You Can Retire Early

Live off of your retirement income before age 62

can take
out, penalty-free.

Five years or 59-1/2. Suppose, for example, John Smith retires at age 48 and wants to tap his IRA without paying a penalty. He does not have to start by taking out 1/36 of his account in year one and gradually draw down the entire account over 36 years. Instead, he can keep up his SOSEPP for five years or until age 59 1/2,
whichever comes later.

John starts his withdrawals at age 48, so he must continue until 59-1/2. If Tracy James starts at age 56, she must continue until at least age 61. Once you’re past both the five-year and age-59-1/2 hurdles, you can take out as much or as little as you’d like, without paying a penalty.

More or less. The SEPP rules permit you to decide among various methods, which result in different distribution amounts.

Minimum distribution amounts. You may want to take a relatively small amount from your IRA or 401(k), leaving as much as possible in the account to support a long retirement. In that case, you might take 1/36 of the account in year one, if you have a 36-year life expectancy, about 1/35 of the account in year two, etc.

Maximum distribution amounts. The Internal Revenue Service permits you to use an “amortization” method instead. In essence, you project how large your retirement account will grow over the years and take your SOSEPP based on that projected appreciation. Depending on your age and on the level of interest rates in effect at the time you start a SOSEPP, you might be able to take two or even three times as much from your retirement account, penalty-free, as you could with the minimum distribution method. (The IRS also permits an “annuitization” method, but it’s seldom used.)

Using recent interest rates, for example, a 50-year-old using the minimum distribution method would be able to withdraw nearly $11,000 a year from a $500,000 IRA, without owing a 10% penalty. With amortization, he could take out $23,000 or so, penalty-free.

Your accountant or financial adviser should be able to walk you through the calculations so you can choose the appropriate method for SOSEPP withdrawals. Be careful, though.

“Contributing just $1 to an account that has begun these distributions could trigger retroactive penalties plus interest,” says Cortazzo. Withdrawing more or less than the permitted amount can also trigger penalties. Therefore, you should be confident that you’ll maintain your SOSEPP precisely until you pass both five years and age 59-1/2.

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131 Responses to You Can Retire Early

  1. Samir says:

    The rules about retirement accounts can be very confusing. Thanks for helping to clarify.

  2. Johnny Moore says:

    I was very impressed by Tyrese  Gibson’s speech on the Trumpet Awards. It was a very motivating speech. The kind of speech that will help one to master the fear of taking on the challenge of starting a small business. Networking with positive people fires up that yes I can feeling.

  3. GTG says:

    This tips is so informational….

  4. Askmysecretary says:

    I see this as a key factor that hold so many would be entrepreneurs back is overcoming their own fears. We’ll talk our own selves out of our dreams

  5. Edwardboyd77 says:

    Without a plan A<B<c it is reaLLY HARD TO take risk ! Careful thinking seems to always help in making the best choicesat risk taking ventures!

  6. Gumdrop Swap says:

    Does the potential reward outweigh your risk? YES! This article confirms what I’ve been thinking for the next step for my business,

  7. Brian S Arnold says:

    Very good information. Will help me make some solid decisions for my business.

  8. God knew that business owners needed this great information to renew, enpower, and move each of us to the next dimersion.

  9. Khyladex says:

    This is good information. Wish I would have had it in the beginning of starting my business.

  10. YFS Magazine says:

     Thanks Treena, for your feedback. A Plan B can be applied to internal resources and management of any suppliers, vendors or partners you may have. Change in business is inevitable — so having a solid plan and option base will help you navigate “the unexpected” with ease.

  11. YFS Magazine says:

     Thanks Ransford!

  12. YFS Magazine says:

     Thank you Tiffany!

  13. YFS Magazine says:

     Martice — I’m glad my tip was helpful – Erica Nicole

  14. YFS Magazine says:

    Thanks for the small business love for YFS Magazine! Stay inspired. – EN

  15. YFS Magazine says:

     You’re welcome Adrian.

  16. YFS Magazine says:

     Thank you! We love you too – small business rocks!

  17. YFS Magazine says:

     You’re welcome! Thanks for the feedback. EN

  18. YFS Magazine says:

     True. Experiment. Build. Refine – and repeat! EN

  19. YFS Magazine says:

     Great point of view.

  20. YFS Magazine says:

     Absolutely! Be inspired.

  21. YFS Magazine says:

     You’re welcome!

  22. YFS Magazine says:

     Thanks for the feedback Vicki.

  23. YFS Magazine says:

     Nice! Yes – if only we could all know this from day one. Thanks for the feedback Michael.

  24. YFS Magazine says:

     True. Glad it’s helpful.

  25. YFS Magazine says:

     Good book recommendation!

  26. YFS Magazine says:

     Many startups combat issues like this via crowdsourcing platforms. Also when you bootstrap in lieu of traditional financing you must employ your dolllars to work even harder. Sticking to a minimum viable product (MVP) and testing often will ofset capital drain in most circumstances. Good points.

  27. YFS Magazine says:

     Awesome! Glad it was helpful Brian!

  28. YFS Magazine says:

     Yes. Good points. Thanks.

  29. YFS Magazine says:

     You’re welcome!

