Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. The show is an extension of the book, How to Retire on Time, which you can grab exclusively on Amazon or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much cover it all. Now that said, please remember this is just a show.

Everything you hear should be considered informational as a not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is mister David Fransen. David, thanks for being here.

Yes. Hello.

David's gonna be reading your questions that you've submitted, and I'm gonna do my best to answer them. You can send your questions in anytime this week by texting them to 913-363-1234. Again, that's 913-363-1234, or you can email them to hey mike@howtoretyme.com. Let's begin.

Hey, Mike. I'm 56 and just lost my job. Everything I have saved is in my 401 k. I think I have enough to retire, but there's a 10% penalty if I take money out of an IRA. Is there any way around this?

There is. Hopefully, your assets are still in the 4 one k because there's something called the rule of 55. If you lose your job at 55 years old or you retire at 55 or older, you can actually take cash out of your 41 k in most situations and not pay that penalty. Now the rule of 55 and Google it, you can use chat GPT on this. It's pretty pretty straightforward.

Mhmm. But look at the rule of 55 and and if that works for you. And if that's the case, make sure you keep your money in the 41 k or at least a part of it. Because if you roll it over to an IRA, now you're gonna have that 10% penalty. And there's an inherent conflict of interest to any adviser that you talk to right now is probably gonna want a lot of the money to roll over and and that they're gonna manage it.

But if they manage it, then it it gets a little tricky. Now in addition to the rule of 55, you've got a few other ways you could go around it. So you've got something in the IRS tax code called 72 t. And based on what they call the riskless rate, so the riskless rate, which is pretty much set by what the Fed's doing, you could take out a portion of the assets under 72 t, and you have to structure this for, like, 10 years of equal payments for a longer term period of time, you might be able to work around that. There's something called a 72q where you could put money into an annuity and then annuitize it.

So annuitize it, I'm talking specifically about not for lifetime income, but, like, for a 10 year period of time, you could annuitize it in a way. There there's a few things you could work with in that realm. So 72 t as in Tom or 72q as in quail. Then 72q is more for nonqualified assets than your deal, but I would've mentioned it anyway. But there are ways that you could potentially get assets and avoid that 10% penalty.

I've known people that were a little bit closer to retirement, and they just took a HELOC out of their house and loan against their own asset and then plan to pay it off when they turn 59a half because they could take it out without the 10% penalty. There's a couple of strategies here that you could use. It just this is when it really takes some legitimate exploration of what you're comfortable with, what you're willing to work within, and and and the strategies available to you to make it happen. Really, if if you have enough to retire at 56 and you just wanna figure it out, then you probably could do it. There are ways around the tax rules to to make that happen.

It just takes some very strategic and deliberate planning. And you've got to be disciplined about it because you may not like that all of your assets are going to probably grow as much as you want. But I'd ask you, is time your most precious asset or do you want to be the richest person in the graveyard? Mhmm. I mean, you've got longevity to deal with.

If you retire at 56 years old, chances are you'll live longer than someone or you have a longer retirement than someone that retires at 65 years old. Right? There's almost 10 years there of extra retirement. You have to maintain a certain amount of income for a longer period of time. That's longevity risk.

You don't need to buy an annuity to solve this. There are other strategies that can be implemented to help you get there. Rule of 55, check that out. 72 t. If you have some nonqualified assets, you might look in the 72q as well to kind of create some stability on the income side through annuities if you want that.

HELOC, and there's a number of other things that like that, but those are the more common ones I wanna mention. Also, be aware of how you're taking income because it's gonna affect your, Affordable Care Act or Obamacare insurance, which you will need to figure out before you hit Medicare age or age 65. The irate or Roth conversion strategy, if you have some nonqualified assets for those I know this isn't your situation for the person that submitted this question. But if you have some nonqualified assets, then your IRA to Roth conversion strategy is still applicable. You just have to do it a little bit differently.

Really, I wanna reiterate this again. More time equals more risk. Longevity risk is probably gonna be one of your main risks that you've got to tackle because it's not like the 1st 5 years of retirement that you can't screw up. It's really the 1st 10 years that you can't afford in most situations that I've seen to take a big market crash hit, accentuate losses, and try to recover because you may never actually recover. Longevity risk is certainly the part here that needs to be looked at.

So if you're listening and this is this is kind of your situation, this is your you're in this camp, ask yourself, how do you wanna spend your time? Will retirement give you more fulfillment or is getting another job more fulfillment? Because you don't want to retire early and then become depressed. You don't want to retire early and speed up your cognitive and your physical decline. A little stress in life is actually a good thing.

A little bit of a I need to get up and do something someone else depends on me is a good thing for your health. Many people that retire too soon struggle physically, mentally, cognitively, and so on. So And many of your friends might not be able to retire as well. The social aspect might be difficult. So just a few things to consider there.

But, yeah, the rule of 55, 72 t, HELOCs, and other ways you can borrow against certain assets to generate income, bridge the gap, and then have a second phase for when you hit 60 years old or 59a half, and then have that phase from that point till 65. Then from 65 when health care starts, your Medicare starts, then, you got kind of those 3 different plans within one plan to, to tackle. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time.

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