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ChooseFI | Financial Independence Podcast

201 | Rule of 55: Early Retirement Withdrawal Strategy

ChooseFI | Financial Independence Podcast

Jonathan Mendonsa & Brad Barrett | Choose FI Media, Inc

Business, Investing, Careers

4.85.2K Ratings

🗓️ 1 May 2020

⏱️ 58 minutes

🧾️ Download transcript

Summary

Most people assume their 401k is locked until 59½, but the Rule of 55 allows penalty-free withdrawals nearly five years earlier—and hardly anyone knows it exists. Brad and Jonathan break down this IRS provision, which lets you tap retirement funds if you leave your job during or after the year you turn 55. The catch? It only applies to your current employer's 401k or 403b, not old accounts. They explain who qualifies, what the restrictions are, and how this lesser-known rule can reshape your early retirement timeline. The episode also features Jillian from Everyday Courage, who talks about moving forward when finances (or life) feel hopeless. Her message: progress doesn't require perfection, and small steps matter more than flawless execution. Brad and Jonathan round out the discussion with listener stories of debt payoff wins and creative anniversary celebrations during isolation. Key Topics: [00:08:41] The Rule of 55: Accessing Your 401k Early The Rule of 55 allows penalty-free withdrawals from a 401k or 403b if you leave your job at age 55 or later in that calendar year. Key restrictions: Only applies to your current employer's plan, not old 401ks Some plans allow rolling prior employer funds into your current 401k to access them early You still owe income tax, just no 10% early withdrawal penalty [00:28:37] Overcoming Hopelessness with Jillian from Everyday Courage Jillian discusses how to take action when financial (or personal) progress feels impossible: Focus on one small step rather than overhauling everything at once "The pain of staying the same might be greater than the pain of change." [00:45:07] Setbacks are part of the process—"Even success comes with its messiness." [00:51:12] [00:01:09] Community Stories and Creative Connection Listeners share wins: hitting debt-free milestones, finding new ways to connect with family during lockdown (including playing board games over Zoom), and celebrating anniversaries in isolation. Resources: ChooseFI Start [00:57:01] ▶ Listen Next: Ep. 202 — Student Loan Planner with Travis Hornsby | Essential Listening

Transcript

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0:00.0

Well, today's episode we share a little known IRS provision that will allow you to access

0:04.1

money in your 401k long before the traditional 59 and a half retirement age.

0:10.0

We're talking about the rule of 55.

0:12.2

Brad shares his COVID board game of choice.

0:14.8

And Jillian from everyday courage joins us to discuss what to do when all hope is lost.

0:20.7

All that and more right after this.

0:22.7

You're listening to Choose FI Radio.

0:27.2

The blueprint for financial independence lives here.

0:38.0

If you're looking to unlock the secrets to financial independence and early retirement,

0:43.0

you're in the right place.

0:44.9

Stay tuned and join a community of like-minded people who are getting all the answers

0:49.0

to your and taking control of their lives in the pursuit of financial independence.

0:53.9

Choose FI.

0:55.2

For home, for financial independence, on live.

1:02.2

So Brad, it's a pretty ambitious show we have teed up.

1:12.4

What's going on in your personal life?

1:13.9

Wow.

1:14.9

Bropped transition much.

1:19.0

I was not anticipating that.

1:21.9

Everything's good.

1:22.9

Everything's going really well.

1:23.9

We're kind of in the groove now.

...

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