BiggerPockets Money Podcast 560: Dude ACTUALLY Withdraws From His 401(k) and Retires at 47
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Sep 3, 2024 Eric Cooper, an early retiree who exited the workforce at just 47, shares his journey to financial freedom by utilizing the 72(t) rule. He reveals how this strategy allows him to withdraw $30K annually from his 401(k) without penalties. Eric discusses the intricacies of this rule, his sizable real estate portfolio, and significant tax benefits he enjoys. He emphasizes that early retirement is achievable for many and encourages listeners to explore smart investment choices and disciplined savings to unlock their retirement dreams.
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72(t) Rule Requirements
- The 72(t) rule requires distributions for five years or until age 59 1/2, whichever is later.
- There are three IRS-approved calculation methods for withdrawal amounts.
Eric's 72(t) Strategy
- Eric chose the amortization method for largest payout, receiving $20,000 annually.
- This IRA, funded by a 401k transfer, continues growing despite withdrawals.
401(k) Early Withdrawal Penalties
- Withdrawing from a 401(k) without these rules incurs taxes and a 10% penalty.
- Verify 72(t) calculations with an accountant to avoid IRS penalties.