Back in Article 2 of my first Semi-Retirement series, when I first ran the bridge math, I mentioned the Rule of 55 almost in passing — one… Continue reading on Financial Strategy »...
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Retirement Planning
Retirement
Financial Planning
Healthcare
Early Retirement
Len Santoro
9 min read
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Back in Article 2 of my first Semi-Retirement series, when I first ran the bridge math, I mentioned the Rule of 55 almost in passing — one line in a spreadsheet that made the whole forty-month runway possible.
I’ve since built an entire healthcare decision on top of an income target (Article 4), and I’m running three income experiments that generate lumpy, unpredictable money (Article 5, Article 6).
None of that changes the fact that savings and 401k withdrawals, not income, are what carry most of this bridge.
Now it is time to go more deeply into the Rule of 55 and also talk about the Substantially Equal Periodic Payment (SEPP) option available, because I’ve now lived with it long enough to know where the real edges are, and they’re sharper than the name suggests.
What it is
The Rule of 55 is an IRS provision that waives the usual 10% early-withdrawal penalty on 401k distributions if you leave your job in or after the calendar year you turn 55.
That’s it.
It doesn’t waive income tax — every dollar you pull is still taxed as ordinary income, exactly like it would be at 59½. It only…
Disclaimer: The views and opinions expressed in this article do not necessarily reflect the official policy or position of IRACircle. Always consult a certified financial planner or tax advisor before executing retirement account transactions.