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The Best Way for Early Retirees to Tap Their IRAs

Many people are successful in saving money for retirement through IRAs. But early retirees often need early access to their money. Avoiding penalties if you're not yet age 59 1/2 can be a challenge. 

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the substantially equal periodic payment exception to the 10% penalties for early IRA withdrawals. Dan notes that early retirees can use three methods for calculating those payments. One is based on the same rules that govern mandatory IRA withdrawals for those age 70 1/2 or older, while the others use more sophisticated calculations based on interest rates and annuity factors. Dan emphasizes that the key to the exception is that you have to keep taking payments until you reach age 59 1/2, regardless of whether you need them. For those who truly need early access to their IRAs, though, substantially equal periodic payments can be a good way to get it without paying unnecessary penalties.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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