3036: [Part 2] Generating Retirement Income Before Age 59 by Darrow Kirkpatrick of Can I Retire Yet

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🗓️ 10 February 2025

⏱️ 11 minutes

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Summary

Discover all of the podcasts in our network, search for specific episodes, get the Optimal Living Daily workbook, and learn more at: OLDPodcast.com. Episode 3036: Darrow Kirkpatrick explores strategies like the 72(t) Rule, home equity loans, and special tax exemptions, highlighting both their benefits and risks. While taxable accounts offer the most flexibility, understanding these alternatives can provide financial freedom before reaching 59½. Read along with the original article(s) here: https://www.caniretireyet.com/generating-retirement-income-before-age-59/ Quotes to ponder: "Once you start down the 72(t) road you are essentially locked in for a period of time." "If you take out any kind of loan in early retirement, you are assuming that you will have the cash flow later in retirement to easily pay off the loan." "The very best way to save for early retirement is probably to max out your tax-sheltered account contributions and then keep on saving into taxable accounts during your working years." Episode references: Dinkytown.net: https://www.dinkytown.net CalcXML: https://www.calcxml.com "How to Access Retirement Funds Early" by Mad Fientist: https://www.madfientist.com/how-to-access-retirement-funds-early 72T.net: https://72t.net Learn more about your ad choices. Visit megaphone.fm/adchoices

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0:30.6	This is Optimal Finance Daily. Generating retirement income before age 59.5. Part 2 by Darrow Kirkpatrick of can I retire yet.com.
0:42.3	72T rule.
0:45.1	Potentially the most accessible mechanism for an early retiree to tap retirement accounts without penalty is the IRS 72T rule governing substantially equal periodic payments,
0:57.5	or set payments. Basically, it lays out an accounting mechanism to distribute your entire IRA
1:03.4	balance over your remaining life expectancy. I am again going to lean on CPA Mike at
1:09.7	oblivious investor to summarize the technical details.
1:13.8	And even he strongly recommends working with a professional tax or financial advisor if you
1:18.7	actually want to implement the rule. There is some potentially complex math involved, and if you
1:24.4	make an error, you could complicate your financial life and set yourself up
1:28.5	for tax penalties. Also, once you start the 72T road, you are essentially locked in for a period of time.
1:36.4	You must continue taking 72T distributions for five years or until you reach 59.5, whichever comes later. Your options for changing the
1:47.3	payment amount before that period is over are very limited. So you need to be quite certain about your
1:53.3	cash flow needs because it'll be hard to change your payments without penalty. And remember that the 72T
1:59.9	mechanism eliminates the 10% penalty, but you must still pay
2:04.0	ordinary income taxes on the withdrawal sums. The IRS offers three methods for calculating the
2:10.1	amount of your annual 72T distribution. You can run the calculations for each method and use
2:16.0	whichever amount best fits your financial needs.
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