Financial Expert Witness - Securities Expert Witness, FINRA Expert Witness
401k Consulting Minneapolis
Financial Road Map
Minneapolis Wealth Management | Minneapolis Investment Advisor

Recent Posts

December 5, 2019

November 7, 2019

September 13, 2019

Please reload

4 Considerations When Retiring Before Age 60

October 16, 2017

In order to successfully retire before age 60, you will likely need an abundance of retirement savings (and the means to access them) that lessen or avoid early withdrawal penalties associated with qualified retirement savings accounts.

 

There are ways to tap retirement savings accounts before 60. While the I.R.S. discourages this with 10% penalties on traditional IRA withdrawals prior to age 59½ and withdrawals from many employee retirement plans before age 55½ – but those penalties may be skirted. (1)

 

THE ROTH IRA CONVERSION

An IRA or workplace retirement account funded with pre-tax dollars can be converted to a Roth IRA funded with post-tax dollars. While the conversion is a taxable event, it allows a pre-retiree more potential to retrieve retirement savings early.

 

Before age 59½, you are permitted to make tax-free, penalty-free withdrawals of the amount you have contributed to a Roth IRA (as opposed to the Roth IRA’s earnings). After age 59½, you can withdraw contributions and earnings tax free provided you have owned the Roth IRA for five years.

 

For Roth IRA conversions, the 5-year period begins on January 1 of the year in which the conversion happens. Roth conversions may be a good move for some, but a bad move for those who live in high-tax states with plans to retire to a state with lower income taxes. (1,2)

 

SUBSTANTIALLY EQUAL PERIODIC PAYMENTS

Under I.R.S. Rule 72(t), you have the option of taking “substantially equal periodic payments” (SEPPs) for five years from an IRA in your fifties. However, the schedule of payments must end after five years or when you turn 59½, whichever is later. Such withdrawals are taxed as ordinary income, and the distribution schedule cannot be altered once distributions have begun. (1,2)

 

LIFE INSURANCE CONSIDERATIONS

For most pre-retirees, buying life insurance comes down to the pursuit of the largest death benefit for the lowest cost. If you have enough net worth to potentially retire before 60, you may have additional objectives. A sizable death benefit could help your heirs pay estate taxes. A whole life policy might provide a consistent return akin to a fixed-income investment in retirement, but without the usual interest rate risk. (3)

 

HEALTHCARE & HSAs

For most pre-retirees, buying life insurance comes down to the pursuit of the largest death benefit for the lowest cost. If you have enough net worth to potentially retire before 60, you may have additional objectives. A sizable death benefit could help your heirs pay estate taxes. A whole life policy might provide a consistent return akin to a fixed-income investment in retirement, but without the usual interest rate risk. (4,5)

 

A Health Savings Account offers a potential triple tax advantage. Your contributions are exempt from tax, the money saved or invested within the account benefits from tax-free growth, and withdrawals are untaxed if the money pays for health care costs. (6)

 

PLAN CAREFULLY BEFORE RETIRING EARLY

Retiring in your fifties may present you with greater financial challenges than if you retire later. While you may retire in better health, you will have to wait to collect Social Security and Medicare coverage. If early retirement is on your mind, consult a financial professional to see if your savings, your potential income streams, your insurance situation, and your ability to work part time correspond to your objective. 

 

 

Citations:

1 - cnbc.com/2017/07/05/three-retirement-savings-strategies-to-use-if-you-plan-to-retire-early.html [7/5/17]
2 - bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/ [3/25/16]
3 - forbes.com/sites/jamiehopkins/2017/04/27/why-life-insurance-is-essential-for-retirement-planning/ [4/27/17]
4 - fidelity.com/about-fidelity/employer-services/health-care-costs-for-retirees-rise [8/24/17]
5 - ssa.gov/planners/lifeexpectancy.html [9/14/17]
6 - cbsnews.com/news/how-to-cope-with-health-care-costs-in-retirement/ [9/12/17]

 

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Please reload

Financial Plan | Personalized Report | Financial Advisor - Minneapolis

Barrington's Financial Blog

 About    |    Our Services    |    Financial Planning    |    Employer Retirement Plans    |    Contact

Litigation Support    |    Expert Witness    |    Pro Bono Services    |    Careers       

Barrington Capital Management, Inc.  |  3800 American Boulevard West  |  Suite 1110  |  Bloomington, MN  55431

952-835-1000   800-944-2419  |   Fax: 952-835-1504  |  Info@BarringtonCap.com

 

Barrington Capital Management, Inc. only conducts business in states and jurisdictions where it is registered or where an exemption from registration exists. This site and its contents do not constitute investment advice or a solicitation to sell securities. Past performance is not indicative of future results. This website is for informational purposes only and Barrington Capital Management, Inc. reserves the right to modify it at any time without notice. Copies of Barrington Capital Management Inc.’s Form ADV Part 2 are available upon request. Images and photographs are included for the sole purpose of visually enhancing the website. No photographs are of current or former clients and they should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All materials used on this site, including all images, are copyrighted and are protected worldwide by copyright laws and treaty provisions. They may not be copied, reproduced, modified, published, uploaded, posted, transmitted, or distributed in any way, without Barrington Capital Management Inc.'s prior written permission.

Neither Barrington Capital Management, Inc., nor any of their Investment Adviser Representatives, provide tax or legal advice. Tax and legal advice should only be obtained from a qualified professional. All written content on this site is for informational purposes only. All information and ideas should be discussed in detail with an advisor prior to implementation. Examples from our news feeds, blogs or articles do not take into consideration commissions, investment management fees, miscellaneous transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. Investors should review transaction costs, margin requirements and tax considerations with their financial or tax advisor before entering into any investment or financial planning strategy. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness.

Investment Advisory services are offered by Barrington Capital Management, Inc., a Registered Investment Adviser in the states of Minnesota, California, Texas, and Wisconsin. Barrington Capital Management, Inc. may utilize the services of First Ascent Asset Management, LLC for certain investment portfolios. Insurance products and services are also offered through Barrington Capital Management, Inc. 

 

Disclosure: Barrington Capital Management, Inc. is not a law firm. Robert D. Lawson and his associates are not practicing attorneys. The scope of any activities performed by Robert D. Lawson, subcontractors or employees of Barrington Capital Management, Inc. is limited to litigation consulting and litigation support.​

By using this website, you agree to our Terms of Service and Privacy Policy.

Business Continuity Plan

Copyright © 2019 Barrington Capital Management, Inc.  |  A Registered Investment Adviser  |  All Rights Reserved

  

 Financial Advisor Minneapolis, MN