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early retirement

We have developed a questionnaire that will help uncover the potenital unfavorable tax time bombs in your retirement plan.    Click here to print it.

Are you aware that your spouse has special privileges in relation to your retirement account, but that those special privileges can be lost if it isn't set up right?

Early Retirement

What are your options for early retirement and avoiding the penalty for early withdrawal before age 59 1/2?
  • No penalty if you have a 457 employer plan (work for state, local governemnt etc).
  • Retire in the year you will turn age 55 or more, and there may not be a penalty on employer plans. (With a Traditional IRA there still would be.)
  • Public safety officers such as police, fire, or emergency response, the early retirement age is 50 with no penalty for early withdrawal on employer plan.
  • 72t rules allow withdrawals before age 59 1/2 but with large limitations. It must be done with what are called a Series of Substantially Equal Periodic Payments that continue until the later of age 59 1/2 or 5 years.
  • NUA — Net Unrealized Appreciation. If you have employer stock in your employer retirement plan you may be able to take it out and only pay capital gains, avoiding regular income tax. There may be a penalty, but it may be small enough to still be worth it.
  • If you have after-tax contributions in your retirement plan there may be some viable options for you, but they are a bit tricky.
  • Borrow life insurance cash values tax free (as long as policy kept in force).
  • There are special Social Security claiming strategies as well, starting age 62.
  • Inherited retirement plan money can be withdrawn penalty free at any age. In fact, the IRS requires at least minimum distributions starting in the year after death of account owner (with certain spousal exceptions, if elected).
  • And of course any non-tax sheltered money held in normal brokerage accounts, or other passive investment income.

The above strategies can not be done casually. They require time, knowledge, and planning.

Note that the retire in the year you turn age 55 or 50 rule, means just that. For example, let's say your plan allows for early retirement with no penalties for early withdrawal at 55. You can't retire at age 52 and then once you hit age 55 start taking penalty free withdrawals. You have to be turning age 55 in the year you separate from service.

The 72t Series of Substantially Equal Periodic Payments strategy is based on payments made over a lifetime expectancy as if that account was the only source of income going forward and so the periodic payments may be lower than what a person might want.

The Roth option has possiblities for many people but requires planning well in advance of retiring in order to have penalty free money. All contributions can be removed tax and penalty free. Conversion money has to be held for 5 years or there will be a penalty on withdrawals. Earnings cannot be touched before age 59 1/2 or there will be a penalty, as well as a tax. The nice thing is that Roth withdrawal rules allow for contributions to come out first, then conversion money, and then earnings. Once age 59 1/2, even earnings can be taken out penalty free, and if it has been 5 years since inception of the plan, then also tax free!

Call us to set up a visit to discuss your possiblities, or click on the "Request Info." button link above!

Phone: (909) 790-8622

Main Office
PGA Financial PGA Financial
34455 Yucaipa Blvd. Suite 209
Yucaipa, CA 92399

Serving Yucaipa, Calimesa, Mentone, Redlands, Banning, Beaumont, Cherry Valley, Highland, Loma Linda, Bryn Mawr, Grand Terrace, San Bernardino, Moreno Valley, San Jacinto, Bloomington, Colton, Fontana, Riverside, Rialto, Big Bear Lake, Hemet, Inland Empire, Forest Falls, Angelus Oaks, Skyforest, Rimforest, Running Springs, Twin Peaks, Lake Arrowhead, Fawnskin, and points beyond in California.

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