  30. YFS Magazine says:

     Take small calculated risks at first and seek “qualified” advice on how to minimize them. Sometimes we are so close to the trees we can’t see the forest.

  31. YFS Magazine says:

     Be fearless. Don’t be afraid to fail — it’s only data points to begin more intelligently.

  32. YFS Magazine says:

     Very true. It should be in the manual! 🙂

  33. YFS Magazine says:

     Focus on delegation – hire interns to free up your time so you can spend more of it growing your business.

  34. YFS Magazine says:

     Yes. You should focus on selling and shipping — but long term you must scale. Look for contract manufacturers in your area via ThomasNet and schedule site visits. As long as it’s just you — you limit production capability.

  35. YFS Magazine says:

     Awesome! Glad it was helpful.

  36. YFS Magazine says:

     Congrats! Be fearless.

  37. YFS Magazine says:

     Yes. Good points.

  38. YFS Magazine says:

     You’re welcome!

  39. YFS Magazine says:

     Awesome. Thanks.

  40. YFS Magazine says:

     Risk is inevitable – embrace it.

  41. YFS Magazine says:

     Awesome! Thanks.

  42. YFS Magazine says:

     Thanks for the feedback.

  43. YFS Magazine says:

     Good points. Thanks.

  44. YFS Magazine says:

     Awesome! Thanks.

  45. YFS Magazine says:

    Yes. Good points. Go for it!

  46. YFS Magazine says:

     Awesome! Thanks for the feedback.

  47. YFS Magazine says:

     Glad it was helpful.

  48. YFS Magazine says:

     Thanks for the feedback.

  49. YFS Magazine says:

     Thanks for the feedback.

  50. YFS Magazine says:

    Thanks for the feedback.

  51. YFS Magazine says:

     You’re welcome Sharlene!

  52. Kim Duncan says:

    i m pleased to get this insight for me and my business at this time.

  53. Kristina Nelson says:

    Great information for business risk and personal risk.

  54. Informative post.You have shared really great post regarding business risk & personal risk.I would like to read your more updates.Keep them coming.

  55. I’ve taken so many risks in the past & ended up with nothing so I am determined to be better prepared in what I need to do. 

  56. Thank you for this insight.  I have been questioning myself for the past week if I wanted to continue with one business that I just started and if it was worth the risk; this article truly made a difference for me. 

  57. Brenda Bradley62 says:

    Finally, the information I have been needing!

  58. Phoebe says:

    This is another wall.  The money aspect and the risk aspect of starting a business.  I want a business, but my decision is how bad do I want and what am I willing to sacrifice to make it a success?  

  59. WLM says:

    The way I see it, you only live once. Play smart and play hard.

  60. Sacharaniartistry says:

    I like the quote, “The more you know, the less you fear.” This is true. I’m adopting this it my list of life lessons.

  61. Brett Patton says:

    Great information working on my plan c and d to minimize my risk

  62. Sandra Butler says:

    Thank God for this valuable information…..

  63. Sandra Butler says:

    The bigger the Risk the greater the reward….

  64. Sandra Butler says:

    Determine how much risk you’re willing to take…

  65. Sandra Butler says:

    Read this tip 10times.

  66. Misha says:

    Extremely useful and applicable information! I really enjoyed it!

  67. Misvista says:

    Excellent information and thought provoking comments. 

  68. Great article on risk and I am assessing currently the risk I want to take with my business within the next 5 years.  

  69. L morton says:


  70. Cherkitawilliams says:

    This was a great article. I like the idea of having backup plans for the back up plan and then something else!! A great way to cover all of your bases and keep yourself protected!

  71. Reaganm says:

    No Guts..No Glory!!!

  72. Great information! Interested in finding out more about the YEC Urban organization. Sounds like something I would like to be involved in!

  73. Richard Jackson says:

    This is great information. I’m glad I decided to visit BE’s website again. I enjoy the comments from all of you fellow go-geters

  74. Lynn Cooper says:

    Erica- Thank you for sharing your insight!

  75. I put my self out on the big net now im on the move . in art school at visual arts east 23thd st new your the words BRAND- AND ENTREPERNEUR never-ever -ever came across the lips of any teacher Ionly found out what it all was about from black/e/m thank you. now i have a new life “A LIVEING MASTER ARTIST looking to move up and help some one els. thank you

  76. Selfdunn says:

    Open dialogue about business in general sparks ideas, motivates execution, trains the unfocused mind to stay diligent  and always think about growth!

  77. PA Course says:

    Really great to finally find a blog I can relate to just my
    kind of thing. You have made really some great points. I have never thought
    about these points. Keep it up.

  78. Jonathanpope71 says:

    Great information.

  79. You were on point with this one!

  80. You were on point with this one!

  81.  You were on point with this!

  82.  You were on point with this!

  83. Tia Jones says:

    This was great. I think fear is the reason most businesses fail.

  84. Bobby says:

    Great article!!!

  85. Bobby says:

    Great article!!!

  86. Click here says:

    Really great to finally find a blog I can relate to just my
    kind of thing. You have made really some great points. I have never thought
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  87. Click here says:

    Really great to finally find a blog I can relate to just my
    kind of thing. You have made really some great points. I have never thought
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  88. A fear of succeeding sometimes takes others persuations to show you your potential.

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