59 1/2. This doesn't apply to earnings, though.

You must wait until you're 59 1/2 and have had your Roth IRA for at least five years before you withdraw earnings tax- and penalty-free. In this case, the five-year clock starts on Jan. 1 of the year you made your first contribution. So if you deposited your first Roth IRA funds today, the five-year clock would start from Jan. 1, 2024, and you'd be able to withdraw earnings tax-free on Jan. 1, 2029, assuming you're at least 59 1/2.

2. You can tap certain 401(k) funds early with the "rule of 55"

The rule of 55 allows you to access 401(k) funds from your most recent employer's 401(k) only beginning in the year you turn 55 (50 for public safety workers). Note that you only have to be this age at the end of the year to do this. So if you'll be 55 or older by Dec. 31, 2024, you can begin withdrawing 401(k) funds now, even if you're only 54 at the moment.

To take advantage of this strategy, you must have parted ways with your employer. And you cannot touch funds in IRAs or other retirement accounts. However, you may be able to roll over funds from other 401(k)s into your most recent 401(k) if you haven't already done so. Check with your plan administrator to find out if this is an option for you.

3. You can make regular withdrawals at any age using SEPPs

Substantially equal periodic payments (SEPPs) are a strategy that allows you to avoid the early withdrawal penalty and access your retirement funds early. This is where you take equal withdrawals from your account for the longer of five years or until you reach 59 1/2. Failure to make a required SEPP withdrawal will trigger the early withdrawal penalty.

There are three methods for calculating what your SEPP will be. You may wish to consult a financial advisor or a tax professional to help you decide which method is best for you. It's important that you understand how much you'll be expected to withdraw and when before committing to this method so you don't accidentally cost yourself a comfortable retirement.

You could also use a combination of these methods if one doesn't do the trick. Or you could try keeping some money in a taxable brokerage account where you can access it penalty-free at any age. Compare all your options before deciding which approach is right for you.

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